Page 3444 - Week 09 - Thursday, 21 August 2008
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These investigations showed several problems in the company. In June 2005, the CEO arranged to be paid a $10,000 advance by the company due to having her bag stolen while on holiday. Incorrect accounting treatment of this amount meant that it was not repaid until the next year, with no interest accrued. Errors in salary arrangements also led to the former CEO being overpaid by $14,599. The investigation by the Auditor-General found numerous instances where business credit cards were used for personal expenditure and several instances where documentation for credit card expenditure was insufficient or non-existent.
Testimony from the chairman of the board of Rhodium showed that the CEO had exceeded her authority in undertaking sponsorship arrangements. The CEO entered into sponsorship agreements on behalf of Rhodium for over $200,000, more than double the amount approved by the board. These agreements provided perks to the officers at Rhodium but did not lead to any appreciable benefit to the company.
The investigations also found that the chief executive officer had drafted her own employment contract, which included a luxury car. The board was not aware of the cost of the car until it was purchased by the CEO on behalf of Rhodium. The investigation also found that the CEO hired several family members as employees in the company—I am sure you would not approve of that, Mr Berry—without disclosure of this fact to the board.
While these kinds of problems can potentially occur in any company, investigation into the events showed that the detail in reports and accounts presented to the board was insufficient for them to identify these problems. Moreover, testimony that we heard from the chairman of the board showed that there was some confusion over the direction the government wished to take the company. But I do not accept that as a justification for the problems that beset Rhodium.
There was a draft business plan submitted to the ministerial shareholders. This plan was put on hold by the absence of a response from the ministers. The chairman of the board testified that he felt that the board was receiving informal mixed messages from the government.
The risks go beyond the normal risks faced by governments that invest in businesses through the stock market or other diversified investment avenues. Under more diversified investment schemes, the government is not exposed to this level of risk. Moreover, these schemes are well served to passive shareholding as they allow the shareholder to delegate responsibility of oversight of the investment to professional investment managers.
I have some issues—time is going to beat me here today—with the recommendation that the voting shareholders should delegate to a separate decision maker any ministerial powers that relate to current or proposed TOC activity. I just do not see how you can start on one hand having ministerial accountability and on the other hand saying, “We’ll delegate it to somebody else and give them all the ministerial power.” I might be misunderstanding that recommendation—I have skim-read this report, as it has only just been tabled—but I do have some real issues with that recommendation. I think that the ministers are charged with the task as acting on behalf of the beneficial
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