Gordon Campbell on Lyttleton executive pay, and more TPP

Column – Gordon Campbell

It isnt often that one story can encapsulate (a) the bogus rhetoric used to justify sky-high pay packages for top executives, (b) the unequal way that workers are rewarded for their efforts, and (c) the threat that outsourcing can pose to workplace health …

Gordon Campbell on the Lyttleton executive pay scandal, and more TPP problems

It isn’t often that one story can encapsulate (a) the bogus rhetoric used to justify sky-high pay packages for top executives, (b) the unequal way that workers are rewarded for their efforts, and (c) the threat that outsourcing can pose to workplace health and safety. Yet yesterday’s story about the pay package for Lyttleton port chief executive Peter Davie contained all of the above.

In the year to June 2014 chief executive Davie’s salary went up by 18 per cent to $1.24 million. There have been three deaths on the Lyttleton waterfront in the last 12 months – and in addition WorkSafe NZ has reportedly issued the port company with five improvement notices, six prohibition notices and four written warnings. As Rail and Maritime Transport Union South Island organiser John Kerr said yesterday, Davie’s pay increase was ”unjustified and inflammatory.’

‘Lyttelton port has an appalling health and safety record, with three deaths on the waterfront in the last 12 months, and that fact alone should mean the man running the company isn’t rewarded to this extent,” said Kerr…..

”We’ve just started negotiations for a port-wide collective agreement that covers cargo handlers, marine, maintenance and security staff and this news will throw petrol on the fire of members’ expectations,” he said. “Whilst we have no objection to people being well paid, we question the propriety and wisdom of shovelling this amount of cash into one man’s bank account…’

Any success at Lyttelton port in the last 12 months was down to rank and file port workers doing difficult and dangerous jobs around the clock in all weathers, ”not one man sat in a warm dry office during normal business hours,” said Kerr.

Kerr expanded on these points in an excellent interview with Kathryn Ryan yesterday morning on RNZ.

The breakdown of Davie’s salary is as follows: for the year ending June 2014, the fixed remuneration was $569,000, the short-term incentive, based on the company’s 2012/2013 perrformance, was $187,000, and the long term incentive for the year ending June 2013, based on achieving a 16 % compounded growth over 5 years in earnings per share was $483,000. True, over the past four years, there has been a 40% growth in container volumes going through the port. Yet rather than this being an expression of Davie’s entrepreneurial skills, the growth in business at the port has been – according to Kerr – the consequence of two factors : the earthquakes and the rebuild one one hand, and the response to it by the workers shifting the containers to meet the need. As Kerr told Kathryn Ryan:

“So what we’re questioning is why one man should reap the benefits, and not the workers who were doing the job around the clock in dirty and dangerous conditions to make the rebuild happen….. For Peter Davie this money essentially fell out of a tree. When those performance targets were set they were probably quite challenging, but post-earthquake my contention is that they have been relatively easy for him to achieve. Its been our guys on the waterfront who have been doing the hard work. We see Peter Davie as a rent-taker. There’s been no element of risk-tasking in what he’s been doing,. He’s not been entrepreneurial. Its been our guys who earned that money.”

Nor, apparently, has the well-paid management left the port in a strong position, for future business. As Kerr claimed in the Press article linked to above, the port’s management were “caught with their pants down” by the recent Tauranga deal, which meant more freight was being shipped via Timaru. As for the workers’ compensation for their efforts ….Over the three years of the collective agreement that has just come to a close, the workers that Kerr represents earned slightly more than a 10% pay increase, or just over 3% annually. Given that a new collective agreement is being negotiated, Kerr told Ryan, Davie’s 18 % pay hike last year will be like ‘pouring petrol on a fire.’

In passing Lyttleton’s poor health and safety record is also worth noting. In part, this has been the product of those extra container volumes for which Davie has been so handsomely rewarded, passing through the confined space available at the portside at Lyttleton and at its inland port areas such as Woolston. “The increase in volumes has increased the risk,” Kerr says. Two of the fatal incidents have involved contractors. No surprise there. Outsourcing has atomised workplace safety conditions in New Zealand. This trend – which has left New Zealand with one of the worst health and safety records in the developed world – goes back 20 years to the passage of the Employment Contracts Act and its “brother” piece of health and safety law, the Health Safety and Employment Act of 1992. As Werewolf explained in an article a couple of years ago about quad bike fatalities:

The ECA assisted employers to bypass union representation and cut the short-term cost of labour. In similar fashion, the HSE Act has sought to liberate employers from the former, more intrusive system of centralised workplace inspection and regulation, and promote in its place a ‘safety culture’ based largely on voluntary compliance. As union membership lapsed, New Zealand work sites began to atomise into a welter of contractors and sub-contractors, each with their own alleged responsibilities for a health and safety regime that has existed more on paper than in practice. In the current climate of price competition between independent contractors, health and safety elements tend to be among the first budgeted items to get trimmed in order to win bids for the work available – while at the other end of the spectrum, the DoL’s inspection and enforcement regime has been gradually drained of resources and technical expertise, in line with the preference for “light handed” regulation and largely voluntary compliance.

As yet, the health and safety legislation revised in the wake of the Pike River Commission findings is still working its way through Parliament. For now, the Lyttleton work force – and workers elsewhere – remain vulnerable to management putting performance targets and profits ahead of safety. Meanwhile, Peter Davie’s remuneration package will feeds into the spiral upwards of executive pay – whereby every excess becomes part of the benchmarking process that pushes executive pay ever upwards. Management may talk the jargon of teamwork and leadership, but at the end of the day, the bulk of the rewards are still reserved for those at the apex of the corporate pyramid.


Footnote on the TPP. To critics of the Trans Pacific Partnership, some of the pact’s most heinous features involve the investor-state dispute mechanisms, whereby foreign investors can sue if they feel disadvantaged by any laws that are subsequently passed by sovereign Parliaments. If the TPP ever got passed since it would codify – and extend – the unequal rights of foreign investors over host countries in trade contexts.

What is the government’s counter-argument? Well, the sovereignty concerns about state/investor dispute mechanisms are routinely met with the ‘glass half full’ rejoinder that these measures actually offer a protection for New Zealanders investing abroad – such that if our firms get badly treated by foreign governments, we will be able to sue for compensation.

That response is no re-assurance at all. In a Werewolf interview in 2012, the US trade expert Jagdish Bhagwati of Columbia University warned that the inclusion of ‘investor state’ dispute mechanisms in regional trade pacts like the TPP would serve to undermine the WTO’s own global trade dispute mechanisms. Since then, that concern has become even more tangible. Just last week, the WTO Director General Robert Azevedo reported on the logjam currently facing WTO investor state dispute mechanisms. The Washington Trade Daily, in a sidebar entitled “Keeping Up With Dispute Cases” has the grim story:

The WTO is facing an unprecedented body of work [that is] putting pressure ion the organisation to keep up with the workload. Not only are more and more cases being filed, but the disputes are increasingly complex and the number of WTO staff available to handle them is severely limited. “We are in a situation where the demand is severely testing our capacity,: the Director-General said, “And there are some clear constraints on our ability to extend that capacity…

Azevedo gave the evidence:

In just over 20 years since the WTO system came into being 482 requests for consultation have ben received, compared to a total of 300 disputes in the 47 years of the previous GATT system….Currently there are 19 panels requiring full time assistance, 3 ongoing appeals and 4 panels in composition.. In addition, disputes are becoming more complex than they were in the WTO’s first decade, routinely with multiple partners involved….advancing a variety of claims, increases in third party participation etc.

In other words, the existing WTO dispute resolution system is tottering under its current workload. Yet Tim Groser, the Key government and the rest of the TPP member countries are negotiating to create a TPP pact that envisages opening up a whole new dimension of investor –state panels on a regional basis, which will be added to a global system already buckling under the strain. Far from offering an avenue of redress to aggrieved New Zealand firms, the TPP – if it succeeds in passing its investor-state provisions –will undermine the one global system of investor dispute resolution that currently works, and which is barely coping with the current demands on its expertise.

As Azevedo adds in the Washington Trade Daily report,
the WTO is also having difficulty retaining dispute settlement lawyers, who can make more money in the private sector, usually by going to work for the same companies that the WTO is trying to monitor and rule upon. “All this is adding up to delays in the litigation process,” Azevedo added. Moreover, in the wake of Azevedo‘s presentation, some envoys pointed to the lack of compliance by the United States in a number of cases involving developing countries.”

Next time Groser and his chums try to defend the investor-state provisions of the TPP they might care to comment on the current problems with arbitrating these measures at the WTO. Won’t this dire situation only be exacerbated (for New Zealand and for everyone else) if the region creates a TPP platform that would require a whole new set of international trade tribunals amid a scarcity of the necessary expertise – and with all the related problems of corporates shopping for jurisdictions that will be friendly to them, and buying off the lawyers involved?


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