Page 3443 - Week 09 - Thursday, 21 August 2008
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But I have some real reservations in my mind that that is where the entire responsibility lies. I think the directors in the first instance have a significant responsibility, but management—and I agree with that aspect of what Ms MacDonald said—have a fair bit to explain in terms of the conduct. Directors can be misled. I have little doubt that, whilst they may have been not as attentive as I might have been if I were in that role—or some of the others here, with the benefit of hindsight—there is no getting away from the fact that they were very badly served by the management of this corporation. I would say, I suppose with the benefit of parliamentary privilege, that they were somewhat deceived in terms of the way that that corporation was run. They have, I think, a legal responsibility but I think they have mitigating factors considering what emerged.
When I first came into the Assembly in 2004, I gave my inaugural speech on an important topic, the dangers of government excursions into business. Little did I know that only two years later a serious issue would arise on precisely that topic. Indeed, the very first bill on which I spoke, some couple of days later, was to create Rhodium Asset Solutions. I expressed my concerns at that time, but Mr Quinlan assured me as a new chum here that I had nothing to worry about.
I worked extensively in business before entering the Assembly and I know at first hand the kind of devotion and skill it takes to succeed in business ventures; it is not an area that one can undertake as a side project. Running a successful business is an onerous commitment. It is not a job for ministers, who are usually run ragged with other government commitments. Ministers lack the time needed to properly oversee a commercial business venture; often they also lack the skills needed to run a successful profit-driven enterprise. Ministers are used to receiving the revenues they need from legislative fiat rather than through dealing with customers on a voluntary basis. As a result, they are often unprepared for the difficulties involved in actually creating wealth.
The policy directions of government can also give mixed messages to these kinds of business enterprises, as is evidenced in the report, since the government is not a profit-maximising entity. When you put those objectives to be a profit-maximising entity in there with other social objectives, you have the real potential to ultimately confuse those you charge with the task of developing the bottom line.
Problems at Rhodium illustrate the danger of government business operations. In the case of Rhodium, we have a company which operates under a part-time board of directors. I know there is sensitivity because some of those directors are to be too critical, but the fact of the matter is that they take those responsibilities; they are paid for it. It has been very unfortunate for them that they have been immersed in all this. And we have the sole shareholders being the Chief Minister and the Deputy Chief Minister, who are trustee shareholders.
This level of oversight means that a large amount of effective control in fact rests with the CEO of the company. The events at Rhodium have shown us the enormous danger of this situation. On 26 February, the chief operating officer of Rhodium informed the board of instances of alleged malfeasance by the CEO, which ultimately led to the investigations by the Auditor-General and the public accounts committee.
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