Current employment arrangements

Under section 94 of the Act, a council must appoint a chief executive officer and fill that position as soon as reasonably practicable, after a vacancy occurs. Applications for the CEO position must, as a minimum, be invited by notice in a newspaper circulating generally throughout Victoria. The exception occurs when the council wishes to reappoint its existing CEO without advertising the position. In this circumstance the council must give public notice two weeks in advance of its intention to put a resolution to reappoint. Details of the reappointed CEO’s total remuneration under the new contract must then be made public.

A council may not re-contract its incumbent CEO earlier than six months before his or her current contract is due to expire. Prior to a general election, the council is prohibited from cutting short its CEO contract and then entering into a new contract to extend the CEO’s employment beyond that election. Nor can a council make any decisions with regard to CEO employment during the caretaker period before a general election.

A CEO’s contract cannot extend beyond five years but there is no limit on how many times a CEO can be reappointed and enter into a new contract. The CEO’s contract must specify performance criteria, and the council must review the CEO’s performance at least once a year.

The Minister may exempt a council from employing a CEO under contract, and may also forbid a council from employing a CEO or entering into a new contract with an incumbent CEO.

What do the arrangements mean?

The current arrangements give full discretion to councils on how they employ their CEOs and under what conditions, with minimum regulation based around ensuring that the public is notified if a reappointment is to occur and that the CEO’s performance criteria are specified and regularly assessed by the council.

There are other prescriptive elements such as limits on a CEO’s contract terms, timelines for renewing a CEO’s contract and requirements for councils to monitor their CEO’s performance. These provisions reflect the interest of local communities about what is an important public office.

It is also argued that the existing provisions fall short in two important respects. Firstly, they attempt to regulate for responsible employment practices in a prescriptive way, rather than specifying high-level objectives. It is argued this promotes a compliance culture, where councils and CEOs can seek to achieve what they want by ticking the necessary statutory boxes.

Secondly, while councils are responsible for employing and monitoring their CEOs performance, councillors sometimes do not have the expertise to do so (for example, expertise to set appropriate remuneration and contractual conditions and to conduct effective and timely performance monitoring). Councillors have expressed concern that CEOs have a disproportionate advantage in negotiating their own contractual conditions and that there is insufficient oversight of their performance.

Proposed legislative reforms

In 2016 the State Government set about a process of reforming the Local Government Act. This resulted in a Bill before Parliament in 2018.

The proposed Local Government Act reforms required all councils to have a CEO remuneration policy that broadly aligns with the Remuneration Principles of the VPSC Policy on Executive Remuneration for Public Entities in the Broader Public Sector. A council was to be required to publish its CEO remuneration policy on its website.

The reforms also enable the audit and risk committee to monitor and report on a council’s performance against the remuneration policy but this is not mandated.

There were also reforms proposed that required the Mayor and/or council to obtain independent advice in overseeing CEO recruitment, contractual arrangements and performance monitoring.

This will be discussed later in the report, noting that the proposed legislation lapsed during the 2018 parliamentary term.