24 October 2019
The Chief Minister has welcomed the Comptroller and Auditor General’s recommendation that there should be a pay policy in place for all States-owned companies, statutory and funded bodies, and that oversight of their governance arrangements should be strengthened.
This recommendation comes in a report on the remuneration of executive and non-executive board members in companies and organisations established or substantially funded by the Government.
Senator John Le Fondré said: “There are Memoranda of Understanding in place between the Government and States-owned bodies, which requires them to seek the Government’s approval for significant changes in pay, and to warn us of any matter that is likely to be a cause of concern.
“In line with these Memoranda of Understanding, the Government has exercised its responsibility to challenge proposed pay rises and bonuses for senior executives in these arms-length bodies, when it does not agree with their proposals.
“These Memoranda are already being overhauled. However, they do not apply to the wider family of entities that we fund, so the introduction of a pay policy across all such bodies will make it simpler for all parties to understand the pay parameters within which they are expected to operate, and I welcome the recommendation.
“In the case of Andium Homes, which the Comptroller and Auditor General highlighted in her report [pages 11-16], it is clear that the company was in breach of its Memorandum of Understanding in awarding substantial pay rises and bonuses for two senior executives without informing the Government or seeking the explicit prior approvals required.
“This issue stretches back five years, to the incorporation of Andium Homes in 2014, since when the pay, including bonuses, of the CEO increased from £118,706 in 2014 to £211,680 in 2018 and of the Finance Director from £87,202 to £157,920, at a time when pay rises across the public sector have been constrained.
“The previous Government had challenged pay increases of up to 55 per cent proposed in May 2015, and subsequently approved lower increases in April 2016. However, the Government was not informed about nor consulted on further substantial increases and bonuses awarded to the two executives in 2017.
“It was only in June 2018, when the current Government received a copy of Andium’s Report and Accounts, that we became aware that these substantial pay rises had been implemented without prior Government approval.
“The Board then sought the Government’s retrospective approval for the contractual pay commitments that the Board had entered into with the two executives. The Government made its dissatisfaction clear to the Chair, and reluctantly gave retrospective approval for the pay increase, but demanded the reversal of the unauthorised bonus scheme.
“However, after further consultation with the States Employment Board and Ministers, the Government directed that the salary increases should be reversed and the bonus payments recovered, subject to the outcome of an independent review of Andium’s executive remuneration.
“Over the past year, the Government continued to have frequent discussions with the Chair of the Board of Andium regarding the failures to comply with the good governance required in the Memorandum of Understanding.
“The matter of Board governance is no reflection on the good work of Andium’s employees. Andium makes a significant positive contribution to the lives of thousands of Islanders, by providing affordable homes of a decent and improved standard. Everyone involved in Andium can be proud of what they do and should know that the Government is fully behind the company in its core purpose of providing quality social housing.
“In agreement with the Assistant Minister for Treasury and Resources, who holds the Government’s day-to-day responsibilities for Andium Homes, we have advised the company of our intention to appoint, for a fixed term, an Independent Non-Executive Director to the Board within the next few weeks. This Director will specifically focus on resolving the outstanding issue of executive remuneration, and recruiting a new Chair and other Board members at this critical time.
“On the wider issues highlighted in the report, we will now take time to study and respond to its recommendations in full. We are already improving governance through an overhaul of the Memoranda of Understanding between the Government and the entities it owns, and we will be developing an overall pay policy for all these entities.”