PUBLIC TRUST OFFICE: UNCLAIMED BALANCES
HELD IN FUNDS IN COURT AND THE OFFICE'S 1998-99 ACCOUNTS
THE FORMER CHIEF EXECUTIVE'S BONUS
37. Ms Julia Lomas was appointed the Agency's Chief
Executive on 1 July 1994, when the Public Trust Office was established
as an executive agency. Her initial contract ran for three years
until 30 June 1997. A further contract was agreed for the three
years to 30 June 2000. The contract stipulated that a six month
notice period would normally be given unless dismissal occurred
on grounds of inefficiency, illness or as a consequence of disciplinary
proceedings, in which case a shorter period would be appropriate.
Continuation of employment was subject to performance to the standard
required. The contract provided for the payment of a performance
bonus, of up to 15 per cent of annual salary at the relevant year
end, linked to the achievement of the Agency's targets.[36]
38. Ms Lomas left her post as Chief Executive of
the Agency on 31 December 1999, six months before the end of her
contract. The Department stated that this was by mutual consent
and that they had made clear to Ms Lomas much earlier that her
contract would not be renewed. As a result of the Quinquennial
Review published in November 1999, the Agency was undergoing significant
change which would run beyond mid-2000, when her contract expired.
The Department considered it appropriate for Ms Lomas to leave
her position early, to enable the programme of work associated
with these changes to be taken forward by others.[37]
39. The Department paid Ms Lomas a final sum of £63,000
on her departure. This comprised £38,700 in salary and related
elements which would have been payable for the six months of her
remaining contract period, and £24,300 of bonus payments
for the period from 1 April 1997 to 30 June 2000. Some £11,800
of this bonus represented the maximum bonus allowable for 1999-2000
and for the three month period to the end of June 2000, including
the six months between Ms Lomas' actual departure date and the
date on which her contract expired.[38]
40. The payment of the full bonus for this period
reflected the Department's view that it was inappropriate to prejudge
whether the 1999-2000 performance targets would have been met
had the former Chief Executive remained in post for the duration
of her contract. Bonus payments in prior years had been about
80 to 85 per cent of the maximum payable, and sometimes higher.
The Department had received legal advice which confirmed that
bonuses for the final 15 months of the contract could not be withheld
as Ms Lomas was contractually entitled to them. The Department
had felt that the Chief Executive should be paid a full bonus
for the last 15 months of her contract because the intention was
to secure a payment for the period which was defensible and enabled
the Department to reach agreement with the Chief Executive over
her departure.[39]
41. The Committee asked why, given the serious problems
at the Agency, bonuses were payable at all. The Department stated
that the Chief Executive's entitlement to bonuses was based on
whether the Agency met its Key Performance Indicator targets,
and year on year these targets were hit or nearly hit. However,
they acknowledged that this was a mechanistic approach and not
necessarily the right way to reward or remunerate the head of
an agency. Selection of a few key targets did not describe the
real nature of tasks for which a person might have responsibility.
It might have been better to consider wider aspects of performance.[40]
42. The Department told us that they did not feel
there were sufficient grounds for termination on the basis of
poor performance. The Department would have been content for the
Chief Executive to have remained at the Agency, if necessary working
alongside her successor, but considered that it was in the public
interest to secure a clean break and a fresh start. The Department
did not explore whether a lower severance settlement could have
been negotiated.[41]
43. The severance agreement with Ms Lomas included
a mutual confidentiality clause which bound the two parties not
to reveal any details of the settlement reached. The Department
had made clear to Ms Lomas that this clause could not be used
to withhold information from this Committee.[42]
The agreement nevertheless falls short of previous responses to
this Committee's recommendations, in which the Government accepted
the undesirability of such clauses in severance agreements, except
for reasons of commercial confidentiality.[43]
Conclusions
44. When the Chief Executive left her post early,
in December 1999, she was paid the maximum performance bonus for
1999-2000 and for the three month period to the end of her contract
term in June 2000, despite the Agency's serious failings in key
areas. The Department considered it inappropriate to prejudge
whether the Agency's key performance targets would be achieved
for these periods, and they were advised that the Chief Executive
was entitled to the bonuses. In our view the presumption should
instead be that a bonus is payable only to the extent that there
is clear evidence of achievement.
45. The Department felt that it was mutually beneficial
for the Agency Chief Executive to leave her position early, to
allow her successor to see through important changes affecting
the Agency. Despite the serious problems at the Agency, the Department
did not consider that there were sufficient grounds for removal
on the basis of poor performance. In their desire to obtain a
mutually agreed departure, the Department made no attempt to negotiate
a smaller severance settlement.
46. The former Chief Executive's severance agreement
included a confidentiality clause preventing disclosure of the
settlement terms by either side. The Committee have made clear
in the past that the use of public money must be open and accountable,
and that such confidentiality agreements are inappropriate. The
Department should refrain from entering into such agreements in
future, in line with government responses to previous recommendations
from this Committee.
36 Evidence, Appendix 2, pp 15-17 Back
37 Qs
9, 118 and Evidence, Appendix 2, pp 15-17 Back
38 Evidence,
Appendix 2, pp 15-17 Back
39 Evidence,
Qs 9, 84 Back
40 Evidence,
Qs 9, 22, 48 Back
41 Evidence,
Qs 84-94, 117 Back
42 Evidence,
Qs 119-121 Back
43 Treasury
Minutes to the 26th Report of the Committee of Public
Accounts for 1998-99, Cm 4469, and to the Committee's 28th
and 40th Reports of 1994-95, Cm 3013 Back
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