Mainfreight was started by Bruce Plested 46 years ago with a single truck. Now the company provides logistics in 27 countries.
No government report predicted that New Zealand could earn overseas exchange from the provision of logistics.
But then, no government report predicted that this year New Zealand would launch more rockets than any other country apart from the superpowers, United States, Russia and China.
No government report predicted that a New Zealand company making toys in China would create New Zealand’s richest family.
The economy is too complex for any government to be able to pick winners. Yet the coalition with its fast-track planning for selected applicants is trying to pick winners.
It is unlikely the firms selected will be tomorrow’s winners.
Mainfreight never received any assistance from the Government, yet it was government action that made Mainfreight’s success possible. But for the deregulation of transport, Mainfreight would have remained a small trucking company.
It is likely there are more Bruce Plesteds, Peter Becks and Mat and Nick Mowbrays with world-winning ideas that are being stifled by red tape and planning laws. They will be in sectors that no one in government imagines New Zealand can be competitive.
We can see the power of deregulation. Donald Trump is a horrible individual, yet he may still win. The reason is his Cabinet made the repeal of red tape a priority. The deregulation caused the US economy to boom.
The coalition would have a greater beneficial impact on the economy if urgent Resource Management reform were the priority rather than picking winners. Instead of having 19 Cabinet ministers proposing new regulations and one, the Minister of Regulation, in charge of repealing, every minister’s priority should be repealing red tape.
Mainfreight has another lesson for the Government. Mainfreight is financing its network of depots and warehouses, never misses a dividend and its share price has gone from $1.20 a share when the company floated, to over $70 a share today.
My experience as a director has given me an insight into the reason for the difference in the relative performance. I was a director before I went to Parliament. I have over 150 director years’ experience in a whole range of companies, from government to privately owned.
In addition, as a minister I oversaw all the Government’s trading activities. I was appointing directors to 23 government companies.
The Government follows the latest template in governance. All SOE boards have independent directors. Many are graduates of the Institute of Directors courses. Boards are regularly refreshed. Most directors serve no more than six years. Many boards are models in diversity. It is a shame about the results.
Mainfreight does not follow any of these templates. Half the directors have been on the board for over 20 years. It is Mainfreight’s view that a director needs to serve for at least six years to really understand the company.
I believe the difference is the owner. Politicians are irrational owners. For most, three years is the future. The No 1 instruction to government businesses is not to become a political issue.
Mainfreight directors are also owners.
As an SOE director, I tried to make decisions as if I were the owner, but it was not possible. The real owner is interested in only votes.
It is the reason government businesses make such use of consultants. It is to give cover should a decision be questioned in Parliament. The second reason is the directors know so little about the business, they need a consultant’s report to help run it.
SOE directors often ask the management to engage a consultant to advise the board on what to pay the management. I never saw a consultant’s report that said the SOE managers were overpaid. It is the reason SOE management pay and results have no correlation.
Mainfreight does not hire consultants. The directors know the business. I was on the remuneration committee. Pay depends on performance.
I am one of the architects of the New Zealand SOE model that has been copied around the world. The model attempted to incorporate the features that make companies like Mainfreight successful. No template can ensure business success when the owner is a politician more interested in votes.
In my opinion, the Government is hopeless at running a business. It should get out of owning businesses when the private sector is willing to take the risk. Concentrate on doing a better job of tasks the Government has to do, like looking after children in state care.
