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The big gamble

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No one wins a war on the application of a tactic only. You may win battles with tactics, and if you win enough battles you may win the war. However, one plans to win the war with the application of strategy. This is the big gamble. Tactics are the small wagers, playing the numbers so to speak. When one wins or loses one's tactics, these are small victories and even smaller losses.

In the contemporary world, the wealth and development of poor small countries cannot be achieved by the application of tactics only. Even if they are successful, they provide only small victories: the occasional balancing of the budget, once in a while the restraint on inflation, incremental increases of live births, the occasional highway, and even perhaps the attraction of foreign investment in a port. Enough, perhaps, to pay the bills occasionally but not enough to leave an endowment for the future generations.

 

Public Service Quality

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Some years ago I carried out a research project on public service quality. The research was designed to show whether the investments in the new public service reforms were justified. The argument was that public service departments should deliver good public service; and the better the public service, the better the public service organization. I used the SERVQUAL instrument to measure public service quality in the new public service agencies and the traditional public service agencies. The expectation was that we would register better public service quality in the new public service agencies, and for the most part the results demonstrated that this is true. However, there was one significant and surprising result. Public service clients thought that they got superior service from the revenue collection agencies!

 

Executive Risk

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Three and a half decades ago Jensen and Meckling published their seminal article on agency cost ("Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure"). They recognised the invidious position in the which the modern executive was place: managing assets that he would almost inevitably apply to his own advantage. Jensen and Meckling were concerned with developing a model that would align the interest of the executive with those of his principals, the shareholders in the enterprise. Their analysis of the inclinations of the modern executive was exceptionally insightful, even if the solution they developed to overcome them, rewarding managers more to align their interests with those of the owners, have not proved to be particularly successful. Greater rewards for the modern executives have just made them more greedy.

To the plethora of risk contemporary investors must now consider a new one: "Executive risk." What are the changes that the manger you employ to husband your assets will simply dissipate it on gambles and his own reward? Unfortunately, it is very. Modern management theory must now address this problem. Jensen and Meckling where on the right tract. It is necessary to align the interests of the executive with those of the shareholders, but this cannot be done only by sharing rewards. It is necessary also to share the risk. The modern executive needs to face the consequences of his actions. Until the modern organization develop schemes to do this, there will be no way to avoid the dire consequences of executives risk.

 

Towards an anticorruption theory of public procurement

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I will come back to this theme several times over the next several months, but I am fascinated by the concept of a corruption-free public procurement system. As much as we advocate for efficient public procurement systems and in our grand pursuit of 'best practices', we always have to address the nagging doubt that our public procurement processes are being derailed by corruption.

It seems that allegations of corruption fall more readily and more easily on poor Third World countries. When such allegations are made against governments in rich countries, they are quickly forgotten. Can you imagine if the allegation was raised, about a poor developing country, that its representatives in Parliament regularly accepted money from persons to raise questions in the legislature; or that the members of the legislature consistently, and uniformly across party lines, had established a tradition of making fraudulent claims on the government for maintenance expenses; or that a government would give tax credits for bribes made overseas; or that the central bank gives business persons foreign exchange permission to pay bribes overseas; or that the government would support the executives of one of its strategic enterprises paying bribes to members of a foreign government; and when evidence of the latter misconduct is made public, the government used its control of the prosecuting agency to prevent the prosecution of those involved.

 

Thick and fast

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Levers JThe Judicial Committee of the Privy Council has recently issued its advice on the hearing of the report of the tribunal to the Governor of the Cayman Islands under s 4 of the Judicial Committee Act on Madam Justice Levers ([2010] UKPC 24). The opinion of the Board was, 'Levers J continued to behave in a manner that was unacceptable in the performance of her judicial duties.' The Board therefore concluded that '... by her misconduct Levers J showed that she was not fit to continue to serve as a judge of the Grand Court and humbly advises Her Majesty that she should be removed from that office on the ground of her misbehaviour.'

Last year the Judicial Committee issued its advice on the hearing of the report on the Chief Justice of Gibraltar ([2009] UKPC 43). In that case, while the Board agreed that the CJ's conduct showed a lack of judgment, they accepted that no criticism was made of his ability to perform his functions. The Board was not prepared to say that the Chief Justice's conduct amounted to misbehaviour and would not accept that his conduct demonstrated inability to perform his functions.

 


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