Monday, March 11, 2013

Corporate memory

In the end, they decided to ask him nicely. Would the former chief executive of one of the country’s largest state-owned enterprises kindly come and talk to a parliamentary committee on how he managed to bankrupt said company, please sir? It would have been rude to compel him, even though the committee was empowered to do so. Besides, the committee chairman reckons the former chief executive would be eager to accept the invitation, as some pretty harsh things have been said about him in the media and ‘he deserves the right to put his side of the story.’

Thus a principle of basic accountability is twisted into a morality about wronged oligarchs and those who dare to question them. At any rate it’s all theatre: even if he decided to turn up – as of this writing, he hasn’t made his answer public – the former chief executive might end up answering about but never for the common wealth he squandered and the livelihoods he destroyed.

In this, the dusk of the neoliberal era, the storyline is so common that it has become difficult to muster any real outrage. That a manager who is forced to resign by the catastrophic effects of his hubris or incompetence might keep drawing his seven-figure salary and look forward to a seven-figure severance, while all around him the lowly employees of his unravelling company are laid off without entitlements, no longer surprises us. Deep down, or more frequently right on the surface, we all know that the much celebrated risk-takers seldom take any risks. They are a caste more than a social class, insulated from the consequence of their actions; rewarded for failing as much as for succeeding.

This technocratic layer is like a lubricant in the contact area between finance and industry. Without it, economic activity as we have come to understand it would grind to a cluttering halt. So Don Elder of Christchurch, a graduate in engineering chosen to lead a company called Solid Energy that used to be in the business of extracting and selling coal, but that he has gradually converted into a much broader energy concern via a series of daring ventures, is also the principal – alongside his wife, a prominent lecturer in political science – of an investment company, and there is nothing peculiar about this. Why wouldn’t they manage investments on the side of their demanding and well-remunerated public sector jobs? In his case, spectacularly well-remunerated: $1.34 million a year, up from $320,000 when he took over the company, in 2001. The biggest and most decisive increase was between 2007 and 2008, when his salary jumped from $740,000 to $1,240,000. This by the way was under Labour, when Trevor Mallard was Minister for State-Owned Enterprises. The game only works because both sides are willing to play it.

The series of phantasmagorical investments through which Elder managed to ruin Solid Energy, fascinating as they are – see the two very good Campbell Live reports to date (1, 2) – are not what I wanted to briefly comment on. It’s about something that the new chairman, Mark Ford, said to the press when he had to explain how was it possible that Elder continued to receive his regular salary even after his resignation and the full extent of the company’s troubles becoming apparent to the new managers:
It's called risk management. I needed to have access, or the company needed access, to Don's memory to have a very smooth transition.

So, to recap: Don Elder, in the new chairman’s words, ‘works from home’. What this work could possible consist of is unclear, except that the new board and management might need to consult him from time to time about the mess he left. For this Elder gets paid a little over $5,000 per day, and according to Clayton Cosgrove he can look forward to another million in April, when his relationship with Solid Energy is due to finally cease. We pay for his salary and we pay for his severance, yet we don’t own his remarkable store of corporate memory, quite the contrary: in spite of the lack of a gag from either his chairman or the Prime Minister, Elder has consistently refused to talk to the national media, and it seems doubtful that he will speak to the Commerce Committee on Thursday. Or if it will, it will be on his own terms.

Equally as troubling is the fact that so much of the information about Solid Energy’s collapse should be locked inside the chief executive’s head, instead of being recorded in the internal documents and public filings of the company. What has been so hard to fathom in the last month is precisely how the workings of this public entity could be so opaque to the shareholding minister and the business media: Solid Energy’s sensational increase in value; the hyper-optimistic predictions concerning its lignite and biodiesel ventures; a forecast of the price of coal that was staggeringly out of step with the industry consensus: none of this was apparently visible to the government and financial commentators. Not even after the layoffs began, when Brian Gaynor – who last week excoriated the company for its ruinous investments in non-core activities – was busy reassuring One News that there was one single guilty party in this affair, and it was the fall in the price of coal. As soon as the price rises again, Solid Energy will be fine, he said.

This was six and a half months ago. Since then, a coal mine closed down and 220 people lost their jobs. This too is loss of memory, and in a region that has suffered dramatically over the years. It is a textbook illustration of how corporate obfuscation and amnesia are functional to the disappearance of labour and of the social texture of actual communities. Compared to these, the knowledge that Don Elder possesses is but a parody of memory. It is the knowledge not of how to fix things but of the very particular way in which they were broken, to be drawn upon so that something may be extracted intact from the wreckage. After all, since the estimated damage is in the order of $400 million, what’s a mere $5,000 per day to assist with the salvage operation? It may just prove to be the closest that Don Elder ever gets to being worth his salary.