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Dáil Éireann debate -
Wednesday, 26 Jan 2000

Vol. 513 No. 1

Written Answers. - Public Sector Remuneration.

Michael Noonan

Question:

364 Mr. Noonan asked the Minister for Finance if he will confirm Government acceptance of the corporate governance recommendations of the Review Body on Higher Remuneration in the Public Sector (details supplied); and the action, if any, taken to implement these recommendations. [1762/00]

Report No. 37 of the Review Body on Higher Remuneration in the Public Sector recommended significant changes in the system of remuneration for chief executives of commercial State bodies, to be linked to changes in contract arrangements, performance-related pay, publication of remuneration information and corporate governance.

In relation to corporate governance, the review body concluded that the system of selection and remuneration of directors would require review in order to ensure that each board had sufficient directors with the particular expertise required to enable them to serve meaningfully on a remuneration sub-committee. To this end, it specifically recommended that:

appointments to the boards should be made solely on the basis of the experiences, competence and expertise of the persons concerned;

there should be an appropriate number of executive directors; as a first step, chief executives should be appointed to the boards; each board should have a suitable civil servant appointed to it;

revised arrangements should be introduced to give chairpersons a greater role in the appointment of all other new directors; and

the timing and duration of board appointments should be structured to avoid expiry of the terms of office of a large number of directors at the same time.

The Government decided, in March 1998, to implement the review body's recommendations on the remuneration of chief executives of commercial State bodies, subject to some modifications. The review body had recommended an initial evaluation and annual reviews by each such board whereby, with the assistance of common pay consultants appointed by the Minister for Finance, basic salary would be derived from comparison of the chief executive job with jobs of comparable size across the private sector. To introduce greater co-ordination, the Government decided that the Minister for Finance should appoint pay consultants to evaluate all relevant chief executive posts in one exercise, analyse rates for jobs of comparable size across the private sector and submit a framework to the Minister for Finance, on the basis of which he would bring proposals to Government as to the rate to apply to each commercial State body chief executive. Hay Management Consultants were appointed as pay consultants.
On the basis of the Minister for Finance's proposals, the Government decided, in July 1999, that increases in remuneration for individual chief executives could be applied in line with the Minister for Finance's framework, based on the Hay report. Such increases would be strictly conditional on the State body and its chief executive accepting the recommendations of the review body on the nature of contracts, performance-related pay and the publication of remuneration information in annual accounts.
At that stage, the Government did not implement the other recommended changes in corporate governance and related issues. The Minister nonetheless considers that the eventual implementation of those recommendations would make a positive contribution to the quality of strategic management in the commercial State sector and intends making further proposals to the Government on those aspects at the appropriate time.
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