Posted on Aug 31, 2012
There are times when a chance conversation triggers thoughts, and perhaps insights, about issues which directly impact on our daily lives. A recent conversation with a British business associate had the effect of making me think about the New Zealand business environment.
The associate's British company has just taken over distribution of their products in the German market from a previously independent distributor. They are now dispatching orders from their UK warehouse, which saves them the expense of running a German warehouse , and can get orders to their German customers as quickly as previously, and cheaper. This reminded us of a competitor to one of our businesses that is able to despatch orders from the United Kingdom, to customers in the South Island of New Zealand, cheaper than we can from Auckland, and it takes only a day or so longer. And it is all courtesy of NZ Post. But that is a story for another day.
So aside from the cost and efficiency savings sending orders to Germany from the UK, we talked about doing business in Germany. Ironically, the reason it is so economic to send goods from the UK to Germany is because the German manufacturing sector is so efficient and productive, and they produce such good stuff, that there is a huge flow of goods from Germany to the UK, meaning backloading freight is cheap.
But what I learned , in addition to the economics of UK - Germany cross border trade, was a little about doing business in Germany.
My associate was positive about the fact that all his German customers pay - and pay on time ! And he also commented that German business people take responsibility for their debts - in part because legally they have to.
Now I don't deny that the limited liability company structure has been for centuries a boon for business in the western world. It has enabled business people to raise capital for projects and the creation of business enterprises, without necessarily taking on the personal liability for that debt.
But you would also have to conclude that there are many instances where not only has risk been protected by limited liability, but so has stupidity, fraud and incompetence.
We don't have to look very far back into our recent business history to find major examples of individuals benefiting from the shelter they have been able to take behind the cover of limited liability company structures, and also trusts.
Perhaps it is time that we took a leaf out of the German book and enforced a degree of personal responsibility ? I wholeheartedly support the concept that individuals who take risks in business, and of course put in the sweat equity, endeavour, ingenuity and the rest, should benefit. But when they are taking those risks with other people's capital there needs to be an element of personal culpability.
It's not just the high profile examples of finance companies. That so many of the supposed guardians of the nation's savings have been able to walk away from the disasters they have created is bad enough. Every day we are seeing examples of businesses walking away from their responsibilities to pay their debts - with seemingly no repercussions. And often these are not just small businesses who have got in over their heads, but major listed companies as well.
More laws are not the answer. Already enforcement is so expensive that often businesses abscond from their debts because they know that they can with impunity.
Perhaps it is time that we placed greater stead on our ethical responsibility. Perhaps it is time to talk about doing what we do because it is the right thing to do - not just because the law says we have to.
DISCLOSURE: Not so long ago a tenant leased a building from Expedio, paid the initial 2 month deposit to the agent, and then never paid another cent until he was evicted more than 6 months later. We will happily disclose full details of this ratbag on application.