Thursday, 2 February 2012

Should Councils have CEO's and should their salaries be lowered.


In the news of late has been the problems faced in Christchurch, one of these was the agreeing to a massive pay rise for the CEO, the public outcry and then the CEO deciding not to accept the offer in full.

The present system being used by councils to decide the CEO’s salary is both outdated and clearly fails the market style requirements in this day and age.
Using this failed and dated model simply lifts salaries by creating a false picture of just what a council CEO actually does and the value of it. It also leads to ever increasing salary levels which have no connection to actual performance requirements.

Firstly the position is not that of a Chief Executive Officer, it is one of a coordinating and advice nature. So it would better to be called, Chief Coordinating Officer [CCO}.

This is because the various specialist positions presently found directly below the CEO give either specialist advice and or plan the actual activities or recommendations, and are better qualified in both a technical and operational sense.

It is in this area of employment that the real strength of any council rests.

To this end we need to redefine the reward structure for the position [Council CEO or CCO]

Using the market to decide the rewards for a new CEO or CCO position needs a new and more effective process that can achieve the goal of a more balanced and realistic level of remuneration.

I would recommend the following process be seriously considered, it could and would achieve a more realistic and market driven approach to the task of containing the remuneration and therefore ratepayer expense.

  • Call for tenders from individuals who believe they have the skills required and are willing to accept a figure less than that stated below.
  • The key entry point will be based on an individuals’ tender figure which must be below the present salary level of whatever amount your council pays its CEO] 
  • Applicants need to clearly state a figure below that stated above to be considered for an in depth interview.
  • Those who state a figure below that listed above will automatically have a head start over those who tender a higher figure.
  • Applicants will be listed in interview order from the lowest tender up.
  • No tender will be considered if the figure suggested is below the minimum legal figure which is currently $13.24 per hour x 40 x 52 per year. This figure is considered by the government a livable salary.

By using this tender process we will over even a short period of time lower the massive salaries being paid to local government CEO’s and thereby reduce the strain on rate payers who are required to foot the huge salaries being paid at present.

It will also save ratepayers from the huge fees that are being paid to various search organisations which are paid on the bases of a percentage of the salary agreed to.

This is the way the market should work for all those who receive rewards for standard tasks in the management field. Presently some private organisation charge up to three months salary for the position as a fee, others charge a percentage of the total salary, and they always support higher salaries because they gain directly by that support.

This tender process is presently used for the purchase of all services and I consider that the role of a CCO is a service / coordination role.

Possible or present CEO’s / CCO’s who are willing to register themselves as a collective [Union] can have negotiations carried out on their behalf by their elected representatives so long as they comply with the Industrial Relations Act plus the requirements listed above. So the ability to use an agent continues so long as that agent is recognised by all parties to the selection process.

This policy would come into effect once any Government appointee or watch dog has removed. The council needs to have been democratically elected to ensure that the citizen acceptance element is protected. [This clause at present only applies to the Christchurch City Council].

Once introduced the ability of councillors via their councils to offer salaries to their one employee [the CCO] will cease until the tender process has been completed.

CCO’s will be expected to follow this process for all positions they control outside of those presently regulated by agreed collective agreements.

Well there it is folks a dynamic and workable process at designing a acceptable remuneration process that is in line with a market approach as suggested by some of our past and now somewhat disgraced and discarded leadership.

Your feed back on this innovative policy would be highly valued.


Anonymous said...

I read with interest and agree that CEO salaries are excessive. however, the model you propose, in my opinion, is destined to fail the communities it intends to protect.

1 - A lowest price tendering model is proposed, with little regard to competence or aptitude. This suggests that an unqualified person may receive the role if they submit a marginally lower price than an institute of directors-calibre candidate.

2 - "CCO’s will be expected to follow this process for all positions they control outside of those presently regulated by agreed collective agreements." This implies that all staff will eventually come under this model. I am unsure how you intend to hire competent engineers, accountants and lawyers under this model when they can often name their price in the private sector.

The key point here is competency. As a former TA employee, I recognise the value and reward of public service however that does not take into account the years of training and certification required to become competent at key jobs. Replacing a competency based remuneration system in local authorities will, in my opinion, lead to a slow decline in the capability of those councils as their good staff leave, replaced by those who are willing to under-sell themselves in hope of a job. A likely bounce-back effect will be an increase in consultancy costs, which in my opinion are where the most savings to a TA budget can be made in the first instance.

Wheeler's Corner NZ said...

Thanks Anonymous the point you make is valid but the task is bring down the CEO's remuneration to more realistic level,no one is suggesting that you would accept a lower offer if the skills were not present and of course interviews are required. ai present as CEO's remuneration rises those below follow suit, except for those at the bottom where they remain static...As you are no doubt aware the CEO in local government is rarely the mose skilled.