Page 3879 - Week 10 - Thursday, 28 August 2008
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this was a new corporation, it was by no means a new line of business enterprise for the government. In fact, by May 2004 the fleet business was the only remaining business line within TotalCare Industries Ltd, which was being wound down in response to government concerns about its poor performance.
Through taking control of the governance regime applied to business operations, the government had put in place measures to rectify the many problems within TotalCare that had been allowed to persist under the watch of Mr Smyth and his fellow voting shareholders while in government. By that stage, the company had become dysfunctional under the Carnell Liberal government. In accordance with advice from the then chair of TotalCare, supported by a report from two expert consultants commissioned by an interdepartmental working group, the fleet business was carved out from TotalCare into a separate corporate entity, with a view to the government disposing of that entity in three to five years.
The committee report has assumed that the only reason for setting up Rhodium was for the government to make money. That simplistic position is indicative of the lack of understanding of governance matters displayed by the committee throughout the report. The decision to establish a TOC was driven by a multitude of considerations which might include a response to recognition of unacceptable risk or to the recognition of the value of market forces driving efficiency. There are numerous reasons why a government may choose to divest direct control of an enterprise. One such vehicle that still provides a solid governance model is that afforded by the Territory-owned Corporations Act.
In this case, it was also necessary due to the tripartite nature of Rhodium’s novated leases and the need to ensure that a separate legal entity was retained. It was recognised at the time of establishing Rhodium, for instance, that the government would want to formally endorse a future business model for the new territory-owned corporation. To that end, a statement of corporate intent process would logically become the mechanism for the voting shareholders of the new entity to finetune the mandate, objectives and business model of the new board.
As is the common governance arrangement in any business, the board of the new TOC was expected to put in place a robust business plan to supplement the statement of corporate intent. This is the normal way these things are done. Somehow, though, the committee has become confused about the relationship between a corporation’s board and its shareholders. In the days since the committee tabled its flawed and incorrect report, the Chief Minister has put on the record advice from the territory’s senior legal adviser, the Government Solicitor, setting out why the basic premise for some of these recommendations is without any legal basis. I table that advice:
Rhodium Asset Solutions Ltd—
Responsibilities of voting shareholders of TOCs—Copy of letter to the Chief Minister from Peter Garrisson, Chief Solicitor, dated 21 August 2008.
The single greatest misconception underpinning much of the committee’s report is that around the role and actions of the voting shareholders and the direction and management of Rhodium. Indeed, the report includes the following conclusion:
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