Transport Minister Stood Down
...Due to issues around a conflict of interest
Transport Minister, Michael Wood was recently stood down for failing to sell his 1340 shares in Auckland International Airport Limited. He was asked to sell the shares about six times since 2020 due to a conflict of interest, but failed to do so, stating that an emailing error and his busy work schedule meant that he didn’t follow it up1.
Analysis
It’s a conflict of interest for the Transport Minister to hold shares in a company that’s part of the transport infrastructure, but how bad is this? Well you could argue that it’s actually a good thing that the Transport Minister is incentivized to ensure the success of part of the infrastructure, but a solid counter to that is that the Minister should not be incentivized for just one arbitrary part of the infrastructure and more importantly any incentives should decided by his manager, in line with the goals on the Ministry.
One thing I will say is that the level of incentive for corruption here is possibly low - we’re talking about an amount of money measured in the thousands, not tens of thousands - though the Ministers feeling about the money is possibly more important than the amount, when trying to persuade someone’s actions.
We know that he’s owned these shares since at least 2020, so assuming that he bought his shares at the low of $5, they would have been worth just $6,700. It’s possible that he owned them before the crash and lost half the value and had an emotional attachment to the loss which caused him to want to hold the shares to recover the money. Typically people have a greater negative feeling of losing money than the positive feeling of winning the same amount of money - imagine how happy you would be to win $100 vs how frustrating losing $100 is. This factor could cause a level of incentive greater than the relatively small amount of money involved.
Sticking with the assumption that he bought them at the low, they are now worth $11,671.40 (I have no idea where the media are getting the number $13,000 from - perhaps they’ve added some dividend revenue?). Using the media’s number, that means that at most he’s made just $6,300 or about $2,100 per year. I think it’s important to keep that number in perspective because in terms of Ministerial corruption, a couple of grand a year is small potatoes, especially compared to the large six figure salary he’s getting for being Transport Minister2 plus all the expenses he’ll be claiming.
Don’t get me wrong, this is still a problem. It’s a problem because:
It’s against the rules and you have to be squeaky clean in such a position (it seems dumb that he seems to have brazenly ignored the rules for just a couple of grand against a salary of at least a quarter of a million dollars a year). Either he doesn’t care about rules or he’s a bit ditsy about this. My personal feeling is that it probably was just human error or he’s been so frustrated about losing money (if he bought them before the crash) that he’s been determined to hold onto them to recover his money before exiting his position.
But more importantly, however small, it’s possibly an amount of money he cares about (otherwise why not just sell them for the amount of risk this poses?). If that’s the case (and he’s not just been lackadaisical about selling them), then this could have influenced his motivations in his job to act (potentially) against the interest of the public in favour of Auckland International Airport Limited.
Opinion
Having presented the information and analysis, I will end by offering my personal opinion on the matter. I suspect that because it’s such a small amount of money, his excuse of I’ve been busy is probably real. We all have things that we should do but put off because we hate doing, even though it’s not much work to do. Also, it’s possibly not enough money to manipulate his actions, though it would probably be diligent to review his work to see if he’s acted unduly in Auckland International Airports interests. This isn’t something that I’ve got time or am inclined to do. Hopefully a professional journalist will put the legwork in here.
Addendum: It’s also worth remembering that there is a transport problem around Auckland Airport, so a slight leaning towards the company’s interests may not even be out of bounds of normal Ministerial policy.
I heard on the radio today that Michael Wood has sold his shares in AIA and donated the proceeds to charity. The problem is that it's somewhat too late now. The concern was that having the shares would taint his choices to act in a way that wasn't in the public's interest, such as under-investing in intercity transport, forcing people to use the airport more, for example. Such damage would be far greater than any benefit he could get from such a small gain in shareholding.
On the positive side, one could argue that donating the shares means that there's less point in researching whether he acted unduly in the interests of Auckland International Airport Limited... Assuming that the maximum punishment would be to fine him to the value of his shares.
I remain of the view that the impact of his actions are negligible, especially because his gain was minimal and as Transport Minister, his interests should already be tilted somewhat in favour of Auckland International Airport.