2005 Roger Award Judges' Statement January 2006
- by John Minto, Maire Leadbeater, Laila Harre
The Roger Award is presented each year to the worst transnational corporation operating in New Zealand and is organised by CAFCA (Campaign Against Foreign Control of Aotearoa) and GATT Watchdog. The judges’ task was to consider the activities of the finalists against the criteria for the Award which cover areas such as unemployment, abuse of workers, profiteering, political interference, cultural imperialism, and negative impacts on tangata whenua, women, children, animals and the environment.
For the 2005 year there were eight finalists, which in alphabetical order are: Bank of New Zealand, British American Tobacco, Comalco, Guardian Healthcare, Merck Sharp and Dohme, Telecom, Toll Holdings and Westpac. Once again we would like to thanks those New Zealanders who entered nominations and for the wealth of supporting material and background information provided in support of the nominations.
Unfortunately the competition this year was as strong as ever and the difficulty of the task was reflected in one of the judges commenting at the amount of “stomach-heaving” induced by so much of the material. In the judges’ view each of the finalists exhibits policies and practices which are well outside the behaviour our community has a right to expect from any company operating in New Zealand.
Before proceeding to the judgment itself we were concerned that this year no less than three companies from the health sector were nominated. Each of the companies – Guardian Healthcare, British American Tobacco and Merck, Sharp and Dohme – is involved in practices which exploit the most vulnerable in our community. It is clear these practices are the result of poor Government policy and lack of commitment to protect New Zealanders. For example -
The judges therefore decided to issue a special award: The “Special Award for the Protection of Profit and Privilege at the Expense of Public Health” to the Minister of Health on behalf of the Government.
Before going on to describe the “Top Four” finalists we wish to comment on those companies which although they did not reach the dizzying depths of the final four their practices nonetheless appalled the judges.
British American Tobacco New Zealand
BATNZ continues to be a rapacious predator on New Zealanders – the young in particular. It is reliably estimated that 4,700 New Zealanders lost their lives last year from smoking related illnesses and that these people are predominantly from lower socio economic groups. Young Maori women are particularly at risk. For example only 18% of Maori girls have never been smokers compared to 48.2% of NZ European girls.
Reliable estimates also show that 101 New Zealanders die each year from exposure to smoke in the workplace and the health costs are astronomical. To give just one figure - $8.7 million per year for the direct hospital costs of secondhand smoke alone (and that’s only a tiny proportion of the health costs of smoking). The Government receives approximately $884 million in tobacco tax each year. BATNZ blames deaths and illnesses on individual choice despite nicotine’s addictive qualities. The company continues to lobby against health warning labels on cigarette packets.
The Government has passed smokefree legislation to ban smoking in hotels and bars etc and this is having a significant impact. However research conducted through Victoria University has found that the most effective reduction in smoking has been in regions where strong controls have been put in place (British Columbia, California, New York State and Australia) compared to NZ which has gone part way.
The social irresponsibility of BATNZ is becoming more sophisticated. Instead of tobacco companies being “banged” as they put it, they want to “work with government and researchers to minimise the harm that tobacco smoking causes”. This is a weasel way of saying they are still looking to find a way to make profits from their addictive products and sidestep the controversy. The Napier cigarette plant is to close this year with the 170 jobs going to Australia.
Internationally 4.9 million die annually from smoking related illnesses – most in the global south – and by 2020 the figure will be seven million annually with aggressive promotion of smoking to youth in developing countries and the use of “free speech” arguments to defend their advertising. The industry, as a whole, lobbied vigorously to water down or defeat a strong FCTC (Framework Convention on Tobacco Control) – this is a World Health Organisation treaty aimed to curb tobacco industry worldwide. It was unanimously adopted by 192 countries in 2003 and ratified by New Zealand in January 2004.
Comalco continues to draw 15% of New Zealand’s electricity supply at a secret rate – believed to be one third of the rate domestic consumers pay. The result is that New Zealand subsidises Comalco on corporate welfare to the tune of several hundred million dollars per year. (Note: 90% of Comalco power is bought at the contract rate [1/3 below domestic price] with 10% bought on the “spot market”).
The company made estimated profits of $80 to $100 million in 2005 on $1billion of sales. In 2005 Comalco began negotiations with Meridian Energy for a long term power supply contract. Just prior to negotiations Comalco threatened to leave New Zealand because of the proposed carbon tax it would be required to pay. “We could just flick off the switch and walk away,” the company said. This is a familiar negotiating strategy of bullying arrogance from a large transnational corporation.
Guardian Healthcare runs a network of rest homes around NZ. It was purchased by Australian DCA Group in July 2005 for $300 million but despite the huge capital gain made by the previous owner in selling and a predicted profit of $28.7 million for the year ended June 2006 the staff employed by the company have been offered just a 2% pay rise.
Wages paid by Guardian Healthcare are already appalling. They pay the minimum adult wage ($9.50 – rising to $10.25 in March 2006) for many experienced workers and even after 23 years experience one worker is paid just $11.36 per hour! On average the company pays $1 per hour less than other similar employers in the rest home sector.
In their best “corporate speak” the company says: “We are attracted to the sector because of its stable revenues and predictable cash flows”. Much of these cash flows come direct from the New Zealand taxpayer. Guardian and other private sector aged care providers have been quick to profit from the July 2005 relaxation in the Government's asset testing rules. There are now a higher proportion of people in care whose fees are Government subsidised and there has been a related jump in the number of people entering residential care. Guardian's Managing Director recently boasted that the higher State financial support has increased the worth of the business more than 5%!
(Note: Churches and charity groups are leaving the elderly healthcare sector because Government funding [around $650 a week per resident] is not enough to maintain high standards of care. Private owners are moving in rapidly now and because they have on average 15% less staff they can make handsome profits by providing lower cost–lower quality care. This is a familiar pattern to those in the early childhood and tertiary education sectors)
Merck, Sharp And Dohme New Zealand
MSD manufactures and distributes the pain relief drug Vioxx with more than 20 million worldwide taking it up till September 2004 when it was withdrawn. However MSD continued to promote and market Vioxx for four years after evidence that it increased the likelihood of heart attacks by four to five times compared to other drugs. It was only withdrawn in September 2004 after highly critical US Federal Drug Administration reports.
One legal firm in the US is reported as saying that more than 100 New Zealanders are part of a class action lawsuit against MSD. (Note that these people can’t take legal action here because of our ACC regulations). Vioxx was not funded by Pharmac in New Zealand – saving between 330 and 1900 deaths induced by Vioxx and several thousands more from heart attacks.
However Vioxx was able to be marketed direct to consumers in NZ because our law allows this. The Green Party has called for this loophole to be closed. Confronted with the evidence MSD engaged in a “consistent pattern of intimidation” of investigators in universities and trained its sales consultants in dodging the hard questions. For example the recommended response to the increase in heart attacks was to say “Vioxx would not be expected to show reductions in heart attacks in patients” or to suggest that the drug Vioxx was being compared with showed a reduction in heart attacks – rather than Vioxx showing an increase! Although this appalling behaviour came to light in 2004 the judges considered that because the full extent of the impact on New Zealanders only came to light last year that this nomination was justified for the 2005 awards.
The Final Four
The final four companies are now listed from fourth to the winner. The judges noted that these four prizewinners are all part of the essential infrastructure of New Zealand and because of this their behaviour impacts hugely on the general public. This emphasies the shameful nature of their anti-social practices.
In 4 th Place – Telecom
Telecom made a $1.3 billion pre-tax profit in 2005 which was up from $1.1 billion in 2004. This represents $325 profit for each man, woman, child and baby in NZ! During 2005 Telecom was convicted of breaching the Fair Trading Act and paid $54,000 in compensation when customers were charged at the peak phone rate instead of the off-peak rate.
The cost of Telecom services is very high compared to other Organisation for Economic Cooperation and Development (OECD) countries. For example, the cost of business access is the highest in the OECD while low data users pay 80% above average and medium users pay 160% more than average. Telecom cellphone charges would need to drop 45% to be in line with other OECD countries!
Ernie Newman of the Telecommunications Users Association of NZ called on Government once more to “unbundle the loop” to allow other competitors to use Telecom’s lines and force down prices. Another failed appeal. In the meantime the most highly paid executive in New Zealand - Theresa Gattung of Telecom – received a 10% increase in her base salary in 2005.
2005 was another year of desperate pleading from many people for the Government to act to curb Telecom’s appalling monopoly greed but to little effect. For 15 years now this private monopoly has run amok with New Zealanders and has made more than $15 billion in profits – most going to wealthy shareholders overseas. The judges are appalled that this national scandal continues. It seems that the Government is terrified of effectively regulating Telecom because it is the largest player on our sharemarket and the health of the sharemarket depends on Telecom’s health! In the judges’ view this is feeble leadership.
3rd Place - Toll Holdings
Toll Holdings operates our rail network and the Cook Strait ferries. It has continued to operate the fast ferry Kaitaki in Marlborough Sounds at 20 knots despite the Marlborough District Council setting 15 knots as acceptable because the wake of the ferry is causing significant environmental damage. However the Council has failed to enforce this through issuing an abatement notice for fear that Toll would relocate its ferry terminal away from Picton!
This is a recurring theme in the 2005 awards – heavy bullying of authorities by big companies determined to get their own way. Toll also operates the Cook Strait ferries with the ferry Awatere (nicknamed “El Lemon”) which has had 43 investigations, including 19 full investigations, since 1999. In one incident the ferry was just five seconds away from going aground.
Toll pleaded poverty to excuse lack of maintenance on the tracks (although it was still able to purchase Singapore Rail!) so the New Zealand government agreed to pay $200 million to upgrade our rail tracks for Toll after ten years of disastrous private sector ownership and management of our rail network. The Government has also agreed to pay for additional “special projects” once the $200 million runs out.
The Minister of Finance, Michael Cullen, agrees the Government would not earn an economic return on its $200 million upgrade. In other words the company takes all the profits while the people of New Zealand take the losses! The Government agreed also to allow no new rail passenger services to use the rail network (which is now owned by the Government) for three years. This means that even if another operator wanted to continue a rail service dumped by Toll it is prevented from doing so. Cullen describes Toll as a tough group of people – “archetypal Australians” but this is a feeble response. In 2005 Toll financial records contained a blackout on salaries paid to senior executives and it has been openly hostile to trade unions representing workers. Toll made a $41.41 million profit in 2005 which its Australian parent company describes as an “unacceptable return on assets”.
The Winners - 1st Equal - Bank Of New Zealand And Westpac
(Judges Note: BNZ and Westpac were both nominated for the 2005 Roger Award although it became clear from the material gathered in support of these nominations that many of the practices they have adopted also apply to the other two large Australian-owned banks – ASB and ANZ – and had they also been nominated then the likelihood is that all four would have been joint winners of the 2005 Roger Award. Emphasis added. Ed.).
Over the past six years the big banks have used tax avoidance strategies to borrow overseas, channel the money through NZ and re-lend it overseas. Through this scam these banks are paying as little as 6.7% tax instead of the official company rate of 33% (according to leaked Reserve Bank documents, as reported in the media).The Inland Revenue Department (IRD) has noted that tax payments by the banks have fallen well behind profit figures. Reliable estimates have put the tax owed by the “gang of four” at NZ$1.63 billion! The judges were pleased to note that the IRD are taking on the banks and insisting on recouping tax from previous years. (During the 2005 election campaign Michael Cullen announced an unexpected windfall of $500 million in taxation received and pledged it to roading. It is almost certain this money came from the Australian banks).
Through 2005 the banks tried to force the New Zealand government to agree to a “trans-Tasman regulator” for banking and to remove them from New Zealand Reserve Bank oversight, as the Reserve Bank insists they remain stand alone in NZ instead of operating as branch operations of Australian banks. Again the judges noted it was pleasing to see the Government and Reserve Bank refusing to buckle to this pressure and protecting New Zealand account holders in the case of a bank collapse.
Our Australian owned banks have an annual combined profit of $2 billion from their New Zealand operations but they still suggested they might leave New Zealand if they didn’t get their way – familiar bullying tactics again. It is interesting to note that Australia expressly prohibits foreign ownership of its banks but New Zealand has no such laws which mean all our large banks are now Australian owned. We have been a bunch of mugs – ripe for a ripoff – and our banking profits flow back across the Tasman instead of supporting our community here.
It is also interesting to note that New Zealand has the highest degree of foreign bank ownership in the world – 99% of assets are in foreign owned banks with 85% of that in Australian banks. Australian banks have been reported to say “the Australian system is highly interventionist, New Zealand is highly market-based” – no surprises here!
Material Relating Specifically To The BNZ
The BNZ sent credit cards with $3,000 to $5,000 limits to prospective customers just three weeks before Xmas 2005. This was a cynical move to exploit families under pressure. It encourages indebtedness at usurious interest rates and was described as “ethically reprehensible” by David Russell of Consumers Institute. The judges agree! The BNZ made a net profit $471 million to September 2005 with the IRD claiming up to $300 million in unpaid tax by BNZ.
The BNZ has required its employees to “sell debt” to its customers to increase productivity with unrealistic targets. This has resulted in huge stress on employees who are asked to fleece BNZ customers, which resulted in the employees publicly speaking out in opposition. It is rare for employees to take action on anything other than wages and conditions and the judges congratulate the bank employees and their union FINSEC for drawing these appalling practices to public attention. The BNZ has displayed appalling anti-union/anti-worker attitudes and practices.
Material Relating Specifically To Westpac
Westpac made a pre-tax profit of $708 million – up from $661 million in the previous yearbut still has $711 million of unpaid tax dating back as far as 1999. Recovery of this money is being sought by the IRD. It was the Westpac Bank Chief Executive Officer who led the charge to get a “trans-Tasman regulator” for NZ banks as described earlier and Westpac has the lowest level of customer satisfaction of all the banks at just 64%.
Westpac keeps its monthly credit card repayments as low as 3% of the total owed. This practice has been criticised by the Consumers Institute – “It’s about keeping people in hock for longer!” The judges agree! Westpac has indulged in appalling anti-worker and anti-union practices in relation to its employees through 2005 and this resulted in strike action by bank workers in the week before Xmas.
These bank practices described above are in direct and serious conflict with New Zealand government policy to reduce spending and encourage private saving. These practices must be effectively challenged by the Government. Together these banks constitute a “gang of four” wielding huge power and influence over the New Zealand economy and operating solely in their own interests rather than that of their account holders, employees and the wider community.
BNZ and Westpac are deserving winners of the 2005 Roger Award.
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