Empire-building seen in study of councils

TAMLYN STEWART
Last updated 05:00 13/04/2013

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New Zealand local authority chief executives are paid for empire building, a University of Canterbury economist suggests.

A new study by finance professor Glenn Boyle and former University of Canterbury student Scott Rademaker found councils that collected the most revenue per ratepayer paid their chief executives the most.

"While this could indicate that chief executives with more revenue to manage have more complex jobs, and hence deserve to be paid more, it turns out that the additional revenue is primarily used to employ additional council personnel," Boyle said.

"The more bureaucrats a council chief executive is able to employ, relative to the size of his ratepayer base, the greater the remuneration he or she is able to extract on average," Boyle said.

Chief executives who increased personnel costs the most during 2005 to 2010 had, on average, received the biggest pay rises.

"In short, council chief executives are being rewarded for good old-fashioned empire-building."

However, the study showed that the direct effects were fairly small.

On average, every 10 per cent extra per ratepayer spent on council staff yielded 1.2 per cent more pay for the chief executive.

For the typical chief executive, this meant that about 5 per cent, or $11,000, could be attributed to empire-building rewards, he said.

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- BusinessDay.co.nz

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