The concept of “moral hazard” has been much in the news recently. If banks can throw money around and pay themselves big divvies when all is well but if someone (or everyone) else must take the hit when things go pear-shaped, then they are encouraged to behave recklessly. If you can sell a mortgage, package the risk, and then sell that package again, collecting commissions all the way for passing on the risk, why not? Let the good times roll.
Well, we know a little about the answer to that little conundrum. In these circumstances I thought it might be an idea to look up “moral hazard” in Wikipedia and found several things of interest. First, the opening definition:
Moral hazard is the prospect that a party insulated from risk may behave differently from the way it would behave if it were fully exposed to the risk. Moral hazard arises because an individual or institution does not bear the full consequences of its actions, and therefore has a tendency to act less carefully than it otherwise would, leaving another party to bear some responsibility for the consequences of those actions.
It struck me that this is an issue going to the heart of the malpractice and incompetence that characterises the British Council. If an organisation knows that it can count on government backing, can operate out of government premises, can count on civil service pensions, can open tax-exempt language schools or otherwise operate from a position of status and tax and subsidy privilege in competition with genuine enterprise, can enjoy diplomatic immunity from prosecution and can lose responsibility for any misdemeanour in a collective fog of obfuscation and evasion, it meets the condition described above in spades.
The Wikipedia entry also puts the concept of moral hazard in the context of management, and here again the points will surely resonate with any British Council watcher.
Moral hazard can occur when upper management is shielded from the consequences of poor decision-making. This can occur under a number of circumstances:
· When a manager has a sinecure position from which they cannot be readily removed.
· When a manager is protected by someone higher in the corporate structure, such as in cases of nepotism or pet projects.
· When funding and/or managerial status for a project is independent of the project's success.
· When the failure of the project is of minimal overall consequence to the firm, regardless of the local impact on the managed division.
· When there is no clear means of determining who is accountable for a given project.
Five points there, and every one of them hits the bullseye. Even today as I seek to loosen the Gordian Knot of British Council prevarication and misrepresentation that has applied in respect of their dealings with me, who in the British Council will accept responsibility? The managers I dealt with are still there, but if challenged they would certainly plead the Nuremberg defence – Befehl ist Befehl. In that organisation, however, such a challenge is improbable. The Director General has moved on and has been replaced by his deputy, many of the trustees are there still, but the pack is regularly shuffled to ensure the sinecure status of all parties. Despite the government funding, the government does not accept responsibility for the actions of the organisation. Other bodies such as the Charity Commission turn a blind eye. No responsibility, insulated, opaque, protected, funded, unaccountable.
The British Council is, in fact, a hothouse for moral hazard growth and a model for how organisations insulated from risk and from the consequences of their actions will behave. The British Council is a study in moral hazard, and it has to change.
Well said, David! And here are two of the comments on Brown's
speech from the Daily Politics
Show blog of BBC's Andrew Neil:
" 10. At 2:33pm on 23 Sep 2008, Philipa said wrote:
I'm watching Brown's speech - can the BBC get the camera OFF has-beens like the Kinnocks and others. Let's see the bloggers and the journalists reactions as well as the two-faced politicians in cabinet that would stab anyone in the back to get on. The BLOGGERS are the representatives of the people more than some ambitious career politician like Milliband (but admittedly he does have a face you want to punch so very interesting to TV)
Let's see the BLOGGERS. Let's see the people and Andrew let's hear from the people too please.
Complain about this comment
11. At 2:59pm on 23 Sep 2008, neilrobertson wrote:
I see that British Council Chairman Kinnock is clapping away in Manchester as I type -
remind him that some of us workers are still needing that appalling quango to settle its
outstanding bills and adhere to its "values".
http://www.dblackie.blogs.com/"
Posted by: neil robertson | September 23, 2008 at 11:33 PM