Editorial: Super City paying too much for CEO

Doug McKay, chief executive of the Auckland Council. Photo / Dean Purcell

Bonus-padded salary may stick in voters' craw come the next election

What is a chief executive worth? The question is hard to answer even in the private sector where a company's performance is readily measurable in financial results. In the public sector it is anyone's guess. The Auckland Council's chief executive, Doug McKay, is now on a salary of $768,750. Even for a person of his undoubted capability, that seems all too much.

With a bonus added for his work in setting up the Super City the previous year Mr McKay was paid just under $840,000 for the past financial year. Much of his bonus has now been converted into permanent salary, giving him the $768,750 to be going on with.

This sum has been agreed on behalf of ratepayers by a subcommittee consisting of Mayor Len Brown and councillors Christine Fletcher, Ann Hartley, Penny Hulse, Richard Northey and Penny Webster. It is a pity some hard-headed councillors were not on the pay review panel. They might at least have managed to keep the performance incentive in Mr McKay's package.

Performance pay now normally comprises 15 per cent of the salary of heads of government departments and can be as high as 20 per cent for other Crown agencies. There seems no good reason to make deals less demanding for local government's administrators.

Mayor Brown tries to justify Mr McKay's salary by comparison with rates for a chief executive of a similar-sized organisation in the private sector but there really is no comparison. Mr McKay heads an organisation that cannot go broke, it cannot even lose money. It has the power to conscript whatever it needs from property owners in its territory.

For the sake of its citizens, a council's rating power, debt levels and borrowing is restrained by Parliament, which also lightens the responsibility of a council chief executive somewhat. There seems no reason that even the chief executive of the country's largest population centre should be paid two to three times the average public sector chief executive salary, $340,000 last year.

The new Auckland Council is not over-burdened. Much of its work was delegated to agencies that stand at arms' length from the council, each with its own chief executive. The council's draft annual report discloses that 123 staff of the "council-controlled organisations" are on salaries of $200,000 or more.

High pay rates would be excusable if the Super City was noticeably more efficient than the municipal bodies that were merged, but it is not. Local government work is said to be as unhurried and comfortable as ever. Aucklanders do not report quicker consideration of resource consents or clearances of blocked drains, or much change at all in the services they have always received.

Perhaps continuity of service in a transition of this scale is an achievement in itself, but it is the least the public had a right to expect. It hardly justifies an ongoing bonus built into the chief executive's salary. Part of the problem may be that a chief executive these days is the only council employee answerable to the elected members.

He or she is the only one the council directly appoints and pays. The appointee is responsible for the organisation that has to fulfil the promises made to the electorate, keep it content and save the politicians from embarrassment. Their fate rests so heavily on the person they have put in charge that they may be too soft in salary negotiations.

Whatever the reason, the Auckland Council is paying too much. The performance incentive will be costly for a future council to restore. With an election little more than a year away, the chief executive's salary might stick in voters' craw.