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Some councillors called for a change to the management structure of council-controlled organisations.
Dunedin City Holdings Ltd director Keith Cooper and Aurora chairman Steve Thompson were told the payout to former Delta chief executive Grady Cameron, and high salaries at the company, ''disgust people''.
The debate at a full council meeting yesterday followed the release of the companies' annual reports. These showed Mr Cameron, who has been criticised for failing to ensure lines company Aurora's electricity network was properly maintained, earned more than $980,000 in the last financial year.
But Mr Cooper defended pay rates at the company, saying directors were required to oversee commercial entities.
He said he would hate to be back in future justifying the performance of the companies if they had not been competitive in the employment market to find people to run them.
''We've got to have quality people. If we don't have quality people, you're going to have substandard outcomes.''
Mr Cooper told the meeting Aurora would embark on a $721million programme over the next 10 years as it upgraded its infrastructure.
With human resources changes, employees' terms of employment changed, and that cost money.
''They're the necessary evils.
''Employment law is always paramount, and always sides with the employee.''
Cr Mike Lord asked if there were people who had turned down jobs because the pay was too low. He was told there were.
Cr Lord asked whether it may have cost extra if contracts were broken.
He was told there was a ''real danger'' in breaking contracts.
''If you've got a contractual obligation, you've got to meet it,'' Mr Thompson said.
Cr Marie Laufiso asked if the company had done research into the market, ''which may actually be wrong''.
Mr Thompson responded: ''In the world I live in, the market is the market.''
DCHL had recently set out its expectations for remuneration in the companies and was following that process, he said.
Cr David Benson-Pope asked whether there was a performance clause in Mr Cameron's payout, but Mr Thompson said he was unable to tell him.
Cr Benson-Pope said nobody was ''remotely happy'' with the situation. While there was little the council could do, as the matter was ''done and dusted'', new contracts would also be signed off with ''yet another confidentiality clause''.
''Next year, at this time, we're likely to see unpleasant information, potentially, sitting in these annual reports about salary levels that are not acceptable in the wider community.''
There was a problem with the management model and the council needed to address it with ''a degree of urgency''.
''What's happening in this community just, frankly, disgusts people.''
Mayor Dave Cull said, at a level of principle, he was ''uncomfortable with the vast disparity'' between very high salaries and the lowest in communities, but that was a societal issue.
If the council tried to pay people less, ''I might be even more uncomfortable with the outcomes for our companies''.
However, he was concerned high salaries had to be paid ''whether the performance is great or not''.
He hoped contracts could be tightened in future. In terms of a change in model, he said the council had to be very careful about unintended consequences.
The council voted to note the reports.