Part of obtaining a University Economics degree is to understand a concept called ‘Moral Hazard’. A moral hazard occurs when the actions of one party change to the detriment of another, after a financial transaction has taken place. Another aspect of moral hazard is the ‘Principal-Agent Problem’. This is where one party, called an Agent, acts on behalf of another party, called the Principal. These concepts highlight a dilemma—how to motivate an Agent to act in the best interests of the Principal, rather than in their own best interests.
It’s a dilemma we face throughout New Zealand when we Principals (Voters) attempt to get our Agents (Councillor’s) to turn up to Council meetings—something we expect of them, given we remunerate them accordingly, in the hope our city will be managed in the most effective way possible. The problem is that when one or more of these Councillors don’t take full responsibility for the consequences of their actions (or inactions in this instance), this leaves other Councillors’ to take on more responsibility for the decisions that are made. It may also mean that there is less diverse thought and scrutinizing involved in the decision making process. It also means that voters feel ‘screwed’, to put it in colloquial terms.
In the business world various mechanisms have been designed to align the interests of Agents and Principals, such as commissions, profit sharing, performance measurement and the threat of termination. In the political world we need to find other alternatives to ensure prime performance. For a start, we certainly need to monitor our elected representatives better than we do at present. While the fourth estate is partly responsible for making politicians accountable, it’s also the responsibility of the District Council itself, to monitor all Councillors’.
One option could be to regularly publish attendance records, and make them easily accessible, through a Council’s website. This practice is becoming more common in City Councils around the world. Many are also providing access to ePetitions as an easy method for citizens to convey important issues to the attention of the Mayor and Council—both of these propositions are sadly missing from most Council websites throughout New Zealand.
While some are suggesting meeting allowances as an obvious answer to the problem of non-attendance, most local authorities in New Zealand have moved away from paying meeting allowances because it is very difficult to predict exactly how many meetings will be held. Another aspect to consider is that not every Councillor can turn up to every meeting, even if they wanted to. Often Council work requires them to be out of town, for example, or to attend other important meetings, and genuine illness can also prevent them from attending. In these instances it would be unfair to reduce a Councillor’s pay.
New Zealand could also adopt a political tool commonly used in the USA and Switzerland, to keep representatives in line—the Recall referendum. This political tool allows voters to sack a Mayor or Councillor in-between elections, when voters are dissatisfied with the performance of their elected representative. Think of Governor Gray, who was replaced by Arnold Schwarzenegger in a Californian Recall referendum in 2003. Once the required numbers of signatures have been collected to trigger the Recall referendum, the whole electorate then gets the opportunity to decide the outcome.
The political theory behind the Recall referendum is that voters should retain the right to control their elected representatives, even after they have been elected. Perhaps the threat of losing their jobs before their three year term is up is just the motivation some Councillor’s might need to fully perform their duties. Imagine the embarrassment to a Mayor or Councillor if they were thrown out of office before the end of their term, along with the humiliation that would follow them for the rest of their careers.
[Steve Baron is a Wanganui based political scientist, co-editor of the book ‘People Power’ and the Founder of Better Democracy NZ.]