Details vacuum befuddles both Key and his rivals

The loyalty scheme for Kiwi shareholders that Prime Minister John Key announced at the weekend is sliding into a hopeless muddle.

Yesterday Mr Key hopped around on the still hazy promise to issue bonus shares to retail investors who get into the Mighty River Power float planned for later this year. Thankfully, for him, the Opposition is managing little better.

Mr Key rather unhelpfully (for him) pointed out that, despite having no loyalty scheme, shares in Air New Zealand and Contact Energy had stayed pretty well within the collective Kiwi bosom. That begged the question - why bother with loyalty schemes at all?

Other than to again stress the Government's enthusiasm for long-term Kiwi shareholders, Mr Key seemed a bit bereft of a powerful argument. He happily admitted that he hadn't seen a "counter-factual" on how things would pan out in the absence of a loyalty scheme.

In fact, it's fallen to a financial commentator usually popular on the left of politics - Rod Oram - to make the best case for loyalty schemes. Oram has canvassed a handful of academic papers showing that not only are the schemes common, but they're also pretty good at encouraging a longer-term grip on shares.

According to Oram, a Finnish study established that in the first 100 days after a share float, only 4 per cent of shareholders promised a loyalty bonus sold down, whereas 40 per cent without bailed out. Even after getting their bonus, more than 60 per cent stayed on, with many by that stage counting the shares as a core part of their portfolio.

But instead of having such choice arguments quick to hand - which you would normally expect from Mr Key - his best lines seemed to be aimed at chiding the Opposition.

It suggests a rather casual, if not rushed, attempt at a newsy "announcement" for the National Party faithful at the weekend. It all feels a bit half-baked - "we think a loyalty scheme will work, but we don't really know why and we can't tell you exactly what it will look like".

The details vacuum perhaps explains why Labour's assault misfired at its first shot, touting a ludicrously inflated and totally unrealistic cost.

Only the Green Party's Russel Norman has been consistently and forcefully pressing the question on the price of a loyalty scheme.

Yet even his practised dissection has rather obscured the point, by becoming fixated on constitutional niceties to the neglect of serious equity questions.

Fairfax Media