Page 3880 - Week 10 - Thursday, 28 August 2008
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The shareholders, while not directly responsible for the day to day failures and questionable behaviour at Rhodium, failed to establish and communicate its expectations to the company.
It appears that the committee has come to this conclusion based on a misunderstanding of the governance framework applying to territory-owned corporations. The committee claims at paragraph 4.30 that the shareholders of Rhodium failed to give guidance to the board on what was expected of it and sent mixed messages around Rhodium’s future. This is despite the fact that the voting shareholders regularly communicated with the board around the future directions of the company as evidenced by the annual statements of corporate intent that have been tabled in the Legislative Assembly and a range of other correspondence between the board and the voting shareholders, all of which information was made available to the committee.
The advice from Treasury clearly shows that the voting shareholders properly provided guidance to the directors even before the corporation was formed. Unfortunately, there was no mention of this in the committee’s report. The advice clearly shows that the voting shareholders sought separate advice on the draft business plan. Indeed, the government gave careful and deliberate consideration to the business plan put forward by Rhodium but decided that, in the interests of the wider community, a different approach was required.
The government has already acknowledged that the board has had to manage in a more uncertain environment while the possible sale of Rhodium was being considered. The government has also indicated that there were delays in reaching certain decisions whilst the voting shareholders sought to obtain more information on various issues, some of which had been the subject of differing advice. However, it is evident that the voting shareholders maintained regular advice to the board about the immediate future directions for the company. I table the Treasury advice, which offers a compendium of written communication on this matter:
Rhodium Asset Solutions Ltd—
Advice on aspects of Report Number 16 of the Standing Committee on Public Accounts, prepared by ACT Treasury, dated August 2008.
The committee report includes the notion that the voting shareholders compelled the board to take on the contract for the ACT fleet management under conditions that were not commercially viable. In regard to the fuss made in the report about Rhodium taking up the ACT fleet management arrangements on a cost-recovery basis, again there appears to be some confusion in the committee’s understanding of the facts.
The voting shareholders did not engage the provisions of the TOC Act that provide for a direction to be made to the board. The assertion in the concluding paragraph before that recommendation that “it appears that the shareholders have failed to comply with the Territory-owned Corporations Act 1990” is simply wrong. Indeed, the facts are quite to the contrary. The board instigated the new contract proposal by seeking to retain the arrangement based on the benchmark pricing in order to protect
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