LATE Model Needs Review
Tuesday, 18 January 2000
LATE MODEL NEEDS REVIEW
Mayor of Auckland City, Chris Fletcher supports a call for a review of the Local Authority Trading Enterprise (LATE) model to give shareholding Councils greater ability to influence the operation of Council owned companies.
Mrs Fletcher says that because 100% ownership is in the hands of elected representatives that Councils have ultimate responsibility, and LATE's need to reflect broader Council objectives.
"While Councils elect the board of governors there are inevitable competitive tensions as the basis of the relationship is defined in the Local Government Act as being 'commercial'," she said.
Chris Fletcher says, LATE's are required to operate as successful businesses, which can be incongruent with the responsibilities of Councils to exercise leadership and be accountable on a range of other governance issues. Councils as 100% owners are not elected to simply consider matters from a purely commercial perspective.
"The principal of providing substantial independence from the local authority as shareholder to operate commercially as prescribed in the Local Government Act needs to be reviewed.
Councils are restricted in their influence of activities to the Statement of Corporate Intent. LATE's can then use their ability to operate independently without consideration of Councils wider objectives."
Mrs Fletcher said, "Legal opinion even suggests that LATE's are only obliged to consider comments from the shareholder on its Statement of Corporate Intent, with the over-riding objectives remaining commercial."
"Regardless of any other shareholders objectives, LATE's primary objective is to be a successful business. Objectives such as environment and consumer issues, business relationships and being a good civic organisation must be given due balance in their operation and could be influenced through the Statement of Corporate Intent process,"
"There must be a change to ensure profit maximisation and returns of shareholders equity are not the only motives," says Chris Fletcher.