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Call for the Reserve Bank to establish guidelines to prevent perceptions of conflict of interest among its board members

PETER CAVE: The turmoil in the gold industry continues, with a call for the Reserve Bank to establish clear guidelines to prevent any perception that its members have a conflict of interest. The call comes after revelations that Hugh Morgan, the Managing Director of one of Australia's largest gold mining companies failed to absent himself from the Reserve Bank board discussions late last year about the sale of gold reserves.

While there's been no suggestion that Mr Morgan benefited from his participation in the meeting, last year his Western Mining increased its hedging against falls in the gold price. WMC insists that this decision was taken independently, but this morning Ole Elsaesser, the General Manager of Finance with Placer Pacific, told A.M.'s Elizabeth Jackson the board has to be very careful about perceptions of a conflict of interest.

OLE ELSAESSER: There could be a perception, it could be justified, yes, because if someone is with a major gold producer and they're also sitting on the board of the Reserve Bank where they're making decisions that can impact the future price of gold, then there's perhaps a conflict of interest there. It could be perceived that there's a conflict of interest.

ELIZABETH JACKSON: Is it appropriate, do you think, that someone like Hugh Morgan, who is after all the director of one of the country's largest gold mining companies, is it appropriate for someone like that to sit on the board?

OLE ELSAESSER: I think it ... I don't have a problem with someone like that sitting on the board, but I think they should not participate in meetings that discuss issues like this that could put them in conflict or appear to put them in conflict.

ELIZABETH JACKSON: The Reserve Bank, I understand, has no formal procedures for ensuring that board members don't participate in discussions on issues which they may have a direct commercial interest in. Is that a problem, in your view?

OLE ELSAESSER: I think so. I think they should establish some fairly clear guidelines when they're putting directors of the Reserve Bank in potential conflict situations.

ELIZABETH JACKSON: Has this historically been a problem, as far as you're aware?

OLE ELSAESSER: I am not aware.

ELIZABETH JACKSON: What sort of guidelines do you think might be appropriate in these circumstances?

OLE ELSAESSER: I guess it's difficult to set guidelines because there are varying things that could happen that could put people in different types of industries and potential conflict. So how do you set guidelines? There would have to be I think ... it really has to be more a set of principles I suppose and circumstances judged on a specific basis.

ELIZABETH JACKSON: The Reserve Bank, of course, says that it's very difficult for their members to absent themselves from these types of discussions because if they were to do that then they'd simply not be able to participate in most of the deliberations that the board goes through. Do you accept that that potentially is quite a problem?

OLE ELSAESSER: It wouldn't be easy, but I think it's incumbent upon them to do that.

PETER CAVE: That was Ole Elsaesser, the General Manager of Finance with Placer Pacific, a mining company.