KEY POINTS:
Large government-owned companies such as Meridian, Genesis Energy and Television New Zealand should be partially privatised and their governance structures overhauled, according to one of the original "architects" of the state-owned-enterprise model.
Rob Cameron of investment bankers Cameron Partners helped to develop the state-owned-enterprise (SOE) model when working at the Treasury during the early 1980s.
Issuing and listing non-voting equity in SOEs had the potential to significantly enhance the SOE model, he says in a paper to be delivered to a public and administrative law conference in Wellington today.
"It would enable direct monitoring and measurement of SOE performance and value by the equity capital market. It would also significantly enhance SOEs' access to capital and financial flexibility."
Partial listings of "selected large SOEs" would also benefit capital markets by improving the size and depth of the sharemarket and widening the range of alternatives available to investors.
Partial listings would "give mum and dad investors investment exposure to some of New Zealand's biggest and best-run companies that are producing goods and services that they consume".
Cameron suggests SOEs issue a minimum of $100 million in equity or up to 10 per cent of their value.
Cameron Partners estimates the top 10 SOEs would have a combined enterprise value of $17.2 billion and an equity value of $14 billion.
Based on their equity value the biggest four SOEs would make it into the NZX10 index and the top 10 would make it into the NZX50.
The original SOE model, shaped by the notion they were being prepared for sale, had prevented the development of strategy consistent with long-term value creation and had hindered their performance.
However, with the current Government confirming that SOEs were now in a "long-term-hold" environment they were now being encouraged to "play more actively in their markets" and had been given greater autonomy in their decision making.
Cameron said there was still a way to go to reach an "optimal" SOE model.
That could partly be achieved by transferring more responsibility for governance from ministers to boards.
He believed SOE directors' remuneration was "an area that requires urgent attention".
A survey conducted by Cameron Partners and Victoria University's School of Management had found that SOE directors "believe they are under-compensated for their roles and responsibilities, both absolutely and relative to private sector benchmarks ... This adversely affects the availability of capable directors."
Suggestions
* Large SOEs should be partially privatised, says investment banker and former Treasury official Rob Cameron.
* He suggests a minimum of $100 million (or 10 per cent of equity per SOE) should be issued in the form of non-voting shares.
* That would enhance monitoring and measurement of their performance and give them access to capital and financial flexibility.
* It would also give the sharemarket a welcome leg up.
