Review of Commonwealth Government Business Enterprises ...

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2 Introduction The Governance Arrangements for Commonwealth Government Business Enterprises (GBE Guidelines) is a policy document that provides a framework for defning the Australian Government’s working relationship with its Government Business Enterprises (GBEs) and the various responsibilities of the parties to that relationship. The document forms part of the overall corporate governance framework under which GBEs operate and as such complements the Commonwealth Authorities and Companies Act 1997 (CAC Act) and, in the case of GBEs that are Commonwealth authorities, their enabling legislation, or, in the case of GBEs that are Commonwealth companies, their constitution and the Corporations Act 2001 (Corporations Act). A GBE is either a Commonwealth authority or a Commonwealth company that is prescribed as a GBE under Regulation 4 of the Commonwealth Authorities and Companies Regulations 1997 (CAC Regulations). Currently, there are seven Commonwealth government GBEs which are a mixture of companies and statutory authorities. They incur different business risks resulting from, among other things, different levels of competition in their product markets and from their varying capital structures. In 2009-10, GBEs generated revenues of over $11.57bn and returned dividends of $265.9m to the Commonwealth. Government Business Enterprises 2009-10 Revenue Commonwealth authorities 2009-10 Dividend Exposure Draft Equity @ 30 June 2010 Australian Government Solicitor $115.9m $3.5m $44.6m Australian Postal Corporation $4,753.4m $171.9m $1,559.1m Defence Housing Australia $983.9m $52.7m $1,290.8m Commonwealth companies ASC Pty Limited $515.7m $5.0m $208.4m Australian Rail Track Corporation Limited $604.8m Nil $2,497.8m Medibank Private Limited $4,594.3m $32.8m $1,720.0m NBN Co Limited $3.9m Nil $232.0m Total $11,571.9m $265.9m $7,552.7m This discussion paper highlights a number of possible reforms to the GBE Guidelines and provides an opportunity for relevant stakeholders to comment on the proposals. Section 1 of the paper discusses the more signifcant areas of policy change and Section 2 contains the proposed revised GBE Guidelines.
The key topics identifed for discussion are: • Mandate and objectives: - Clarifying the process for the review of the mandate and objectives of a GBE. • Public sector accountability: - Clarifying matters for inclusion in letters of appointment for directors and Chief Executive Offcers (CEOs); - Establishing a requirement for new directors to formally respond to letters of appointment, giving an undertaking to the Shareholder Minister(s) that they will advise them of any matters which may impact on their ability to be a director; - Formally requiring boards to establish, document and maintain a code of conduct and conficts policy; - Establishing a general requirement for GBEs to behave in a politically impartial manner; and - Guidance on taxation planning. • Board appointments and performance: - Establishing guidance on appointment processes to ensure that high-calibre directors are appointed to GBE boards, and that appointment processes are open, transparent, defensible and aligned with government policy objectives; - Establishing guidance on the tenure of directors to maintain a balance between introducing new skills and ideas and business continuity, and outlining the need for directors to attend all board meetings; - Incorporating a general requirement for board induction, training and performance reviews; and - Including a general requirement to renew board committee charters and composition annually. • Guidance on the role of CEOs: - Providing guidance on the Commonwealth’s preference for the appointment of CEOs to facilitate clear board governance practices; and - Establishing a general requirement for GBEs to implement and maintain a succession plan for CEOs. • Planning and reporting requirements: - Providing guidance for publishing Statements of Corporate Intent (SCI) on GBE websites and reporting on performance against the SCI’s broad objectives in GBE annual reports to enhance transparency; - Formally adopting quarterly performance reporting (which is the basis under which the vast majority of GBEs report in practice) and outlining key features that each report should provide to enhance transparency; - Establishing minimum requirements for fnancial and non-fnancial performance indicators to be included in Corporate Plans and progressively reported against; - Establishing guidelines for the preparation and presentation of business cases; - Providing additional guidance on the setting of fnancial targets; - Including a requirement to hold Annual General Meetings; and - Including a general requirement for risk management to be addressed in Corporate Plans and performance reports in order to increase transparency and accountability of GBE risk management practices; Exposure Draft 3
Page 1 and 2: Australian Government Department of
Page 3: Contents Introduction 2 Part 1 - Ov
Page 7 and 8: Part 1 - Overview 1.1 Mandate and O
Page 9 and 10: Proposed Change: (New) 3.3 2.3 a. A
Page 11 and 12: 2.3.4 These changes aim to make GBE
Page 13 and 14: . The Chair shall write to the Shar
Page 15 and 16: 2.5.4 A similar principle operates
Page 17 and 18: 2.6.4 These issues have also previo
Page 19 and 20: Part 3 - Planning and Reporting (Pr
Page 21 and 22: Table 2: Best Practice Timetable fo
Page 23 and 24: Proposed Change: (Replaces entire 2
Page 25 and 26: 3.3 Statement of Corporate Intent (
Page 27 and 28: 3.4.7 The focus on comparing budget
Page 29 and 30: 2.11b(i) 3.14 The current disclosur
Page 31 and 32: Proposed change: (New) 3.21 Proposa
Page 33 and 34: Part 4 - Financial Governance 4.1 C
Page 35 and 36: 4.2A Weighted Average Cost of Capit
Page 37 and 38: 4.3 Managing Risks 4.3.1 The govern
Page 39 and 40: Part 5 - Other Governance Matters 5
Page 41 and 42: Appendix A: Commonwealth Government
Page 43 and 44: Part 1 - Overview Defnition 1.1 A G
Page 45 and 46: 1.9 In addition to setting a princi
Page 47 and 48: 2.6 The code of conduct may cover t
Page 49 and 50: 2.17 On an annual basis the GBE boa
Page 51 and 52: Table 2: Best Practice Timetable fo
Page 53 and 54: Measure Key Performance indicator F
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d. commentary on any emerging issue
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3.23 GBEs should allow a reasonable
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Financial Targets for GBEs 4.7 All
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Part 5 - Other Governance Matters W
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5.10 The above requirements relatin
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Governance Arrangements for Commonw
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Principles Part 1 - Overview 1.1 Th
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(c) earn at least a commercial rate
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(e) The plan also covers any other
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Keeping Shareholder Ministers Infor
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Part 4 - Financial Governance Capit
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shareholder would expect the adopti
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Partly Owned GBEs, Partly Owned Sub
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Attachment A Matters for Inclusion
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