THE PRESS THURSDAY, OCTOBER 23, 1980. The super-company plan

Press, 23 October 1980, Page 16

THE PRESS THURSDAY, OCTOBER 23, 1980. The super-company plan

Even by international standards the merging of three of New Zealand’s largest companies produces a fairly big conglomerate of business enterprises. By New Zealand standards the holding company being formed by Fletchers, Tasman, and Challenge is enormous and the concentration of the final control of its business can only be frightening to smaller businesses. The Government itself, is of course, by far a larger enterprise when measured by spending power and decisions on raising loans that can be backed by the whole strength of the New Zealand economy. In its capacity to control the expenditure of a large sum of tax revenue and other earnings the Government is many times more powerful than the proposed group. Relatively little of this State spending is truly discretionary. Adjustments can be made up or down in the State spending and these adjustments have a significant impact on the condition of the economy. An analogy with the spending and investment decisions of a very large company may be tenuous, but the critical point is that a company, even one as diverse in its activities as the proposed grouping, has much more discretion in the directions it will take and the changes it can make in its investment and spending programmes.

Separately, the three large members of the group can make different decisions. Together they must make one, and this fact gives the group unprecedented power in the economy. One likely response from the Government, or from a future government, is that more stringent supervision and controls will be devised to monitor and counteract the combined strength of the group. The effects of such Government intervention would touch all business.

In spite of initial expression of caution by industrial unions, the merger may prove to be good news for the many unions concerned with the industries and trades within the group. An extremely powerful group, commanding the employment of a vast number of workers, can take a very independent line in negotiations. This may be a tough line. In practice, however, the dominant and most prosperous employers, especially those engaged in exporting, can accept and set trends in wages and conditions that cannot be borne by smaller companies. Governments have been irked by such circumstances before and have found that the trends run against the best interests of

the country as a whole. On this front, too, the impulse for Government intervention is likely to become keener. The hope that more jobs will be created cannot be ignored.

The combination of assets through the proposed merger is not by itself a way to increase wealth and productivity. Increases in both are possible under united control but, so far, all that is immediately enlarged is the power of those in charge of the group. The three enterprises combined are not any larger than they were before. The real change is that every other business enterprise is suddenly becoming relatively smaller, and even the biggest of them relatively less influential in business decisions. This -is not good news for a country in which small businesses play a big part in developing new ideas and in which by far the greater part of the labour force is employed by small and middle-sized businesses. One result of the merger, if not of the forces that caused the merger, will probably be more mergers to create stronger and more adventurous business groupings. In international dealings, in exporting schemes, in joint ventures with large overseas companies, and in launching new enterprises from a bigger base for investment, the merger can be accepted as a logical and probably beneficial move. It will certainly be better than ad hoc groupings to deal with overseas companies, for in such groupings the New Zealand strength and voice can be divided among partners. The benefits of the merger in bringing about industrial growth and in reinforcing a change that should increase employment in New Zealand and promote export earnings have been outlined by the. spokesmen for the group. Such benefits are needed, and they may prove to be real. The right decisions by the group could pertainly be beneficial. The wrong decisions could have bad effects in proportion to the size of the group. The greatest source of unease about the concentration of management lies in this.

It is small compensation that tens of thousands of." New Zealanders through direct and insurance company shareholdings have some stake in the merger. The responsibility for control lies at the top. Such a change in the business world demands a great adjustment in the thinking of New Zealanders and the people at the top of the new company can expect the going to be hard until that adjustment is made.