Yesterday I noted the incredible achievement of Rocket Lab, creating a world leading tech company in Auckland. But now it has many employees in the US. Will the NZ dynamism leak away to California, as it has with so many of our best businesses? 

It must be a high likelihood, and not just because US protectionism could force the issue.

We are now over 40 years into trying to stay in the first league while wearing the ball and chain of stupid personal grievance and unfair dismissal law. It routinely protects the incumbency of management by jobsworths. It magnifies the damage from  DEI appointment preferences.  We have the own goal of not being able to change dud management unless and until they’re doing damage even lawyers can recognise.  

Think about the impossibility of creating here a Google or an Amazon, or Microsoft, or an Apple or a Tesla or a Space X.  A Steve Jobs or Elon Musk has to keep sifting and culling to ensure that key staff are all truly outstanding people. US productivity soars with innovative companies because, among other things, they do not need to tolerate second best. 

Our law means you have to prove there is something wrong with an employee to replace them. So managers need not worry about being replaced by someone better, as long as they’re not clearly bad. 

Getting outstanding leadership in place needs a right to replace when you need or find someone better, not just when you can prove that the incumbent has persistently messed up, after warnings or has his hand in the till.

Bosses are paid hundreds of thousands more than loyal workers who might average say $60k. Senior management get so much more because we know leadership matters. No organisation can be outstanding, no matter how diligent and skilled its workers, without outstanding leaders. Mediocre leaders kill the prospects of everyone they can affect.

Until lawyers invented unfair dismissal, a justification  for high executive pay was the ever-present risk of being replaced by someone better. Because the interests of the enterprise and its people came first. But our law now shelters these super-earners from the risk that justifies their pay. The law says you can’t put the interests of the many ahead of the privileged senior management, by replacing them because there is someone better. In fact, the way the law works in practice, duds can hang on for years.

ACT MP Laura Trask has a member’s Bill drawn that would modify one small aspect, allowing without prejudice negotiation so you can at least sound out the possibility of someone mediocre getting out of the way if you pay them to go. That is a useful but timid start.

The real reform needed is to allow high flyers, perhaps defined as people earning more than an MPs salary, to agree employment terms that accept they cannot use unfair dismissal law to save them having to go when asked. The change need not be forced on anyone. High flyers could insist on the status quo. If they are the genuine article, they should have enough bargaining power to determine whether they want security and less pay, or more pay plus say three months’ compensation for accepting that they must go as soon as the directors lose confidence in them.

This is not revolutionary.  It was our law until 50 years ago. It has long been the law in Australia for people above a salary bar.  It should be welcome to genuine trade unions, interested in improving the circumstances and job security of workers with less bargaining power.  Why should they worry about fat cats having less job security? 

Indeed that was what the CTU thought more than 20 years ago, when I sounded them out. I proposed that as an amendment to an employment law bill. I was told by a Labour MP that Margaret Wilson vetoed it. And National has never revived the proposition. Nor, as far as I know, have any of the major business organisations. Or the Institute of Directors. 

Is that too much of a surprise? They, and National and Labour are staffed by loyal members of the professional managerial elite, protecting their class interests. I’d love to draft the bill to fix this. But only if one or more of those bodies paid – so had a stake in it. Otherwise they’ll quietly let the idea die.

Do not be surprised when we lose Rocket Lab.