Rein can manage out of conflict… Midas sale unsure… Water power… Coonan caves to Telstra

Rein can manage conflict if Rudd is PM

Therese Rein’s ownership of global employment services business Ingeus raises some real conflict of interest issues, but would selling be her only option if her husband Kevin Rudd became prime minister?

The issue hit the headlines yesterday when it was revealed that employees of Ingeus subsidiary WorkDirections Australia were put on to common law contracts that reportedly strip away penalty rates and overtime in return for a pay rise of 45 cents an hour in breach of award requirements.

Ingeus says the underpayment was an error that it sought to rectify as soon as it was detected earlier this year, but the revelation has left Rudd open to Coalition accusations of hypocrisy. After all, how many times has Labor mounted against companies that have used AWAs to similarly cut conditions in exchange for small pay rises?

Once the political attacks have blown over, a deeper issue will remain. Not only does Ingeus operate in a sector in which government policy plays a significant role, the company’s Australian operations make a lot of money out of government contracts.

If Rudd becomes prime minister later this year – and at the moment, all the polls suggest he will – the perception of a conflict of interest will be unavoidable.

Rudd says it is a “tough decision” the he and Rein have to make about the business she founded and majority owns, implying that she is considering selling the business.

But this is not the only choice available to her. Hall & Willcox corporate law expert Deborah Chew says it should be possible for Rein to arrange her affairs so that she could retain her interest in Ingeus and continue to play a role in some aspects of the company’s operations.

One option would be to split operations and create separate corporate entities for Ingeus’ domestic and overseas arms. “It would be possible to create a Chinese wall between overseas and domestic operations; that would allow her to continue to be involved in the overseas aspect of the business. She would have to find someone to run the Australian business so it wasn’t dependent on her, but if she could do that it could work.”

Time may be the biggest stumbling block to this strategy. “Major corporate restructuring can’t be done overnight, and to find the right person to take control of a big part of the business in a short time might also be a hard ask,” Chew says.

And, even if it is achievable, the company would still suffer form the loss of Rein’s drive and expertise, Chew says. “It is her business; she built it up and she’s obviously central to it. If she was required to step back and not be active, a substantial portion of the business’s value would be diminished.”

– Mike Preston

Midas sale negotiation ongoing

Phillip Bonney, the owner of car care franchise Midas Australia, has advised his franchisees that rumours that the sale of the Midas business have fallen over are untrue.

In an email to franchisees and staff sent yesterday he says: “We will be able to announce the settlement date in early June. If the remaining matters that need to be done before settlement are completed earlier, we may be in a position to advise the settlement date before that.”

On Wednesday, we reported rumours that the planned sale of Midas Australia to John Pearson, the owner of Tyrecorp, had fallen over and that Bonney is under increasing pressure as a growing number of franchisees pursue claims against his company.

Bonney has not returned SmartCompany’s calls.

– Jacqui Walker

Water power

The National Generators Forum, representing the major electricity generators, has called for all state governments to follow the NSW Government’s lead and set up strategic water reserves to safeguard against crippling electricity shortages if the drought continues.

Wholesale electricity prices has been soaring as water shortages hit generators and some big energy users have been quoted price increases of between 30% and more than 120% when renewing contracts for electricity, reports The Australian Financial Review.

– Jacqui Walker

Coonan gives ground to Telstra on broadband

Signs are beginning to emerge that Communications Minister Helen Coonan is prepared to make some concessions in order to get Telstra’s $4.1 billion fibre-to-the-node broadband plan off the ground.

The Australian Financial Review reports that Coonan conceded that the cost of providing rural services is relevant to the pricing of Telstra’s proposed broadband network in a Senate Estimate hearing yesterday.

The concession is a backflip on the Government’s previous position that rural and metro pricing should be dealt with separately. Coonan’s comment that “there are some issues that I understand better now about complex matters” suggests all that noise Telstra has been making for the past year might finally be getting it somewhere.

– Mike Preston

Economy round up

Interest rates may have to rise if the strong economic growth and tight labour market conditions persist, according to the OECD’s new Economic Outlook report.

The OECD forecasts that the Australian economy will grow at a strong 3.25% over the next 18 months, but says that if the skills shortage continues “further monetary tightening may be necessary”.

In the US, new home sales rose 16.2% in April, the biggest increase in 14 years, Department of Commerce figures show. The rise was driven be a record 11% drop in building prices.

At 1pm The S&P/ASX 200 is down 0.3% to 6259.1, while the Australian dollar is trading at US81.97c, down on last night’s US82.27c close.