Crown Company Monitoring Advisory Unit
Executive summary
Executive Director – Murray Wright
CCMAU remains committed to being the Government’s ownership advisor of choice. Ultimately, our success is based on the performance of the companies and entities in our portfolio and the impact they have on New Zealand.
One of the three themes that constitute the Government’s priorities for the next decade is economic transformation. The performance of all the companies and commercial entities owned by the Crown is critical to achieving this priority theme.
CCMAU contributes to the improved State sector performance outcome as set out on pages 27s-30. We do not expect our core services to change over the coming year. The focus of our work will continue to be on creating the environment for excellent company performance by assisting the Government to communicate clearly what it expects from an ownership perspective.
Measuring the impact of what we do is difficult. Nonetheless, we are committed to trying to develop some meaningful performance indicators by which our Ministers can assess the value of our contribution to portfolio performance.
Over the coming 12 months, CCMAU expects to manage and provide advice on a range of issues affecting individual or groups of companies in its portfolio. These issues can be complex and have long-term impacts on ownership policy or company performance.
We will continue to give priority to the training and development of our staff. The quality of CCMAU’s advice depends heavily on the calibre of staff we are able to recruit. Staff retention is an ongoing challenge for CCMAU.
CCMAU’s purpose
CCMAU contributes to the efficient management of the Crown’s balance sheet and net worth by providing services which enable shareholding Ministers to hold Crown company and entity boards accountable for their performance in maintaining and enhancing shareholder value.
CCMAU provides services in the following areas:
- Monitoring – reporting on business plans, company reports, and performance against targets and sectoral trends.
- Ownership advice – advising on strategic issues, investment and diversification opportunities, restructuring issues, and the impact of policy positions.
- Ministerial servicing – managing issues and drafting replies to correspondence, Parliamentary Questions and Official Information Act requests.
- Governance – identifying and screening potential directors, managing the board appointment process and promoting best-practice corporate governance of Crown companies and entities.
To achieve its purpose, CCMAU is structured around four sector-focused teams supported by a pan-unit corporate team that provides administrative and legal services. Details of each team follow.
Science and Innovation Team
Acting Manager – David Ryan
The portfolio of companies monitored by this team comprises the nine CRIs, New Zealand Venture Investment Fund Ltd (NZVIF) and Research and Education Advanced Network New Zealand Ltd (REANNZ). These Crown entity companies have a key role to play in the Government’s economic transformation agenda by providing or supporting the research that will boost New Zealand’s innovation system. The portfolio has total assets of $520 million.
Energy, Land and Environment Team
Manager – Michael Moore
This portfolio is made up of two sector groups – the energy sector and the land and environment sector. All companies in the portfolio are SOEs.
The energy sector companies include the three generator-retailers (Meridian Energy Ltd, Genesis Power Ltd and Mighty River Power Ltd), Transpower New Zealand Ltd, Solid Energy New Zealand Ltd, and the residual business of Electricity Corporation of New Zealand Ltd (ECNZ). Together, they account for nearly $13 billion of assets.
The seven land and environment sector companies are more diverse in nature and have total assets of around $1.6 billion. Landcorp Farming Ltd is by far and away the most significant of the companies in this sector, but the others still have a major impact on the New Zealand economy. They include AgriQuality Ltd, Asure New Zealand Ltd, Animal Control Products Ltd, Meteorological Service of New Zealand Ltd (MetService), Quotable Value Ltd and Timberlands West Coast Ltd.
Communications, Services and Infrastructure Team
Manager – James Cunningham
This team monitors a diverse group of companies and entities in the broadcasting, telecommunications, services and transport infrastructure sectors. The group includes five SOEs (Airways Corporation of New Zealand Ltd, Kordia Group Ltd, Learning Media Ltd (LML), New Zealand Post Ltd, New Zealand Railways Corporation (ONTRACK)), two Crown entity companies (Radio New Zealand Ltd (RNZ) and Television New Zealand Ltd (TVNZ)), three partly Crown-owned airports (Christchurch International Airport Ltd, Dunedin International Airport Ltd and Invercargill Airport Ltd), two Crown entities (New Zealand Lotteries and Public Trust), and a partly owned shipping company (Pacific Forum Line Ltd). Collectively, these companies have assets of nearly $18 billion.
Appointments and Governance Team
Manager – Steve Rich
This team manages, on behalf of responsible Ministers, the board appointment process for all the SOEs, CRIs, and Crown companies and entities monitored by CCMAU. Broadly, this process includes identifying the skills needed on each board, identifying a range of suitable candidates for appointment, and managing the various processes that enable Ministers to confirm the numerous appointments and reappointments that occur each year. The team also manages the board fee-setting process, aspects of the induction of new directors, and CCMAU’s director training and development activities.
Looking ahead
In 2007/08, we plan to build on a number of outputs that have been achieved in the last 12 months.
The Science and Innovation Team will continue to engage broadly with other government agencies on policies affecting the companies in the portfolio, such as the impact of the funding system on the CRIs, the respective roles of CRIs and tertiary education institutions in the innovation sector, and issues affecting the venture capital market in which NZVIF operates. During 2007/08, the CRIs will report for the first time on the “research application indicators” developed during 2006 to measure their technology transfer activities. CCMAU will use this information to assess the non-financial performance of CRIs.
The energy sector will continue to face challenges in 2007/08 in both electricity generation and distribution. CCMAU is committed to building further its capability in assessing energy sector performance. The sector includes some of New Zealand’s largest SOEs and their performance has a significant downstream effect on New Zealand’s economy, including access to affordable electricity, both commercial and domestic. We also expect to monitor closely the contribution of the Crown’s energy companies to the Government’s draft New Zealand Energy Strategy.
In the land and environment sector, CCMAU expects to play a central role in implementing outcomes from the Landcorp-related land review, the assessment of the viability of merging AgriQuality and Asure into a single SOE, and MetService and the National Institute of Water and Atmospheric Research’s (NIWA) collaboration initiatives.
The convergence of broadcasting and telecommunications is likely to have a significant impact over time on companies like TVNZ and RNZ, as well as Kordia and LML. Equally, implementing digital television transmission (following decisions by the Government earlier in 2007) will be a key focus for TVNZ and Kordia. CCMAU expects to consider and monitor TVNZ’s strategic response to the changing technology and market.
We also expect to publish SOE- and CRI-specific versions of an updated Owner’s Expectations Manual.
Managing the core appointments activity for all the SOEs and Crown companies and entities around the prospect of a General Election sometime in 2008 will be a key focus for the Appointments and Governance Team. This will necessitate careful planning to avoid the period before the election when, by convention, governments do not generally make any new appointments.
Furthermore, our existing board succession management system and candidate database is coming to the end of its useful life and decisions will have to be made about how we replace this critical tool early in 2007/08, if not before. If possible, we will discuss with central agencies the possibility of our new system having cross-government functionality. Whatever approach is taken, the design, build and implementation of a new system will be a significant undertaking for the Appointments and Governance Team.
In addition, we expect to “bed in” our new director training and development activities following a change in provider during 2006/07. We will also conduct an annual review of director fees against market benchmarks, consistent with the Crown company fees framework already in place.
Finally, CCMAU will continue to maintain and enhance its relationships with other agencies involved in board appointment and governance activity, whether as nominating agencies or as departments or ministries seeking assistance with appointments to the boards of non-commercial Crown entities.
