Weldon Tells SOEs Pretend You’re About To Be Sold
July 1st, 2009
NZX CEO Mark Weldon has given SOE directors a strong serve at a Treasury briefing on SOE performance, telling them they should drop their concern for their political masters and start acting as if their businesses will be on the block in the next two to five years. Weldon says “whether or not such an event comes to pass is immaterial,” although his choice of timescale does look a bit convenient. The National Party went into the 2008 election promising not to sell any state assets “in its first term.” Two to five years perfectly spans a National-led Govt’s second term, assuming it gets one.
Weldon strafed the SOE sector for achieving just 2.6% return on equity in the year to June 2008, while owning assets worth $39bn, turning over more than $10bn and employing more than 17,000 people. He says such a performance suggests there is something deeply wrong with the way SOEs are set up. He blames a combination of over-concentration on political and media risk at the expense of properly judged commercial risk for seriously limiting growth potential. Equally unhelpful is having both the Treasury and the Crown Company Monitoring Advisory Unit breathing down the necks of SOE boards all the time and second-guessing commercial strategy.
Weldon says “these are smart people. But they’re not business people.” But Weldon is not immune from criticism. He reportedly got a serve from NZ Post chair Jim Bolger who was in attendance and suggested maybe the NZX’s job of monitoring listed company performance isn’t all that flash either. SOE Minister Simon Power is already some way down this track, telling Select Committee hearings he sees SOEs adopting a continuous disclosure-style regime, akin to that required by the NZX for listed companies, although he sees that taking place over a matter of years.
Meanwhile, with the poorest performing of the electricity SOE’s, Meridian Energy, overhauling its internal cost structures, Weldon suggests one powerful signal of a change to commercial focus would be to axe politically motivated elite sponsorships such as ballet and opera and focusing instead on their local communities of interest. Sponsorships involving “customer-free events in Wellington with powerful policy Mandarins and politicians would only be logical if Boards believed business and politics are as one.” Meridian is a major sponsor of the Royal NZ Ballet while Genesis Energy sponsors the NBR Opera.
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