Dear Board members

You’ll recall that in Sunday’s newspaper Reserve Bank Board chair Neil Quigley declared, when asked by a journalist, that

Orr’s chequered behaviour is not something on which the Reserve Bank chairman, Neil Quigley, is prepared to act.

“I have not received a formal complaint from any party about the governor’s interaction with them,” he said. “The Board has full confidence in Adrian Orr’s leadership.”

Such an underwhelming attempt to avoid any pro-active responsibility to look into concerns in plain sight, let alone those under rocks.  He hadn’t had a “formal complaint” (but had presumably heard quite a few informal expression of concern) “from any party about the governor’s interaction with them” (suggesting that if someone had expressed concern to Quigley about how the Governor had treated other people, let alone other issues or processes, it wasn’t covered by his denial.  And all that without acknowledging the difficulty many people would have in formally complaining –  even if they had any confidence in the Board itself – given the Governor’s power over numerous financial sector businesses.  But it was all too much par for the course from the Board, which consistently seems to act as if it is more interested in covering for the Governor (whichever one) than in acting on behalf of the Minister and the public.

But as I noted the other day, Quigley’s narrow comment could be seen as a bit of an invitation for people to lodge expressions of concern.   I heard that someone had written to the chair of the Board expressing various concerns and calling on them to exert greater leadership in holding the Governor to account, and that in response Quigley had indicated the issue would be discussed at the Board’s regular meeting on Friday (Orr himself is a Board member, so one hopes at least some of the discussion occurs in his absence).  I decided to add my tuppenceworth to the mix and wrote to the Board last night.  As I’ve noted here, I’ve not had any bad interactions with the Governor myself, but what I’ve seen and heard of other episodes, and the succession of issues around poor process, poor policy substance, and poor communications were, to me, ample to think that the Board really needs to start taking these issues seriously.    It is hard to think of an advanced economy where so many people have had such broad-ranging concerns about an incumbent Governor –  and our one has more power than most.

The full text of my letter is here

Letter to RB Board re Orr October 2019 FINAL

Here is some of the text

You will, no doubt, be aware of the recent series of articles by the Stuff journalist Kate MacNamara. One does not have to be persuaded by all her arguments, or those of the individuals she quotes, to be seriously disconcerted by the perspectives on the Governor’s conduct that she reports. Some of the questionable conduct – the Governor’s treatment of Jenny Ruth at a recent press conference – was visible to all. Others weren’t. Perhaps all those other stories are false, perhaps all are grossly exaggerated. You would surely want to know whether or not that was so – MacNamara clearly having talked to people who are at least somewhat well-informed and the claims having been run prominently in a major mainstream media outlet – but you cannot have that assurance yourselves, or offer it to the public or Minister, without a serious review of the allegations, and of the wider “culture and conduct” that are claimed to have characterise the Governor increasingly in recent months. And yet your chair, when approached for comment, simply fell back on the line of “we haven’t received a formal complaint” (clearly suggesting you’d heard the informal unease many are feeling) as if that meant there was thus no need to do anything more. Frankly you owe it to the Governor, almost as much as to the public, to treat these issues seriously. If there is nothing to the stories – bullying, intimidation, bad-mouthing critics in public fora etc – surely the Governor’s name deserves to be cleared? If there is much to the stories, you need to act, and – having let things drift to this point – to be known to have acted.

And towards the end

Most recently, there was the statement released late last week by the Bank’s senior management – but clearly under the Governor’s aegis and in the Governor’s personal style. Anyone I know who has read it – and fortunately perhaps it hasn’t had much coverage – has been incredulous. How could the Governor of the central bank – the most powerful unelected person in New Zealand – be reduced to so much bluster, and attempts at distraction, trying to suggest that critics were raising unfair issues about Bank staff, when almost all concerns I’ve seen or heard have been about the Governor himself and, to a lesser extent, his senior management? The fact that his handpicked senior management went along with that statement, and were fully party to it, should itself raise further concerns for the Board (including because you also have statutory responsibility for keeping under constant review the performance of the Deputy Governor).

I could go on, but won’t. But there are ample prima facie reasons why the Board should be concerned about how the Governor is conducting himself and how he is conducting public affairs, and why that concern needs now to result in some open-minded but searching investigation and some serious accountability.

We should have a right to expect a Governor who is temperate, who displays gravitas, who demonstrates rigour, who recognises that every one of us has blindspots and is prone to making mistakes, who is open to genuine debate and challenge, who exercises a judicious authority, and models this sort of behaviour to the staff in the organisation he leads. You were responsible for Adrian Orr’s appointment. You need to act to ensure he operates in a manner consistent with those reasonable expectations. If you don’t, the Bank will be diminished – substantively, and in the eyes of domestic and foreign observers – the conduct of policy will be impaired, whatever potential Adrian has to be good Governor will never be realised, and your own standing as guardians of the public interests in the Bank will rightly -and perhaps irretrievably – be stained.

I gather from Neil Quigley that my letter will also be discussed by the Board on Friday.

I also wrote this morning to the Minister of Finance, partly to send him a copy of the letter to the Board, but also to highlight to him his responsibility for the Bank and for the Governor.

In many areas of the Bank’s operations the Governor operates independently of the Minister of Finance, and the Reserve Bank has day-to-day responsibilities for monitoring the Governor’s stewardship and conduct. But none of that diminishes your responsibilities as Minister of Finance. You appoint the Governor (on the Board’s recommendation) and the Deputy Governor, you appoint Board members (and now, specifically, the chair) and it is only on your recommendation that, if things got particularly bad, that either Board members or the Governor (or the Deputy Governor) can be removed from office. Moreover, you are the only person referenced in the Reserve Bank Act who is directly accountable to Parliament and to the public. If serious issues or concerns arise it is not satisfactory for a Minister of Finance to fall back on lines about operational independence or about leaving the Board to do its thing. You are responsible to ensure that all these appointees are doing their jobs to the high standards the public should expect from public officeholders.

and

These are serious matters and need to be addressed as such by both you and the Board. To the extent that concerns raised are either ungrounded or exaggerated, it is important that the Governor’s name be cleared. But to the extent that those concerns are warranted, it is important that they are addressed and issued remedied, for the sake of the Bank itself (including its staff), for the sake of good quality policymaking, in the interests of good governance in New Zealand more generally, and (frankly) for the Governor’s own sake. It isn’t good enough for the chair of the Bank’s Board – who is directly responsible to you – to suggest that not having received a “formal complaint” there is no need for the Board to do anything. Anyone charged with a monitoring responsibility needs to be much more pro-active than that.

One of criticisms of the Governor has been the lack of any serious or substantive speeches from him on topics he is responsible and accountable for.  As I noted to the Board, apart from anything else, such speeches can be one way of benchmarking the Governor’s performance.    As it happens, late this morning the Bank issued a speech by the Deputy Governor. I haven’t yet read it –  so reserve the right to disagree and criticise specifics (good serious speeches create the basis for intelligent discussion and debate) – but flicking through it it simply looks like a serious speech, of the sort a thoughtful central banker would give anywhere in the advanced world.  Of the sort unseen from Adrian Orr.  Bascand has his weaknesses (I’ve written about some of them here, including his apparent reluctance to make a stand) but back in 2017 he told media that he had applied to be Governor (which I wrote about here).  He missed out.  But whatever his other weaknesses, it is impossible to imagine that anyone would be raising the range of concerns –  process, substance, conduct –  had the Board and Minister appointed Geoff Bascand as Governor.

 

 

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