Shareholder
Executive
HM Government Commercial - In Confidence
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Minutes of Shareholder Executive Board
Thursday 16 May 2013 at 15.00
Members Patrick O'Sullivan (Chair) (POS) Attendees:
present: Claudia Arney (CA)
Lord Carter (PC)
Gerry Grimstone (GG)
Jeremy Pocklington (JP)
Roger Lowe (RL) Secretary:
Ken McCallum (KMC)
Anthony Odgers (AO)
Mark Russell (MR) Apologies:
Mark Boyle (MB)
Fiona-Jane Macgregor (FJM)
Keith Morgan (KM)
Peter Batten
Tony Watson (TW)
1. Apologies for absence, Chair’s welcome and introduction, minutes from last
meeting, declarations of interest
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2.4. AO provided an update on Post Office Ltd’s emerging commercial strategy,
noting that the company was performing well as an independent company.
The Board heard that the company’s plans to modernise its network were
running behind expectations and that difficult political decisions might be
required. JP noted that it would be important to seek to minimise subsidy in
the period to 2020, and AO suggested a [AP] deep dive at a future Board
meeting.
2.6. POS noted that the third ShEx Chairs’ event had been the most useful so far,
and requested that [AP] a copy of the minutes be seen by members. CA
agreed, but suggested that invites should be targeted depending on the topic
of the event. MR noted that the events work best when attended by a Minister
who is involved in the subject matter.
2.7. MR explained that there is now a more streamlined approach and greater
advice and guidance available on senior executive pay processes.
. Cross government working
3.1. MB presented his paper on intra government requests for ShEx support and
advice, noting that a recent key change has been requests to provide
assistance to departments generally, rather than on specific asset issues. MB
suggested that this was a result of ShEx’s reputation across Whitehall. This
raises issues for ShEx in terms of the type of work ShEx is now being asked to
consider, ShEx’s resource abilities to meet these requests, and how ShEx
should engage with other departments.
3.2. MB noted that ShEx’s core skills are closely aligned to the capability plan
themes of the Civil Service reform programme. POS sought clarification about
ShEx's ability to ‘lead change’, MB explained that this was a reference to
delivering projects, where ShEx has a strong track record.
3.3. The Board discussed the suitability of ShEx’s involvement with infrastructure
capacity plans (ICP), which is being led by Infrastructure UK. MR explained
that there were benefits to ShEx being abreast of developments across the
wider Whitehall community. However, GG and CA expressed a concern that
involvement in ICPs risked diverting ShEx resource away from its core
business. GG was also clear of the need to establish boundaries and defined
roles within Whitehall
3.4. MB provided an overview of progress to date with four departments (DfT,
DECC, Defra and DCMS) who are seeking assistance. MB noted that DfT and
DECC in particular were expecting to identify a shortfall of commercial
expertise, and that they were looking to ShEx as a source of filling the gap.
3.5. Additionally, MB explained that MoD and DCLG were also seeking ShEx
involvement on a number of projects. In the case of MoD, this is more a
matter of reengagement (following a period of mutual non-engagement) which
will be facilitated by a MoU. GG queried whether the MoU covered ShEx’s
costs, noting that this MoU is likely to set a precedent. MR explained that he
was keen to avoid ShEx following the same route as Partnership UK.
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3.6. Turning to engagement with DCLG, MB noted the department had requested
assistance to develop its commercial function, but that it applied the term
‘commercial’ very widely. Unlike MoD, DCLG have no specific projects that
they want ShEx assistance with, but would like to negotiate a MoU with ShEx,
that would see ShEx leading engagement, with DCLG paying.
3.7. GG expressed the need for care to be taken, noting that the distinction
between policy advice and corporate finance was in danger of blurring. CA
noted that the Board had previously considered and dismissed the proposed
DCLG model of engagement before, and queried why it was still being
considered? MR explained that a MoU would give safeguards and provide a
clear delineation of responsibilities, and that it was not envisaged that ShEx
would be involved in pre-policy activities.
3.8. GG noted that precedents from the private sector showed that satellite
operations were very difficult to operate, and feared that a ShEx satellite in
DCLG would not be able to benefit from daily exposure to the ShEx peer group
and culture. CA expressed concerns that ShEx's reputation could suffer as
management oversight would be diluted which could affect quality assurance
processes. JP noted concerns about scale, suggesting that there is an
optimum size for ShEx. PC suggested that a key Board responsibility was in
advising which activities ShEx should not become involved with
3.9. MB explained that ShEx had been built on flexibility and fungibility, and that
the proposals were a continuation of this approach. CA agreed that a MoU
could be helpful in defining roles, but that it had to be clear in addressing the
tisk of a potential drift into providing policy advice.
3.10. In summarising MB explained that historically ShEx has engaged only
on discrete projects and that engagement with MoD would be a continuation of
this. PC suggested that ShEx needed to stay as a specialist adviser. MR
suggested that engagement with MoD was on the right lines, but that ShEx
should reconsider engagement with DCLG
3.11 The Board discussed the optimal size of ShEx and internal organisation.
MR explained that ShEx historically consisted of around 70 FTEs, but this
figures was currently closer to 130 FTEs, due in part to temporarily homing the
business bank team. It was suggested that the IE policy team could move out
of ShEx in the future. GG noted that he was relaxed about the size of ShEx,
provided that there was appropriate management oversight
. Chief Operating Officer paper — the ShEx licence to operate
4.1. Members welcomed FJM to the Board who presented her paper outlining
ShEx's evolution and possible future developments. POS endorsed the ShEx
mission statement, noting its continued relevance.
4.2. CA noted the creation of two director roles, and suggested whether the posts
should be filled by external appointments to ensure ShEx continued to benefit
from external expertise. MR explained that Ceri Smith was an internal
appointment, and that the corporate finance director appointment process will
run after the summer and could result in the appointment of an internal
candidate.
4.3. GG asked if the executive and assistant director appointments would be
internally or externally sourced. AO explained that they would all be external
appointments.
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4.4. FJM explained that she is looking to formalise the risk assessment process
across ShEx and was in the process of creating a dedicated risk committee to
fulfil this purpose.
— MB and FJM left the meeting —
5. Information Economy
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6. Royal Mail
6.1. RL noted that RMG would be publishing good results in the coming week and
that the team was aiming for an initial offering in October. RL explained that
the biggest concerns remain industrial relations.
6.2. RL thanked the Board for its previous advice on the retail offer, and explained
that Ministers had taken the view that a public offer was a political
requirement.
6.3. GG expressed concern that it can be hard to control demand for a public offer,
and that running a register could be very resource hungry if undertaken
properly. MR noted that care had to be taken not to scare institutional
investors. [AP] RL and GG agreed to meet separately to discuss the retail
offer.
7. Business Bank
‘IRRELEVANT
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10. Actions
Outstanding actions
Action I Action point Action Due Status
ref. officer I date
13/08 I i
IRRELEVANT
13/11 I Full Board paper to consider [AO [Sept] An interim update is
Post Office Ltd commercial 2013 provided in the CEO
strategy report of these papers.
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13/13
ShEx Board Secretary