As publicity rages over ‘boomerang bosses’ and council chiefs’ salaries, former chief executive and now private sector lawyer, Peter Keith-Lucas, takes a measured look at the issue of pay-offs

Imust start with a declaration of interest. Almost 20 years ago, the Association of Local Authority Chief Executives (ALACE) negotiated a severance payment for me on ceasing to be chief executive of Medina BC on the Isle of Wight, and shortly afterwards, I was appointed as director of central services for Swansea City Council. As a result, I am one of those upon whom the Audit Commission has targeted its sights in its recent report on severance payments for chief executives.

While the headlines have been about a very small number of senior officers who have left one authority with a pay-off, and been re-employed almost immediately by another authority, I think there are other lessons to draw from the report, as follows... It is no accident that the introduction of robust performance measurement for local authorities, together with more managerial senior members – following the introduction of executive government in the Local Government Act 2000 – has coincided with life at the top of local authorities becoming more fragile.

The number of chief executives departing each year has increased significantly, and notably more so in single-tier and county authorities, for which executive government is mandatory.

The mythology has it that the requirement for the agreement of a ‘designated independent person’ to any disciplinary action makes it all-but-impossible to sack a chief executive, even for misconduct.

The truth is rather that the Joint National Council terms and conditions of employment, which the local government employers agreed in 2008, offer too many opportunities for delay, particularly where misconduct is accompanied by ill health. The DIP requirement, properly managed, should not be a cause of delay.

There will always be a small number of chief executives who depart as a result of personal misconduct. But the commonest cause of departure is a breakdown in the relationship between chief executives and senior councillors, responsibility for which cannot always be laid at the door of the departing chief executive.

The Audit Commission found that many authorities did not have robust arrangements for monitoring the performance of chief executives.

So, when problems arose, the evidence was not available to support a capability dismissal. As a result, authorities reached for their cheque books to break the impasse.

The district auditor examines all compromise agreements to ensure that any pay-offs are justified as compromising genuine and quantified claims which the departing chief executive has against the employing authority, and are now in accordance with the employing authority’s written policy on severance payments. So, a departing chief executive should not receive a pay-off unless the authority has been at fault.

But, it should be recognised that, while the vast majority of local authority employees are relatively-poorly paid, the salaries of some senior officers in local government have increased substantially over the past decade.

The pay differential between chief executive and clerical assistant has grown from a factor of 10 to a factor of 15 or more. The absence of a clear measure of profit makes it difficult to provide a simple justification for some current senior local government salary levels. Comparisons of managed budgets and the numbers of subordinate staff become less convincing unless budget cuts feed back into senior salaries. The current state of the stock market and of commercial property values, which so recently caused pension fund managers to declare contribution holidays, now open a frightening gap between the value of local authority pension funds and the anticipated cost of defined benefit pensions. Chief executives’ rising salaries mean that their prospective retirement benefits are not supported by their historic contributions.

None of these features are unique to local government, and the most blatant examples of pay-offs for failure, of inflated pension pots at the expense of shareholders, of tame remuneration committees and revolving doors are all to be found in the private sector. But that does not mean all is well in local government.

The Audit Commission recommend that changes were needed to enable claw-back of pay-offs where the departing employee was promptly re-employed in another local authority. This would be in addition to the existing claw-back where an officer takes up the new post within four weeks of leaving the old post, and the current set-off of the new local authority salary against pension payments.

It recommended improved performance appraisal for chief executives, and improved advice and guidance on managing termination of employment.

But, perhaps it is time to accept that the introduction of executive government has changed the relationship between senior members and the chief executive. Perhaps ALACE should move from seeking to protect chief executives’ continued employment with complex disciplinary procedures and copy football managers by including a simple ‘no blame’ termination provision with a predetermined pay-off. It will not be cheap, and it will hurt the employment lawyers, but it would enable a quick transition to a new chief executive where, for whatever reason, the existing chief executive’s face no longer fits.

Peter Keith-Lucas is local government partner at lawyers Bevan Brittan, and is a former chief officer and chief executive