Page 3982 - Week 11 - Tuesday, 15 Sept 2009
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The powers and functions of each authority are defined by statute. This means they can be subject to varying degrees of ministerial direction and control as prescribed by legislation.
Territory authorities are also subject to the Financial Management Act, which contains many of the common governance provisions that apply to each authority. Territory-owned corporations, on the other hand, are formed under the commonwealth Corporations Act. They are commercial businesses managed by a board appointed by the government shareholders. The board members are subject to the duties and liabilities of directors under Corporations Law.
It is important to realise that territory-owned corporations are real companies. Their directors and management are subject to the strict disciplines of Corporations Law. Their accounting systems and operations must comply with Corporations Law. They are subject to real sanctions if they do not comply. An interesting feature of territory-owned corporations is the inter-relationship between the government and the company. The ministers are shareholders of the company. They are not pretend shareholders; they are real shareholders with the right to replace the board or to intervene by way of calling a general meeting to pass resolutions or to use their residual powers of direction under the Territory-owned Corporations Act. However, as with shareholders of privately owned companies, they do not normally exert control over the day-to-day operations of the company.
Under the Westminster system of ministerial accountability, ministers are seen as responsible and answerable for all that occurs under their administration. However, it is evident that ministers have limited ability to exert direct control over territory-owned corporations. Of course, the opposition and the media will always try to beat up particular incidents for political point scoring as the case may be. However, it is impractical to expect ministers to run large commercial organisations as managing directors. It would simply be unrealistic for ministers to be expected to have the relevant background and the experience to run multimillion dollar businesses. That is more properly the role of an expert and experienced board.
The government for its part should ensure that it has in place the right systems to monitor the performance of each of its territory-owned corporations. This government does have in place well-established and comprehensive monitoring arrangements to oversee the activities of each of its TOCs. These are reflected in legislation through the TOC act, and they are consistent with the regimes in all other jurisdictions. In fact, it was this government that updated the governance arrangements for statutory authorities and TOCs through legislated amendments to the Financial Management Act in 2005 and the Territory-owned Corporations Act in 2004.
Obviously not all government business activities are suited to being established as territory-owned corporations, and I will demonstrate a classic example of this point later on. The challenge for any government is to get the role and incentive structures right in terms of sensible administration There are also a select few government-owned companies that are not subject to the Territory-owned Corporations Act. One that springs readily to mind is Totalcare. Perhaps at this point I can briefly reflect on what transpired with Totalcare.
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