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How the Government Dethroned A Crown Corporation

Posted: 12/19/2012 11:01 am

Last week, the Harper government announced that it is putting Ridley Terminals Inc. (RTI), a relatively small federal Crown corporation, up for sale.

RTI is one of those many state-owned enterprises that serves no useful public policy purpose, and really never has. It was built on a wish and a prayer, much like the Mirabel airport boondoggle was in the same era. The head-scratching logic probably made sense to the mandarins that came up with the scheme.

In the last early 1980s, the Trudeau government spent $250 million to build this coal terminal in the hope that coal mines would magically appear. Well, they didn't, and RTI has been a taxpayer-funded sick hole ever since.

It paid its employees extremely well, and offered cabinet appointed board members — most of whom wouldn't know a balance sheet if their lives depended on it, but where strong supporters of the governing Liberals — the "prestige" of being on the board of a Crown corporation.

Throughout the Mulroney and Chretien years, it was business as usual for RTI. But when Paul Martin became prime minister, Ottawa decided to sell RTI for a grand total of $3 million in cash. Once elected, Stephen Harper put a stop to that sale.

A year later, cabinet appointed Dan Veniez, a tough businessman and entrepreneur, as chairman of RTI. He reluctantly took the assignment on three conditions: A credible board would be appointed; RTI would be run on a commercially sensible basis; and it would be free of political interference.

Together with a new board that he pressed us very hard to appoint, Veniez fixed the core problems he called the "low-hanging fruit" and went to work on a fundamental reshaping of RTI's business model for the long-term. Senior management was replaced. Board oversight, management information systems, customer service, employee relations, productivity, and overall rigor of analysis were all dramatically improved. He actively engaged the auditor general of Canada, Sheila Fraser.

The work RTI's new board was doing caught the attention of many. Some of it was good. They had a loud cheering section within government — including me — who believed that RTI would become a test case for how bloated and lazy Crown Corporations could be led and managed professionally and create value for the taxpayer.

Although markets were poor, Veniez and the team he had assembled knew that wouldn't last. They injected urgency to the transformation project so that RTI would be ready when markets rebounded. He also introduced a series of changes in operations including the immediate focus on increasing operational efficiency, cutting costs, and securing long-term relationships with customers.

That included the painful process of turning an entitled culture into a commercial one. RTI's board insisted that Ridley's users should no longer enjoy a free ride on the back of taxpayers. The business should not only pay for itself but also build value for all stakeholders.

This new approach upset powerful vested interests that had come to believe that RTI was there to serve them. After all, it is government-owned and operated. Why else would the taxpayer pay for something like this and compete with private sector operators if it wasn't to serve their interests?

Veniez and his board had changed the rules and communicated them clearly to users. It was to be expected that they wouldn't like having to pay fair market rates for RTI's services. That was a big change, but one that made sense. Why should taxpayers continue to subsidize profitable multinationals?

Today, Ottawa takes credit for everything that they fiercely resisted. Everything the board put in place — the strategy, people, business model, and culture — remains in place.

RTI will fetch hundreds of millions of dollars. It will be in spite of years of government neglect and political interference.

Joseph Soares is an entrepreneur, a former advisor to the prime minister of Canada (2008-2009) and to the minister of transport, infrastructure and communities (2006-2008). Visit his Facebook page.

 

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