Modernising Trust Ports 2nd Edition.pdf - SailingNetworks

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1. THE PORT AND ITS STAKEHOLDERS.3 Performance Indicators.3.1 Given that trust port boards hold the local monopoly right to justify an asset(which can deliver public goods as well as private benefits), and that there areno formal shareholders to scrutinize performance, it is especially importantthat trust ports actively demonstrate their levels of efficiency, and strive forimprovement where necessary. It must be possible for a trust port'sstakeholders to measure the performance of the port in a straightforwardmanner, to compare it with relevant market competitors, where these exist,and with the port's own historical performance. A great many trust portsalready do this, but the Department believes that greater benchmarking acrossthe sector would be valuable..3.2 Annex A sets out examples of performance indicators which, whereappropriate, can assist a stakeholder in determining a port's performance yearon year. They constitute indicators of both financial and operational efficiency,and also of wider impacts, which can be calculated relatively easily and aim todemonstrate the overall economic contribution that the port makes to theeconomy..3.3 The relevant indicators could include:Financial: Profitability Return on CapitalEmployed(RoCE)Weighted Average CostGearingof Capital (WACC)Operational: Labour productivity Profitability of landholdingsChannel Depth ManagementBerth UtilisationWider Impact:Gross Value Added/Net Value Added.3.4 The cycle of making an assessment of these factors, subsequently settingtargets for improvement, and then reporting on them, should form an integraltask of a trust port board, in pursuing the interest of the port's stakeholders..3.5 Nonetheless the Department acknowledges also that performanceassessment should not become such a burden that it inhibits performanceitself. Performance indicators have been selected that are readily obtainablethrough relatively simple calculations, and easily defined..3.6 Assessment of these indicators should be included in the board's AnnualReport, and aspirational targets included in the port's strategy document.10
1. THE PORT AND ITS STAKEHOLDERS.4 The Stakeholder Benefit.4.1 <strong>Trust</strong> ports can expect to generate a significant return. In a private company,after deducting strategic investments and contingencies, that return would bedistributed among shareholders in the form of a dividend. <strong>Trust</strong> ports, havingno shareholders, must use any profits generated to support the long termviability of the port and thus for the benefit of the whole community ofstakeholders..4.2 A conventional trust often distributes income generated by the trust's assetsamong its beneficiaries. There are some trust-like organisations where such apayment is possible. An example is Glas Cymru, owners of Dŵr Cymru(Welsh Water), which is able to distribute a standardised dividend among itsuniform stakeholders. The Department does not however recommend thedistribution of a 'dividend' among trust port stakeholders. A trust port'sstakeholder group is by comparison much more varied and indirect and asimple dividend payment is not possible..4.3 There is instead a range of ways in which a trust port's surpluses may be, andare, justifiably employed. Rather than a direct dividend, these uses constitutea stakeholder benefit, and may include any of the following, subject to theimportant caveat that some may be outside a port's legislative powers:• investing in infrastructure with a longer-term view than might be expected ofa private company port, which may need to generate a return over a shorterperiod;• investing in infrastructure, or another good such as environmentalprotection, to a higher standard or greater extent than might maximiseprofits, but where this brings direct quantifiable benefits to stakeholders;• undertaking activities that have a lower commercial return than might beacceptable to a company port, but which have other benefits forstakeholders — eg for the local community;• providing employee packages, including training, above the market rate,where this helps to build the local skills base;• making charitable grants or donations of time; and• making other financial investments, for example in local enterprises orcommunity projects, with social as well as economic returns..4.4 The benefits that accrue to stakeholders in this way should be activelydetermined by the board after consultation with stakeholders, andtransparently recorded. After consultation with stakeholders the board shouldconsider and decide upon the nature of stakeholder benefit. The appropriatetime frame is at the board's discretion but can include consideration of futurebenefits. This process should be conducted in conjunction with the setting of atarget level of return, as discussed earlier in this chapter..4.5 There must be a clear rationale for the choices made, and they should bealigned with the commercial expectations. In other words the stakeholderbenefit should not be directed towards practices which threaten to distort themarket in which the port operates.11
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