Business Opinion: This week should see the publication by the Irish Congress of Trade Unions (Ictu) of a paper on the idea of a State holding company for the commercial State bodies.

It is a welcome initiative, aimed at cutting the gordian knot in respect of balancing State companies need for commercial freedom and access to capital markets, with the retention of sufficient control to protect the national interests.

Its fair to say that the two models tried so far in the Republic have not worked particularly well.

The full-blown privatisation of State infrastructure, as exemplified by the flotation of Telecom Éireann, highlights what happens when the commercial interests of the company's owners - be they employees via Employee Share Option Plan (Esop) or financial investors - diverge from the strategic needs of the State. The company's owners come first.

The other model, is in effect the opposite. Companies like the ESB and Aer Lingus remain in majority State ownership and are denied access to capital and must instead resort to borrowing.

Their commercial freedom is severely restricted and political involvement in their affairs goes far beyond what could be called national strategic planning, with the resulting effect that they often become chips in much bigger poker games played between the Government and vested interests.

The broad brush strokes of Ictu's solution to this problem has been outlined already, but the detail will be filled in this week.

The core concept is that by amalgamating all the State companies into one large entity the State will be able to raise a significant amount of capital without having to dilute its shareholding below a level that allows it to exert control.

Ictu is talking in terms of raising €700 million in equity through the sale of less than 15 per cent of the State holding company.

Properly leveraged this could meet the medium term financing needs of the major State companies such as Aer Lingus, ESB and the Dublin Airport Authority.

It goes almost without saying that the structure of the company will have to be sufficiently independent and robust to satisfy the financial markets that commercial reality will prevail at board level.

To that effect Ictu has proposed that it is run by a board made up of company executives and nominees from the Government, social partners and the new investors.

While it is inevitable that the Government of the day will try and exert influence on the State holding company, Ictu presumably believes that the structure they propose will convince prospective investors that the risk is worth taking.

But before taking the plunge any prudent prospective investors would drill down to the level of the boards of the individual State companies.

And based on what is going on in the ESB board room at the moment, they would have to think twice before investing.

The current stand-off between ESB worker directors - led by deputy chairman Joe LaCumbre - and the rest of the board is as good an example as you could hope for as to why the worker director corporate governance model does not work.

At one remove Mr LaCumbre and his fellow worker director Pat Smith are taking the sort of principled stance that most investors should be delighted with.

They have refused to sign off on the ESB's accounts because they do not think it is prudent for the company to be paying massive dividends to the Government (€77.5 million this year) until it has sorted out its €1.3 billion pension deficit.

But, in fact, this sort of behaviour strikes fear into the heart of investors.

The stock market is full of companies with very serious pensions deficit issues and if they were all to take dividend holidays until the problems were resolved, then the consequences for investors would be drastic.

Mr LaCumbre could - and no doubt would - argue that these companies are by and large addressing the deficits in their pensions schemes, but the ESB has refused to engage with its unions in a realistic manner on the subject.

The counter argument is that the whole pension thing at the ESB is really something of a red herring, given that the state owns the company.

Ultimately, the ins and outs of the ESB dispute is not relevant in this context.

What is important is the extent to which the worker directors see their role as being the voice of the workers in the boardroom, rather than having a primary duty towards the company itself or more importantly - from the investors point of view - having a duty towards the shareholders.

Worker directors do seem to adopt a rather á la carte approach to this whole issue.

Another pertinent example being the recent stance of the worker directors at Aer Rianta, who opposed the break up of the company, a position that just happened to mirror the official stance of Ictu, but was contrary to the expressed desire of the shareholders.

Its not the sort of scenario that has prospective investors reaching for their cheque books.

If Ictu is serious about its concept of a State holding company for the State commercial companies, then it will have come up with a structure that gives investors comfort that both politicians and the unions will not have a disproportionate say in the running of the holding company or the semistates within it.

Its hard to see worker directors being part of this solution.