Hundreds of millions of dollars in wage subsidies have been paid out to profitable companies and their shareholders. Nick Mowbray, Zuru co-founder and one of NZ’s most successful entrepreneurs, urges them to do the right thing and pay the money back.
Last month, Summerset Group Holdings, an NZX50-listed company and one of the country’s largest aged care providers, declared an underlying profit of $45m for the first six months of the year. Summerset’s stock price also rose 34.2% over the previous 12 months, adding $430m dollars in market value for its shareholders.
A few weeks later, New Zealand retail chain Briscoe Group, which owns Briscoes, Rebel Sport and Living & Giving, declared a profit after tax of $27.9m, following a period in which the company experienced “unparalleled demand”, according to its CEO.
And in early September, SkyCity, a company that made nearly 1,000 workers redundant in April and May, reported a net-profit of $66.3m – down 60% on the year before but still far better than expected. Others that have sailed through relatively strongly include rubber manufacturer Skellerup, aged care provider Metlifecare and fisheries giant King Salmon.
This shows that while Covid-19 has devastated some businesses, it has not hit all with equal force. There are dozens of cases of large New Zealand companies earning significant profits despite the global pandemic laying waste to our economy, ending thousands of jobs and causing immense financial hardship.
Apart from the huge sums of money these companies made over the past year, what else do they all have in common? They all received the government’s Covid-19 wage subsidy.
As a CEO and business owner, I believe these companies are exploiting the system. They are abusing its purpose. The wage subsidy was not intended to boost the corporate profits of our largest companies or foreign companies. It was intended to help people who genuinely needed it: the out-of-work builder, the struggling restaurant owner who couldn’t open during lockdown, the tourism business that no longer has any customers.
In what world is it ethical for companies to take a government handout and then declare profits and pay dividends a few months later? Not only have they levied an enormous burden of debt on the country by needlessly taking borrowed money, but they have shamefully contradicted the way they usually behave when things are going well.
When times are good, these companies choose to privatise profits and keep their earnings for themselves. But as soon as things turn bad, they’re more than happy to take a government handout and socialise their losses, making it society’s problem. Only, these companies didn’t even make losses – they continued to make profits, and in some cases even increased them. Capitalism is not meant to be a one-way street. You shouldn’t get to take profits in the good times and put your hand out and have hard-working New Zealanders pay for it in the bad times.
What was the wage subsidy for?
The wage subsidy criteria was built on a foundation of trust. Businesses needed to self-declare that they were struggling; that their revenues were down 30% or 40% in order to receive the subsidy. It was a simple criteria that relied on the integrity and honesty of its applicants. It is therefore incredibly easy to abuse.
These companies make no secret of their profits – they’re listed on the NZX so declare them, and issue proud press releases. Nor is the amount of wage subsidy they received confidential. It’s right there, for all to see. A simple search on the MSD website will show anyone how much these businesses received.
Cumulatively the New Zealand business community has received over $13bn in support, intended to help retain workers through the lockdowns and their immediate aftermath. It’s an unprecedented and expensive crisis. And it’s important to remember that every dollar paid out in wage subsidies is borrowed. At the end of the day, it’s our children and our children’s children who are going to have to pay it back. So you would hope that, even if they took the subsidy in good faith, business owners who have discovered that they didn’t really need it will return the money, so that the government can direct it to where it’s needed most.
It ultimately comes down to society, and business’s role within it. Surely in such a crisis, where the principles of kindness and compassion are so critical, these hugely successful companies can afford to chip in and shoulder a share of the fiscal responsibility?
Surely in a time when thousands of New Zealanders are losing their jobs and are struggling to make ends meet, shareholders can be moved down the list of priorities?
If they can financially sustain their business, then they shouldn’t be taking a handout. But if they have taken the wage subsidy and then reported profits, then they have an ethical and moral obligation to hard-working New Zealanders to pay it back immediately.
It’s the right thing to do. It’s the fair thing to do. It’s the human thing to do.
The Spinoff Daily gets you all the day's best reading in one handy package, fresh to your inbox Monday-Friday at 5pm.