Directors' fee rise of 200% advised

Recently revealed, previously censored parts of a report on the future of the Dunedin City Council's holding company show advice to the council was for a three-fold increase in directors' pay.

That suggestion came as the council looked for ways to deal with an $8 million shortfall in dividends from its companies.

The man behind the report, independent consultant Warren Larsen, said "penny-pinching" in such an environment would be a mistake.

He also said the directors, who had been appointed to run the city's companies while a major restructure was under way, were earning less than suggested in the report.

Dunedin City Holdings Ltd is the holding company for city companies including Aurora Energy, CityForests, Dunedin City Treasury and Delta Utility Services.

The report into the companies' problems was released last year.

It confirmed the multimillion-dollar shortfall, and preceded the sacking of the DCHL board, and the hiring of Auckland-based Denham Shale and Queenstown's Bill Baylis to replace them.

One other director will be hired soon.

It caused a political stoush between then chairman Paul Hudson, also a city councillor, and Mayor Dave Cull.

The council blacked out some sections of the report it released publicly last year, including part of Mr Larsen's discussion on the skills needed by directors.

His report suggested the skill base was strongly weighted towards accountancy and financial abilities, rather than the actual activities of the companies.

The key requirement was proven business and governance experience, the report said.

The next sentence was originally blacked out, but has since been made public by the council.

It reads: "To attract the appropriate people to these roles, remuneration levels would need to be in the upper quartile.

"It is unlikely the required candidates would be attracted below $75,000 per annum with the chairman paid at twice that rate."

With a planned three directors, that figure would come to about $300,000.

That would compare with a previous figure of $101,811 - the level of directors' remunerations for the year ending June 2010.

That figure came from four directors on $17,593 and the chairman, at the time Paul Hudson, on $31,4339.

But asked about the figures last week, Mr Larsen said he understood Mr Shale and Mr Baylis were being paid less than that figure.

The figures in the report were "my own version of the market rates" for someone with the skills to do the job, and for a temporary appointment.

Mr Larsen said "penny-pinching" in such a situation would be a mistake.

Mr Cull said he did not know the level of remuneration was "a fait accompli".

There would also be fewer positions, so that made the overall cost less.

Mr Shale said he and Mr Baylis were doing "more than just being directors".

He promised to respond more fully, and to give an update on the work being done, tomorrow.

Mr Larsen said he was staying on as a consultant, something the council had asked him to do to make sure the recommendations in his report were implemented.

He said he planned to make sure that came about.

"I am keeping a very close eye on what's happening."

He said he expected to stay in the role until such time as he and Mayor Dave Cull agreed the recommendations had been implemented.

The third director was to be somebody who could "step up to be chairman" at the completion of the restructuring.

david.loughrey@odt.co.nz