Garry’s Corner – 28 September

I read this morning an article questioning the effective ownership of Fonterra, the dairy farmers are the end result beneficiaries of the efforts made on their behalf. The problem is the decisions and some instances losses that the executive are responsible for have zero effect on their resulting reward. Now I won’t attempt to describe to you the many examples that most of you will have read about except to say accountability is only lip service. This is symptomatic of many companies, we in racing could well ask are we affected by the same malaise.

You see what is the measure we are able to assess both our effective ownership and executive performance against. Fonterra has on one hand the wholesale milk price and the dividend shares generate. We have a distribution based on whatever is deemed suitable after commitments are met. Not unusual, but if a company, share price and value of the company reflect the performance.  Most involved in racing have little knowledge of how the end result they race for is arrived at, but they are aware of the inability of our management to improve their opportunity to stay in the industry. Nobody suggests there is any suggestion of impropriety, the question is could it have been run better. The Messara report and the Minister certainly believe so, I hope so because if this is best that can be achieved then we are doomed. I spoke to Messara in Melbourne last Friday, he is adamant his aspirations in the report are achievable. If so I would hope our current  Board and executive are working towards making sure we progress the reports direction. Will they, I doubt it. Why should they, because the business is not theirs!  Like Fonterra we have morphed into a them and us situation. It wouldn’t matter if it was just about racing. But it’s more than that, it is a significant employer, racing is a important brand in both South East Asia and Australia our major markets.

The intent when the TAB and Racing Boards merged was to pass the decision making back to the industry participants. The legislation unfortunately structured the Board with four independents, shouldn’t have mattered, I am sure they are capable but will bet nobody in racing knows who they are. So back to start, would we be better positioned now had the Board had more interested parties on it, who knows except to say they would have put the interests of participants ahead of any executive rewards.

Where are we now, well we don’t know. We are told the Paddy Power assimilation is not on target but on budget. I’d take short odds they aren’t but then who knows what the budget was. We are told the 12m a year borrowed to sustain stakes will be repaid out of Racefields results, well assuming Racefields returns 15 m a year any benefit after debt repayment is at best 2021 away. Paddy Power was promoted on not only a bigger spread of betting options but more offshore participation, good luck, Australia has closed, who else is interested. Our Minister suggested to continue along our existing path would leave us with 200m debt within five years, somebody must have told him, we better hope they are wrong. I dunno!

We need to take ownership, NOW. Cheers G