The Government will soon have to make up its mind what to do about the pay rates of semi-state chief executives. Just before Christmas it blocked a proposed pay package for a new chief executive for the VHI because it exceeded the existing guidelines. Earlier this year, a similar controversy erupted over the pay of the ESB chief executive. With more posts to be filled in 1998, a clear Government decision on pay for commercial state companies is now required.
The VHI board wants to recruit the chief executive of the National Lottery, Mr Ray Bates, and had offered him a salary of £135,000 plus bonuses and perks. However the Government decided it could not approve the package because it exceeded the guidelines set down in the Gleeson report. This is the report which set pay norms for semi-state chief executives, members of the judiciary, TDs and senators. The Government has yet to decide whether to adopt guidelines set down by a new committee chaired by a senior AIB executive, Mr Michael Buckley.
The Government decision threatens to leave the VHI without a chief executive, as the current incumbent, Mr Aidan Walsh, is on secondment from accountants, Price Waterhouse, and is due to return there early in the new year. It also creates problems both for the VHI board and for Mr Bates who has effectively had his job offer vetoed.
The VHI board will meet early in the new year to decide what to do. It may offer Mr Bates the job at the current salary of around £70,000, or conclude a consultancy arrangement with him. Whatever decision it makes, it is important that a new chief executive is installed quickly, as the VHI has faced more than enough management upheaval in recent years.
The Government must also clarify its position on public pay. It has so far baulked at implementing the Buckley guidelines which broadly recommend that the boards of commercial semi-state companies be allowed to set executive remuneration packages in line with private-sector norms. Once the boards of these companies are competent in discharging this role - and the assistance of outside consultants may be needed in some cases - the Buckley recommendations make sense. It will clearly be impossible to attract skilled senior executives to head semi-state organisations if the existing Gleeson guidelines remain in place.
Already many organisations have found ways around the Gleeson pay levels. Telecom Eireann and Aer Lingus, for example, both pay their chief executives well in excess of the existing guidelines, through the use of contracts. And in some cases senior managers in semi-state companies working on contract earn more than their chief executive does on the Gleeson rates.
The Government no doubt fears the public reaction to implementing the Buckley report, as it would also involve salary increases for TDs and Ministers. But whatever about the wider public service, it is essential that the Government makes an early decision on the pay levels of the heads of the big commercial semi-state companies. Many of these companies are facing periods of upheaval and change during which the presence of top class management will be absolutely essential.