Late Items Agenda of Council - Wednesday, 25 January 2023

Supplementary Items 4 25 January 2023

16. Finance and Corporate Services Report

16.4 ESTABLISHMENT OF CEO PERFORMANCE REVIEW COMMITTEE

STRATEGIC THEME	LEADERSHIP - A Council that connects with the community and is accountable in its decision making.
STRATEGIC PRIORITY	4.2 Deliver governance systems that facilitate open, ethical and transparent decision making.
SUBJECT INDEX	Governance
BUSINESS UNIT	Corporate Services
REPORTING OFFICER	Acting Director, Finance and Corporate Services - Sarah Pierson
AUTHORISING OFFICER	Chief Executive Officer - Tony Nottle
NATURE OF DECISION	Executive: Substantial direction setting, including adopting budgets, strategies, plans and policies (excluding local planning policies); funding, donations and sponsorships; reviewing committee recommendations
VOTING REQUIREMENT	Absolute Majority
ATTACHMENTS	Attachment a CEO Performance Review Committee Terms of Reference ⇩ Attachment b Amended Council Policy: CEO Performance Review ⇩ Attachment c Current Council Policy: CEO Performance Review ⇩ Attachment d Council Policy: CEO Performance Review Track Changes ⇩

OFFICER RECOMMENDATION

That the Council:

1. Disband the CEO Performance Review Panel established under Council resolution C2108/162;

2. Pursuant to section 5.8 of the Local Government Act 1995 (the Act), establishes a Chief Executive Officer Performance Review Committee (the Committee) and adopts the Terms of Reference for the Committee at Attachment A;

3. Appoints the following Councillors to the Committee as members:

(a) Cr. Grant Henley

(b) Cr. Paul Carter

(c) Cr. Anne Ryan

4. Appoints the following Councillor to the Committee as deputy member:

(a) Cr. _____________________

5. Adopts the amended Council policy: CEO Performance Review (Attachment B) to replace the current policy (Attachment C).

EXECUTIVE SUMMARY

This report recommends that the Council establish a Chief Executive Officer (CEO) Performance Review Committee under section 5.8 of the Local Government Act 1995 (the Act), in replacement of the current CEO Performance Review Panel, which is recommended for disbandment. It also recommends the adoption of an amended Council Policy: CEO Performance Review (the Policy) to reflect the proposed new governance structure, and to provide for an improved and more transparent process for the CEO performance review.

BACKGROUND

Section 5.38 of the Act requires a local government to review the performance of the CEO if the CEO is employed for a term of more than one year. Changes to the Act and the Local Government (Administration) Regulations 1996 (the Regulations) in 2021 resulted in a set of model standards being prescribed in relation to the recruitment, review of the performance, and termination of employment of CEOs (Model Standards). Local governments were required to adopt (by absolute majority) standards which incorporated the Model Standards. The City of Busselton CEO Standards for Recruitment, Performance and Termination (CEO Standards) were adopted on 28 April 2021 (C2104/083).

It is a requirement of the CEO Standards that the process by which the CEO’s performance will be reviewed is documented and agreed to by both parties. While there is no specific requirement to have a Council policy (only to set out the agreed process in a written document), in support of transparency Council adopted the current CEO Performance Review policy in August 2021 (C2108/162). The policy provides for the establishment, composition and responsibilities of a CEO Performance Review Panel (the Panel), with the Panel members also appointed via Council Resolution C2108/162.

The City appointed Mr Tony Nottle as its new CEO on 5 December 2022. Under the CEO employment contract the Council and the CEO are to negotiate and determine Performance Criteria within 3 months of its commencement, with the Panel responsible for developing and recommending the performance criteria to Council. It is proposed that amendments be made to the governance structure for the CEO performance review prior to that process being undertaken.

OFFICER COMMENT

CEO Performance Review Committee

The establishment of a CEO Performance Review Committee (the Committee) is recommended in order to strengthen the governance structures associated with the CEO performance review, and to ensure application of the City’s Standing Orders Local Law to decision making, and confidentiality provisions of the Act.

A proposed Terms of Reference for the Committee is presented for Council adoption (Attachment A). It is proposed that the Committee be responsible for:

· review of the CEO’s performance in accordance with the CEO Standards, CEO employment contract and the Policy;

· developing and recommending to Council performance criteria to be met by the CEO;

· reporting concluded findings and recommendations to Council;

· monitoring progress of achievement against performance criteria; and

· as required, provide advice and recommendations to Council in relation to the appointment of an independent facilitator to assist them with the performance review process.

It is also recommended that the Committee provide advice and recommendations to Council on CEO remuneration reviews and assessments.

As per the Terms of Reference the Committee members may meet outside of formal Committee meetings to undertake functions which inform their formal decision making.

With respect to membership, it is recommended that the Committee initially consist of three Councillors, to align with the current Panel membership, with a fourth Councillor appointed as a deputy member.

It is further recommended that the current Panel members are appointed as Committee members, until the day of the next ordinary Council election. Officers believe a Committee membership of 4 or 5 Councillors would be ideal, however given the relative urgency of this item (with performance criteria pending negotiation) and the fact that not all Councillors will be present at the 25 January 2023 Council meeting, it is suggested that Council further review and consider increased membership as part of the usual review of Committees and working groups in the lead up to the ordinary election. It should be noted that, under Section 5.10(4) of the Act, the Mayor would in any event be appointed to the Committee if he informs the CEO of his wish to be a member.

CEO Performance Review Policy

The Policy (Attachment B) outlines the process and principles applicable to review of the CEO’s performance. Amendments to the current policy (provided at Attachment C) reflect the proposed establishment of a Committee, with the functions and responsibilities of the Committee and its members moved to the proposed Committee Terms of Reference.

The Policy retains detail around the appointment and role of an independent consultant as a facilitator, and sets broad guidelines for the review process. It is recommended that commencement of the process is brought forward to before that start of each financial year as opposed to ‘as early as practicable in each financial year’ to allow for performance criteria to be properly considered as part budget finalisation and as part of the organisation’s broader performance review processes.

Additional process provisions are proposed to formalise the feedback mechanism for Councillors not on the Committee, and to provide some more guidance around the assessment of the CEO’s performance, with a rating scale included to guide Committee members.

Statutory Environment

Section 5.38 of the Act requires a local government to review the performance of the CEO annually.

Section 5.39B(2), (3), (5) and (6) of the Act relate to adoption of model standards, as contained within Schedule 2 of the Regulations.

Under Section 5.8 of the Act, a local government may, by absolute majority, establish committees of three or more persons to assist the Council. Section 5.10(4) of the Act provides for the Mayor to be appointed at their election to the Committee.

Relevant Plans and Policies

Council adopted the City’s Standards for CEO Recruitment, Performance Review and Termination at its Ordinary Meeting 28 April 2021 (C2104/083).

Financial Implications

There are no financial implications associated with the officer recommendation, with the City’s 2022/23 budget containing relevant and adequate funding allocations.

Stakeholder Consultation

No external stakeholder consultation was required or undertaken in relation to this matter. Officers have however researched the governance structure of other local governments in relation to the CEO performance review, and the recommendation to establish a committee of Council aligns to the research findings.

Risk Assessment

An assessment of the potential implications of implementing the officer recommendation has been undertaken using the City’s risk management framework, with risks assessed taking into account any controls already in place. No risks of a medium or greater level have been identified.

Options

As an alternative to the proposed recommendation the Council could:

1. Not seek to establish a committee under section 5.8 of the Act and instead retain the current CEO Performance Review Panel. It is recommended in this case different amendments be made to the Policy to guide the functioning of the Panel;

2. Amend the Committee Terms of Reference;

3. Make additional or different amendments to the CEO Performance Review Policy.

CONCLUSION

The establishment of a CEO Performance Review Committee will strengthen the governance structure associated with the CEO performance review. As such, it is recommended that the current CEO Performance Review Panel be disbanded and that the current Panel members be appointed to the new Committee. Amendments are also proposed to the CEO Performance Review Policy to reflect this and to provide for a more structured and formalised process.

TIMELINE FOR IMPLEMENTATION OF OFFICER RECOMMENDATION

The Panel will be disbanded and the Committee established immediately on adoption of the officer recommendation. The Committee will meet within one month to elect a Presiding Member and Deputy Presiding Member. The Policy will be updated on the City’s website within one week.

Supplementary Items		8		25 January 2023
16.4	Attachment a		CEO Performance Review Committee Terms of Reference