RAMESH THAKUR. Importing private sector efficiency or infecting the public service with the ‘greed is good’ disease

Sep 6, 2018

There has never been a more exciting time to be a critic of the ‘greed is good’ philosophy of the corporate sector. The revelations from the banking and finance royal commission have been gobsmacking. There was also the beat up of my university for having the temerity to weigh the attraction, of substantial funding from the Ramsay Centre, against demands for having voice and veto in academic decisions on staffing and curricula.

Universities risk falling victim to two corrupting influences: the decline in public funds and the seductive appeal of the model of corporate governance. Shortfalls in government funding force universities to look to alternative funding models and can create an unhealthy dependency on private money. Winston Churchill memorably said of the Munich Pact that Neville Chamberlain was given a choice between war and dishonour. In choosing dishonour, he ensured he would get war. The ANU chose honour over genuflecting to Mammon.

In his reply (The Australian, 28 June), Ramsay Centre CEO Simon Haines took issue with many points in the account provided by ANU Chancellor Gareth Evans and Vice Chancellor Brian Schmidt the day before. But there was one telling silence. A particular object of ire for ANU critics seems to have been the Centre for Arab and Islamic Studies, funded among others by some Middle Eastern governments. Evans and Schmidt wrote: ‘if the Ramsay Centre were to take the same approach to a gift to ANU as the donors to CAIS, we could reach an agreement in less than 48 hours’. Haines did not take them up on the direct and unequivocal offer. Gotcha!

Public-private partnerships should see private money flow into public institutions. In true philanthropy, benefactors donate to universities and retain an interest in what is done but within the bounds of institutional autonomy and intellectual integrity. If a donor is given an academic controlling voice, in effect the taxpayer ends up subsidising the whims and indulgences of a mega-rich donor. This is the key difference between ‘for’ Western Civilisation and ‘Western Civilisation Studies’. And if universities should succumb to donor pressure on academic matters, they will vindicate the contempt of wealthy ‘benefactors’ for academia. The notion of university autonomy is itself a critical contribution of Western civilisation to public policy. Perhaps the Ramsay Centre doesn’t do irony.

Another perennial topic of conversation is the plummeting membership of private health insurance schemes. On my retirement recently, we terminated our membership. I explained to the fund why the cosy arrangement had worked very well for them but not us. We paid over $3,300 in annual premium, in the expectation that when the need arose, the scheme would cover the substantial portion of medical expenses, albeit with the equivalent of an “excess” that we would pay out of pocket.

It was instructive to discover that with private health insurance, the system works precisely in reverse. It is as if they pay the excess amount and we pick up the bulk of the costs. How many people would buy car insurance on this principle? For cataract surgeries costing $5,795, Medicare paid $1,458 and the fund reimbursed $624, leaving us $3,713 out of pocket. A dental implant cost $9,744. With the annual limit for dental costs covered per person at $400, we paid over 95% of the costs. Without the annual premiums, we would have been better off by a few thousand dollars in meeting these medical bills.

We had stayed in the scheme not because it offered value for money but because of the corporate welfare policy of successive Australian governments, ALP as well as Coalition. This imposed heavy punitive costs through the tax system for those above a certain income threshold without private health cover. Thus by definition the funds were not price-and-benefits competitive, and governments coerced us to convert our incomes into corporate profits. I would have preferred to pay the extra $3,000 in taxes annually to boost the public health system from which every Australian benefits, including us. But of course governments of all persuasions never include us mere citizens in the internal policy conversations, only the lobbyists bearing gifts for party coffers to fight elections.

Which leads me back to my main complaint. The depth and extent of financial malfeasance exposed by the royal commission is intrinsic to the nature of rent-seeking crony capitalism. Perhaps what Australia needs is a bit more of the old public service virtues infecting the inefficient and molly-coddled private sector.

Much of the corporate environment has become an ethics-free zone where fees can be charged for no service and billed to deceased clients. As the mode of corporate leadership came to be more widely emulated in the public sector and universities, the vices of casino capitalism corrupted sectors that previously were pillars of public service ethos. The dominant management ideology has imposed the corporate culture on public sector and university administrations, with an accompanying infestation of some ethically-challenged CEOs.

The primary motivation becomes not public or community service, but extracting the maximum compensation package, paid for by downsizing staff and short-changing students. There is the parallel risk that the chief criterion for selecting university presidents becomes not advancement of teaching and scholarly reputation but fund raising, as seen in North America. Of course, modern universities are complex operations with huge sums of money involved and CEOs ought to be reasonably compensated. But should university boards appoint candidates whose final decision to accept or reject an offer hinges on the size of the compensation package?

A respectable university should have bottom lines that do not collapse into only the bottom line. University leaders must have the experience and judgment to tell the difference between the two, the moral compass to navigate these treacherous waters, and the courage to act on their convictions. Brian Schmidt has shown the way but not too many other Australian VCs seem prepared to follow his example. (Note: as a retiree, I can afford to write without fear or favour.) According to the table of VC salaries published by Fairfax Media (27 August), the sole Nobel Laureate VC, of the country’s most prestigious university is, by his own choice, the lowest paid in the country. His package is one-third below the average and less than half the top package of Sydney University’s VC.

To restore public trust in financial institutions and the corporate sector, perhaps the best and the brightest from the public sector should be poached and perched in positions of corporate power to instruct them on what a moral compass means in practice. It is time to bring civic virtue back into the marketplace and spread civility, along with racial and gender diversity, in the boardroom.

Ramesh Thakur is emeritus professor at the Australian National University.


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