Solid Energy and the last men standing

By Karl du Fresne In Business, Economy, Politics

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Solid Energy chief executive Don Elder

Don Elder, photo Kirk Hargreaves/NZPA

What were the directors of state-owned enterprise Solid Energy doing while the company amassed debts of $389 million?

That was one question on the minds of opposition MPs when Solid Energy chairman Mark Ford appeared before a parliamentary select committee this week to explain how the SOE, once a star performer in the public sector, was now on the critical list.

They were also curious to know why bonuses totalling $23 million were paid to chief executive Don Elder and top managers when Solid Energy was evidently in freefall.

Ford wasn’t the only SOE chair fielding curly questions at Parliament.

MPs also grilled former prime minister Dame Jenny Shipley about her involvement in the construction company Mainzeal, which collapsed only weeks after she resigned as chairwoman.

Labour MP Clayton Cosgrove was keen to know whether Shipley’s role at Mainzeal might damage the reputation of state-owned enterprise Genesis Energy, which she also chairs.

Mighty River Power was on the mat too, especially when it emerged during select committee hearings that directors were being paid $1200 a day as the company prepares for its flotation on the stock exchange.

It was a rare instance of directors being subjected to close public scrutiny. More often, they fly below the public’s radar. But as the latest issue of the Listener points out, directors are the “last men standing” – the ones who must carry the can – when companies fail.

Dame Jenny Shipley

Dame Jenny Shipley, photo/David White

There was a vivid reminder of that in the Court of Appeal this week, where former directors of the failed Lombard Finance appealed against convictions related to the company’s collapse – and simultaneously faced the prospect of tougher sentences, since the Crown argued that they had got off too lightly.

Two of those Lombard directors are former cabinet ministers, which prompted the Listener to examine the track record of retired politicians who have made the transition to the company boardroom. More often than not, as we report, the results have been less than stellar.

Yet paradoxically, the Listener also raises the intriguing possibility that SOEs whose boards include former politicians might be better equipped to steer clear of the type of strife they have found themselves in this week.

That’s certainly the view of a leading commercial lawyer and former MP who believes governments should be bolder in appointing former politicians to boards, even if it means cries of “cronyism”.

For the full story, see The Trophy Director in this week’s issue.

More by Karl du Fresne

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