Mea - Where Do We Go From Here

[Motivator]

Summary: The Island is just too slack in stopping things like this from happening. And the reason for that is the lack of understanding, ability, intelligence and involvement of our elected Politicians, who just aren't clever enough to prevent these things happening... as we can see!

[Gladys]

The sad fact is, that the Island is so rife with dishonesty (and I'm not just talking about this whole MEA thing), that it would work out cheaper, and save us all millions and millions of pounds each year if we didn't have any investigations into any allegations of corruptness about anything! Certainly from a financial standpoint, the answer to the question "Are any of these (almost annual) investigations worth it?" The answer is a resounding "No".

 

There is only one economically viable way to deal with anything like this, and that is to make sure no one person is ever put in a position where corruption could even take place. And that could be done very easily for very little public money, and very little re-organisation. You simply have systems in place which mean no one figurehead would ever have anything to gain in the decisions to be made. And how do you do that? Again it's simple. Decisions should never be made by a CEO or Managing Director. They should stick to what their job titles suggest - day-to-day management of the company. If things need to be sold, bought, reshuffled, invested, built, etc. by the MEA, it should be a decision made by a panel made up of four senior AND junior employees, and five elected MHK's selected for the task completely at random.

 

All these 'post-problem' investigations are just extremely expensive locks put on a stable door after the horse has bolted. Let's stop the horse from being able to bolt in the first place!

 

Richard

x

What you are describing is a board, Motivator, and that is exactly what was already in place. However, how strong individual members of the board were to stand up and oppose something that was, perhaps, 'a little close to the wind' is a different matter. I hasten to add here that I do not believe the borrowing issue is one of corruption, it may have been 'creativity' pushed beyond what the MEA was legally able to do, given pressures that they may have been under to deliver. I confine my comments to the borrowing issue.

 

Since the Maxwell fiasco there have been several committees, starting with Cadbury, who have looked at corporate governance and the general view is now, certainly for quoted companies and as best practice for substantial companies, that the Chairman and Chief Exec positions should not be held by the same person and that there is a very strong cadre of non-execs with proven track records in business and/or who are commercial professionals. The role of the non-execs is to provide a sound knowledge base outside of the executives able to check, advise and test the proposals of those who have the closer knowledge of the business itself. That role, in my opinion, cannot be filled by MHKs. It has to be good quality, impartial individuals with considerable commercial savvy.

[joeyconcrete]

Now, whatever happened to that cable thing?

[Motivator]

No, I'm not talking about a Board Gladys. Fine, elect a Board who make decisions, but what I'm talking about is a body of people who keep their eye on that Board. Specifically for the reason you mentioned of some Board members not being able, or capable of standing up to oppose certain issues. Thinking more about it, lay-people if possible. In an ideal world, none of them would have any direct involvement with the company or authority concerned. Just 'ordinary' intelligent people who are able to grasp what is being proposed, and where necessary, question it.

 

Richard

x

[Gladys]

Well that is the point, why appoint a board, then have another board watching it? Much better to appoint a good quality board with a mix of execs and non-execs who have direct responsibility and accountability for the MEA.

 

If you go down the route of a truly split management in the political environment, you have exactly the set of circumstances that has given rise to this little mire; one 'board' blaming the other for any mishaps. Clearly defined obligations and roles are what is needed. The government's role should be that of an interested shareholder (not invest and rest) which seeks reporting and communication with those it has appointed to carry out, in tactical and strategic terms, the overall aims set by its charter, monitored (not second-guessed) by the Government as the interested shareholder.

 

It really isn't very different to a PLC, where the the board delivers the shareholders aims (a mix between capital appreciation and dividend stream) but the aims delivered are more to do with securing a power supply for the island etc.

[Motivator]

You obviously know more about company stewardship than I do Gladys but I think I agree with you!

 

Richard

x

[Tugger]

Well that is the point, why appoint a board, then have another board watching it? Much better to appoint a good quality board with a mix of execs and non-execs who have direct responsibility and accountability for the MEA.

 

The continentals do this though - have a "management board" and a "supervisory board", although I have no idea whether it is a better system in practice

[Gladys]

Well, it is what I do or, at least, used to do.

 

My own experience is of a statutory body in the UK that emerged from a spectacular failure many, many years ago, not too dissimilar to the MEA situation. The main reason for that failure (and I read all of the various UK Government commissioned reports, of which there were many) is that neither side knew exactly where their limit of responsibility or obligation lay, or what they really were and to whom they were accountable.

 

I have to say the organisation itself survived and, in a modest way, flourished, playing a very important role, albeit unsung, in some of the more notable recent international events. Its survival was purely as a result of clearly defined boundaries and respect for those boundaries. We knew what we could do under the incorporating act, what had to have Ministerial consent and what was absolutely outside of the bounds. It was part of my job (and getting Ministerial consent was no picnic either), and every member of the board (as it did have a board structure) knew and respected the boundaries also.

 

If those boundaries are not in place, or if in place not taken seriously, then the MEA-type situation will happen and it does need a mixed board of those with direct knowledge of the business and those that are able to counsel and test; but together are fully responsible and accountable for the body in question.

[Gladys]

Well that is the point, why appoint a board, then have another board watching it? Much better to appoint a good quality board with a mix of execs and non-execs who have direct responsibility and accountability for the MEA.

 

The continentals do this though - have a "management board" and a "supervisory board", although I have no idea whether it is a better system in practice

Yes, it achieves a little towards that, but with our current company legislation is just doesn't quite fit. When applied to our familiar company territory, the split is more between execs on the management board and non-execs on the supervisory board, and then there are the owners. Either way, they are both organs of the same entity, whereas what Motivator was proposing was some kind of external watchdog.

 

Edited to add: The non-fit comment is because prudence dictates that public quasi-commerical bodies should follow best practice in the commercial sector so to try a new structure in the public sector for quasi-commercial bodies that hasn't had a track record in the true commercial sector isn't a good idea IMV.

[P.K.]

it is highly possible that the MEA board could be sued for professional misconduct. Which in my experience would be completely counter-productive because directors of companies invariably have "teflon shoulders" clauses in their contracts that basically say if they get sued it's the company that pays up on their behalf i.e. the MEA. So if they screw up big time (or rather get found out!) they NEVER have to suffer the quincequonces.

That simply isn't the case. Section 151 of the Companies Act 1931 would make such a clause void. There are a couple of exceptions (companies are allowed to purchase insurance that covers directors' negligence, and they are allowed to cover a director's costs when the director is subsequently cleared of negligence), but it is nothing like as broad as you are making out.

Yes it is the case. In my international business dealings (and in these days of globalisation that means just about everything) it is common practice that should the Directors, CEO etc screw up then the company picks up the tab. In fact it is so prevalent companies take out insurance to cover the possibility it may happen to them. Here is a classic example:

 

SEC wants settlements in which defendants pay own fines.

The U.S. Securities and Exchange Commission is refusing to approve fraud settlements with companies and executives unless the defendants agree to pay civil penalties out of their own pockets.

 

"It's critical when we take money for a civil penalty, which involves a serious wrong, the money not circle back into the hands of those who have been involved in the wrongdoing," SEC Commissioner Harvey Goldschmid said.

 

Goldschmid, one of two Democrats on the five-member SEC, also said last week that the agency should consider requiring defendants to admit they violated securities laws.

 

The Washington-based SEC first required that violators pay their own civil penalties, rather than have insurance or the company pick up the costs, in April with the $1.4 billion settlement with Citigroup Inc. and nine other Wall Street firms over biased stock research.

 

"This is a critically important policy change to create appropriate deterrence and accountability," Goldschmid said.

 

The SEC also applied the policy to the $3 million fine against six former top Xerox Corp. executives in an overall $22 million settlement earlier this month. The case prompted agency Chairman William Donaldson to say executives cited should pay a bigger portion of the penalties.

Now don't get me wrong. If there are individuals who should be made liable for wrongdoing (I'm talking generally here) then as far as I am concerned they should be personally bought to account.

 

The thing that has always amazed me about this sorry affair is that there seems to have been little or no exchange of information on the project between MEA and the Gov. If I was in the Treasury I would be demanding meetings every week or so to discuss the project progress, spend, SWAT, timetable, milestones, projections etc etc etc in fact all the usual things you do to manage a large project. Instead it appears that the MEA was allowed to go off and do what it wanted, including taking out illegal loans! Did the Treasury care? Talk about little men in big hats.....

[Lonan3]

Whoops! There it goes!

 

[Tugger]

Yes it is the case. In my international business dealings

 

[WTF]

an irk i have on the subject is that the some or all of the old board who oversaw the loans paid them selves huge bonuses, and then when questions were asked just resigned with their bonuses, presumably from the loan?? so it appears the manx taxpayer is in dept illegally to fund lawbreakers bonuses??

[P.K.]

Why should anyone in the MEA pay themselves a bonus just for BAU?

[Albert Tatlock]

The Manx Electrickery Authority