Thursday, 27 August 2009

DOWN TO THE DOCTOR’S: Envy, greed and broken contracts

richardmcgrath In which Libertarianz leader Dr Richard McGrath takes his regularly irreverent look at some of the past week’s headlines.

  1. Telecom board defends CEO’s ‘shameless’ salary package – Union boss and Labour Party hopeful Andrew Little calls the Telecom chief executive’s remuneration package “insulting to striking lines engineers”, and “shameless greed”. Well, if you think you can do a better job for less pay, Andrew, I’m sure the board of Telecom would like to hear from you. And isn’t it a little ironic that unions regularly strike to increase the pay of those they represent? Aren’t those employees being “greedy” too?
        It always seems those who protest the loudest about the “obscene” pay deals of high-ranking executives are those least qualified and able to fill the job themselves. Could there be just a smidgeon of envy colouring the views of these whingers? What they tend to forget is this: Telecom is a private company owned by shareholders, with governance by a board who appoint a CEO. The details of what executives are paid is the business of the board, and to a lesser degree, the shareholders. The latter can overturn the board if they feel the CEO is being overpaid; however none of us really know what was in Paul Reynolds’ employment contract. He may well have fulfilled his agreement with the board to the letter, and thus may be fully entitled to his salary and bonuses.
        Those people so upset about how much Mr Reynolds’ is paid also forget that the IRD probably steal half of his earnings back anyway, so that other people can be paid for not working and for breeding the next generation of Labour-voting non-workers.
  2. Tobacco firm fined $20.4m – A brief report on yet another example of an irrational and grossly disproportionate payout to the family of a person who, knowing the risks from smoking tobacco, elected to carry on regardless and then to everyone’s surprise developed a fatal lung cancer.
        This whole story is absurd. The dangers of smoking are well-known to everyone; as a child in the 1960s, I knew that smoking was linked to lung cancer. Anyone who has opted to continue smoking since the Surgeon-General’s report of 1964 has done so knowing the potential consequences of their actions. To award damages against tobacco companies is to relieve smokers of responsibility for their actions.
        The means by which juries arrive at the amount of damages often awarded to smokers or their families can only be described as non-objective. Philip Morris - the tobacco company being punished for selling a product that adults want to purchase - allege that prosecution evidence violated state and federal law, and described the punitive damages award as “unconstitutionally excessive.” Still, in 2002 another jury recommended damages of 28 billion dollars to this same smoker and her family before the decision was overturned by a district court of appeal. Clearly, juries are making punitive damages awards based on emotion not reason, and there is a clear anti-business bias and a persistent portrayal of smokers as helpless victims which does not reflect reality.
        Those who sue tobacco companies should have to prove fraud or some other initiation of force by the company in question, and a more objective quantification of harm caused should be a requirement before damages are awarded. Whether or not one has any sympathy for tobacco companies, multi-million dollar damages awards to smokers (who knew the risks they were taking) are manifestly excessive.           
  3. Kiwibank joins bank fee slashing – Hey! Surely Jim Bolger’s taxpayer-funded state bank hasn’t been ripping off its customers for the last few years? No? Then how come they have only just decided to remove overdraft fees, months after those greedy Australian banks did the same? Why should Kiwibank customers have to put up with this corporate greed? This is the same Jim Bolger who, along with his wife, gets a 90% taxpayer subsidy on his air travel. The same Jim Bolger who, it is alleged, quickly put his mum’s assets into a family trust before a law change, so that the taxpayer would be landed with her rest-home fees. I think the latter might just be a nasty rumour, so please Jim, correct me if I’m wrong there.
  4. Households refuse to pay power bills – That’s OK; don’t pay your power and gas bill, and learn the hard way what life was like before someone invented electricity and greedy utility companies brought it to individual homes. As the Electricity Complaints Commissar said, her staff were powerless (pun intended?) to help: “If [your power bill] is high because you’ve used a lot of electricity, there’s not much we can do.” The first law of thermodynamics states that energy is neither created nor destroyed, so that there is a cost to generating electricity; by the second law there is a cost in relaying electricity around the country. There is no such thing as a free lunch, or a free kilowatt-hour. Power companies have to run at a profit or they will disappear; and there is no right to have electricity supplied cheaply just because you want it. There is also such a thing as individual responsibility and the moral onus to honour contracts – so if a power company has supplied you with their product, kindly pay for it!

See y’all next week!
Doc McGrath


  1. This comment has been removed by a blog administrator.

  2. so if a power company has supplied you with their product, kindly pay for it!

    True...but if the government would get the hell out of the way, power would be much cheaper.

  3. Greg: Yes, despite all the whinging about the "privatisation of electricity" three of the four biggest power companies are gummint-owned (SOEs).

  4. Juries may be making awards based on emotion rather than reason - but where does it say they're not supposed to?

    Juries are doing their job - representing the instincts and beliefs of ordinary schmoes in the populations they're drawn from. To criticise them as "irrational" is pure paternalism.

    If you don't like juries making these decisions, perhaps you'd like to suggest who should be making them instead?


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