CEO Remuneration — Establishing the Gatekeeper
9 November 2021
It is timely to conclude our series of Alerts on the first tranche of amendments made to the Local Government Act 1999 (the Act), by the Statutes Amendment (Local Government Review) Act 2021 (the Reform Act), with the second tranche set to commence on Wednesday 10 November 2021.
In this, our final instalment on the first tranche, we examine the changes made to the manner in which CEOs are remunerated. The second tranche of amendments will then serve to alter the manner in which CEOs are appointed, to ‘codify’ the performance review process, and to insert an additional consideration for a council, prior to termination. Keep an eye out for our Alert on those changes shortly!
Remuneration of the Chief Executive Officer
Relevant to this Alert is the introduction of a new section 99A to the Act, giving the Remuneration Tribunal (the Tribunal) the power to determine the minimum and maximum remuneration that may be paid or provided to council CEOs, with councils being required to make the final decision on remuneration within these parameters.
That is, whilst the remuneration of the CEO will be decided by the council, as a governing body, the Tribunal will be charged with determining ‘from time to time’, the parameters under which the council may set that remuneration, by reference to a minimum and maximum, including whether those parameters are to be indexed (the Determination).
In making the Determination, regard is to be had by the Tribunal to any matter prescribed by regulation. Currently, there are not any prescribed matters.
Importantly, the Remuneration Act 1990 (the Remuneration Act) provides ‘remuneration’ includes:
- salary; and
- allowances; and
- expenses; and
- fees; and
- any other benefit of a pecuniary nature.
That is, all elements of a Total Employment Cost package are included, when determining the minimum and maximum remuneration, not just the salary component.
This raises for consideration a frequently asked question. That is, whether a distinction will be made between metropolitan and regional councils, in setting the parameters.
We now know that under subsection 99A(4) it will be for the Tribunal, in making its Determination, to consider the geographical location of a council, such that a different scale may be set. In which case, noting the ‘all inclusive’ definition of remuneration, it will be important for the Tribunal to have regard to practical matters, such as travel considerations for regional CEOs and the provision of a council vehicle as part of any remuneration package.
Whilst the Tribunal’s website has now been updated to include a link to Local Government Elected Members & CEOs, there is yet to be a Determination made under section 99A. Accordingly, councils may continue to consider issues of remuneration for its CEO in the manner it did, prior to the insertion of section 99A of the Act.
Making the Determination
Shortly, we expect the Tribunal to notify its intention to make a Determination.
At that time, the application of section 10 of the Remuneration Act will be important for councils to consider (subject to any modifications that may be proposed by the regulations), the effect of which, in making its Determination is:
- the Tribunal is not bound by the rules of evidence but may inform itself in any manner it thinks fit;
- before the Tribunal makes a determination affecting the remuneration of council CEOs, it must allow persons of that class a reasonable opportunity to make submissions orally or in writing;
- a person may appear before the Tribunal personally, by counsel, or by other representative; and
- the Minister may intervene in proceedings for the purpose of introducing evidence or making submissions on any question ‘relevant to the public interest’.
That is, whilst current council CEOs will clearly have an opportunity to make a submission on the Determination, it is not clear how those persons, who may aspire to be a future CEO, will be heard as part of this process, if at all. It is likewise, unclear, as to the opportunity for a council, as governing body, to be heard as part of this process.
Finally, for its efforts in making the Determination, the Tribunal’s reasonable costs are to be paid by the Local Government Association. In turn, the LGA may then recover those costs as a debt from the councils to which the Determination relates. However, this ‘cost recovery’ provision is framed as a discretionary one.
If you have any questions about this, or any of our previous Alerts, please contact: