Fran O'Sullivan: Key needs more than hot air to keep business leaders onside

The headline read "The Prime Minister has hosted a jobs summit on the same day as companies announced more than 3000 job losses".

No, it was Not directed at John Key, who is now being mercilessly lampooned by his political opponents due to the fact that the prime ideas from his one-day "do fest" have not stymied the growing avalanche of redundancies now resulting in 1000 people a week moving onto the dole.

The prime minister in question was the hapless British PM Gordon Brown. But those nasty headlines coinciding with Brown's January employment summit should have signalled warning signs at Beehive level over the limitations politicians face when they try to interfere with market forces.

My take after spending a day out at Manukau observing the summit in late February was that the attendees were really more focused on ensuring New Zealand comes out of this tough period with policy settings that result in the economy being more internationally competitive - not the reverse.

They wanted corporate tax rates that are an incentive to come here rather than chase investment away. And a stronger focus on the agenda to reform Auckland into a "super city", rationalise its traditional infrastructures and encourage foreign investment into establishing new infrastructures such as first-class broadband that will provide a platform for talented New Zealanders to run global businesses from home.

Despite the summit sessions geared to helping firms survive, they weren't looking for rescue packages. They did not want vital taxpayer dollars to protect industries and jobs that are not truly competitive. Basically they wanted the Government to get on with the job it was elected to do.

But unfortunately the summit participants couldn't hold off from the Government imperative to announce a few job-saving ideas.

As it becomes clear few of those ideas have yet to reach fruition, Key is a sitting duck for opposition attacks.

Mark Weldon - the business wonderkind that Key appointed to chair his own Summit on Employment - is now in damage control mode. Weldon makes the point that New Zealanders won't really know until the recession is over just how successful the summit ideas were in convincing employers to examine a raft of measures they could take to keep their workforce together before opting for redundancies.

My soundings in the business community indicate more than a few major Kiwi companies are taking a responsible attitude to their workforce. Instead of moving to straight to "head count reduction" mode, they are negotiating wage and salary freezes, paycuts in marginal sectors, bonus freezes, four-day weeks (without Government top-ups), options for staff to take unpaid leave, and so forth.

But there are limits to how far employers are prepared to go when they also face an expectation from shareholders that they will still get a suitable return on their investment irrespective of the economic climate. Couple this expectation with the fact companies still have to pony up corporate tax of 30 cents in the dollar (far more than our prime competitors) and it is easy to see the pressure that goes on chief executives and boards as they weigh the respective "rights" of their stakeholders.

Air NZ chief executive Rob Fyfe - who had the guts to go public before the summit and advocate via my column the mothballing of personal tax cuts - also suggested that as the recession deepened there ought to be a debate on whether shareholders should take smaller dividend returns so that more staff could be kept on through to the inevitable upturn.

As Fyfe put it, this was too radical to advocate as a first wave response to decreased revenues - but should form part of a second wave response.

This was in fact the "elephant in the room" at the Job Summit. But it is an issue that cannot be ducked for much longer. The reality was that many of the big ticket summit ideas were parked as the economy worsened. Finance Minister Bill English (as he must) put the need to stave off a credit rating downgrade ahead of dishing out more Government cash to underpin employment.

But the reality also is that Weldon and Key did not do enough to ensure that others were appropriately delegated to take the summit ideas further within the business community. Weldon still seems to be running the "programme" - an expected prime ministerial unit has not emerged.

There is a lot of goodwill within the business community.

But to keep hard-pressed bosses engaged Key and Weldon need to do more than simply invite them to take part as "window-dressing" for a political sideshow.