As the Dunedin City Council shake-up of the governance of its companies begins, it should be asked if the council is, in fact, going far enough.
The axe fell this week on the board of Dunedin City Holdings Ltd (DCHL) as the council implemented the recommendations of the Larsen report. It said subsidiary company directors should not be directors of DCHL and vice versa, and should not serve on more than one company.
It also recommended elected councillors and senior council staff should not hold board positions.
This is all well and good, and the council has appointed two experienced outsiders to DCHL, with a third to be hired to make up the interim team to implement changes. Denham Shale, from Auckland, and Bill Baylis, Queenstown, appear to be good choices.
A mark of their stature is that they were appointed, along with Dunedin's Stuart McLauchlan, as independent directors of South Canterbury Finance in 2009 as attempts - unsuccessful as it turned out - were made to sort out the mess there.
Gone, as it happens, is Mr McLauchlan himself, along with Mike Coburn, Norman Evans, Ross Liddell and chairman Paul Hudson. These men remain, at least for now, scattered through the subsidiary companies.
Mr Shale has said that no-one is suggesting the former directors have not done a good job. Rather, the local authority restructuring was to promote good governance.
Even allowing for the likely politeness of Mr Shale, it should be acknowledged the companies have, on the whole, done well and returned many millions to subsidise city costs.
The latest DCHL report shows last year they made a $19 million profit and paid a $23.3 million dividend to the council. As Mayor Dave Cull said, however, there comes a time when all institutions need refreshment.
What might have been appropriate 10 to 15 years ago might not be now.
Contention arose between Mr Cull and Mr (as he insists he should be called in his director role) Hudson about communication between the DCHL and the council over the ability of the companies to meet council appeals for ever-increasing dividends.
Mr Hudson was correct that the information the companies were stretched when meeting the dividends should have been clear to councillors from reports. Nonetheless, DCHL and Mr Hudson can be criticised for not making it abundantly clear earlier to the council that the dividend demands were damaging. That was the directors' responsibility.
Mr/Cr Hudson should not have been wearing two hats, even though he is a knowledgeable and respected businessman. As Cr Kate Wilson noted when she resigned as a director of Taieri Gorge Railway, problems are created when issues come up at the council.
Crucially, she noted that because of the nature of collegial relationships, it is important that councillors are free to act with no regard to personality issues. The dividend issue highlighted another reason why councillors should not be on company boards.
They need to be seen to act with independence.
The Otago Regional Council has never seen the need to have councillors on its subsidiary, Port Otago Ltd, even when astute business people were councillors.
The railway company, an important visitor attraction in Dunedin, will always struggle to break even, no matter how well it is managed. It should return to the earlier years when leading Dunedin business people offered their directing skills as a free public service.
The council sold Citibus, and Aurora Energy and Delta Utility Services are closely linked. Dunedin City Treasury, like DCHL itself, is part of a complex, top-heavy management structure.
Why could not the council companies have, say, one CEO and one board including even City Forests? Many major businesses have different wings, with talented professional directors capable of dealing with governance and strategy issues required across different areas.
There might well be a case for Dunedin International Airport, because of joint ownership with the Crown, having its own board.
But most of the rest could be combined. While the Larsen report and the council's response is a substantial advancement, further reform could well have been a sensible option.
