The echo of the criminal conviction handed down in the first instance for the Morandi Bridge disaster has just subsided. Notably, 12 years were given to former CEO Giovanni Castellucci, to whom investigations and judges attributed responsibility for corporate management aimed at saving maintenance costs, thus putting motorists’ safety at risk. Furthermore, despite awareness of the Morandi’s structural problems, the start of extraordinary maintenance work remained on paper for too long.
The occasion is therefore opportune to explain and help readers understand the (only apparent) “trap” in which any manager responsible for infrastructure networks systematically finds themselves. Whatever they may be: electricity, gas, highways, aqueducts, etc…
Those who manage them are caught between Scylla and Charybdis: if they let themselves be guided, in carrying out ordinary and extraordinary maintenance works, by technical necessities and the principle of maximum caution, they will probably end up closing a financial statement with modest or even negative results. And very likely will be dismissed by the main shareholder who does not receive the generous dividends they hoped to achieve with their investment.
If, on the other hand, the guiding light of their action is the budget constraint and, specifically, shareholder remuneration, they will probably be forced to cut costs – and the maintenance item is among the most important when we talk about infrastructure networks – achieving magnificent financial results. Until a disaster occurs which, besides costing human lives – in a tragic roulette – brings the company to its knees, ruins their career, and sends them to jail.
The cause of it all is the particular nature of the business activity of building and managing infrastructure networks.
From a revenue perspective, it enjoys relative stability, often being a natural monopoly (just like highways) whose prices are regulated and the entire activity is heavily controlled. In short, there is no market and there cannot be one. Given the substantially stable and predictable revenues, profit is therefore directly a function of costs. Among these, maintenance has a so-called deferred effectiveness: its value is appreciated when nothing collapses or bursts. Otherwise, immediately, they seem like costs that do not generate value, in the sense of direct correlation to emerging revenues or ceased costs. They simply serve to reduce or eliminate the probability of a future harmful event which, due to its potential danger, could jeopardize business continuity. Its value generation consists of avoided damage, rather than a more evident and easily understandable emerging revenue.
And this is precisely where the difference and the logical and causal short circuit lie: avoided damage cannot be evaluated and appreciated until it manifests itself, unfortunately often in tragic and catastrophic ways. So someone – ignorant of the basic rules of business economics and thirsty only for dividends – could absurdly claim that it is “wasted money.” The ceased cost (i.e., savings on maintenance) is instead immediately accounted for and visible. Indeed, defying fate, the avoided damage might never occur and the “cost-cutting” manager – like a trapeze artist managing to perform somersaults without a net – would go down in history as a management genius, glorified by the shareholder with full pockets, when in fact they have only played roulette with people’s lives.
It all depends on the number that comes up. But by that point, ethics and sound principles of business economics have long been buried.
Putting things even more in perspective, one wonders how it was possible to entrust such assets to private entrepreneurs guided (legitimately, of course!) only by market logic and profit, perhaps with a short-term horizon.
These are assets that only the State, a patient investor with social and strategic objectives, not therefore subservient to quarterly numbers for investors and subject to the dictatorship of ROI and ROE, can own and manage. In fact, the Fathers of the Republic had placed all energy networks under public control with Enel, Eni, Autostrade, Telecom, etc… and Enrico Mattei even paid with his life for the development and defense of these vital infrastructures for Italy’s growth.
Then came the EU, the Maastricht criteria, Mario Draghi’s privatizations, finally the “brave captains” of the left-wing struggle and government, and since then, Mattei turns daily in his grave.
