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Owner's Expectations Manual

2 Ownership Framework

  • Commercial entities owned by the Crown provide a significant contribution to the wellbeing of the New Zealand economy. They provide a range of services and products covering areas such as electricity generation and transmission, postal and meteorological services, control of air traffic movements and property valuation. Their performance is important to the Crown's overall fiscal and balance sheet position and its capacity to meet fiscal, social and other government policy goals.

2.1 Crown company model

  • During the 1980s, the Government began using the company model as part of its broader State sector reforms. A key principle under the company model is the separation and maintenance of a clear division between the Government's ownership, purchasing and regulatory interests.
  • Under the company model, Crown-owned companies:
    • operate at arm's length from the Government (unlike departments, Crown-owned companies are not part of the Crown, but are owned by the Crown)
    • have independent boards that are accountable for the companies' performance
    • are separate legal entities, with directors being responsible for overseeing the management of the business and affairs of the companies, and
    • are subject to the financial reporting and other requirements applying to all companies, together with any relevant sector-specific legislation.

2.1.1 SOE model

  • As part of the broader State sector reforms, SOEs were established as limited liability companies under and subject to the Companies Act[3]. Each SOE is also subject to the SOE Act. These Acts address the ownership, governance and public accountability arrangements for SOEs.
  • Under the SOE model:
    • the principal objective of every SOE is to operate as a successful business and, to this end, to be:
      • as profitable and efficient as comparable businesses that are not owned by the Crown
      • a good employer, and
      • an organisation that exhibits a sense of social responsibility by having regard to the interests of the community in which it operates and by endeavouring to accommodate or encourage these when able to do so
      • compensation is paid to each SOE for any non-commercial activities that the Crown requires it to undertake, and
      • competitive neutrality is maintained between SOEs and the private sector.

2.1.2 Non-SOE model

  • COMU monitors a number of entities that are not SOEs. These include:
    • Crown entity companies - Radio New Zealand Limited, Television New Zealand Limited and the New Zealand Venture Investment Fund Limited
    • some statutory Crown entities - Public Trust and the New Zealand Lotteries Commission
    • some PFA Schedule 4 companies - Research and Education Advanced Network New Zealand Limited, Health Benefits Limited and Crown Fibre Holdings Limited
    • airport companies (in which the Crown has joint ownership with City Councils ) - Christchurch International Airport Limited (25% Crown ownership), Dunedin International Airport Limited (50%), Invercargill Airport Limited (45%) and Hawke's Bay Airport Limited (50%), and
    • CFIs - Accident Compensation Corporation (COMU monitors only the investment arm), Earthquake Commission, Government Superannuation Fund Authority and Guardians of NZ Superannuation Fund (statutory Crown entities); and National Provident Fund (a statutory board).
  • Ministers' expectations for the boards of these entities are outlined in Chapter 10. While the entities are not SOEs, many of the expectations in this manual for SOEs are applicable, where appropriate.

Notes

  • [3]New Zealand Railways Corporation (trading as KiwiRail Group) is an exception. Though it is an SOE, it is a statutory corporation rather than a company. As such, the Companies Act does not apply. However, the Crown expects KiwiRail's board and management to operate in a similar manner to that expected of a company.
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