Pay consultants accused of conflicts of interest

Take a look at this article in the Guardian of 5 June 2012

Pay consultants accused of conflicts of interest
70% of remuneration consultants behind bumper executive pay packages earn fees from extra services to same firms

What the article says is that companies who provide a service setting pay of executives who provide other services to the same clients have a conflict of interest e.g. if you help to hire executives and your reward is a percentage of their earnings then there is no incentive to keep the recommended pay scale down.

Note who got a mention in the article. The Hay Group (don't confuse them with Hays Employment, they are different) and so this is of interest to readers in Barnet:

...and Xstrata, which employs the Hay Group, another consulting firm which sold additional pay data to the mining group.

Now look at the papers from the first meeting of the Remuneration Committee of Barnet Council. Who do you find there, The Hay Group (and Penna)

Remuneration Committee Reports 9 May 2012

Do The Hay Group sell any other services to Barnet Council? It would seem so.

 

Department	Item	Date	Ref	Value £
Children's Service	Staff Training	20/10/2010	5000277068	34,100
Children's Service	Staff Training	11/11/2010	5000280404	22,050
Children's Service	Staff Training	11/11/2010	5000280419	850
Children's Service	Staff Training	10/01/2011	5000287081	30,000
Children's Service	Staff Training	11/02/2011	5000291595	22,050
Deputy Chief Executive	Consult Fees	10/03/2011	5000295930	6,491
Deputy Chief Executives	Consult Fees	15/08/2011	5000314400	5,000
Deputy Chief Executives	Consult Fees	05/10/2011	5000319582	20,190
Children's Service	Staff Training	13/01/2012	5000330514	22,050
Total				162,781

Richard Cornelius asked a question of Sarah Murphy-Brookman at that meeting. Are there other (pay measurement) systems. SBM replied that there were but they were not as robust. How very interesting that the Guardian article also mentions firms called Deloitte, Towers Watson, Kepler and Hewitt New Bridge Street so there is plenty of choice. You need, Richard, to start asking questions to which you already know the answer otherwise what is the point? or when you get the answer which is vague to keep asking until all of the relevant facts are out in the open.

What evidence is there that the Hay system is the most robust? None that we have seen. 

If there had been competition for the pay scale setting work it could have been done on the basis that it is the only type of work which the winning bidder could do for the council in order to get some impartiality into the equation.

There is something called the  Framework Agreement RM692 which has been set up by the Government Procurement Service ("GPS") for the supply of non-permanent staff and which Barnet Council can sign up to and use without getting into a long tendering process. In Lot 6a there is a supplier called the Moorhouse Penna Partnership.

Mr Mustard sent GPS the following question:

I note that a supplier in lot 6a of Framework Agreement RM692 for non permanent staff is named as the "Moorhouse Penna Partnership".

I would like to know which companies make up this partnership please. The answer duly came

For the purposes of the Non-Permanent Staff framework agreement, the Moorhouse Penna Partnership consists of Moorehouse (sic) Consulting, Hay Group, Penna and BiP Solutions

If you look at the recommendation on the first page of the Senior Posts and Council Re-organisation report it recommends Hay as Reward advisers and Penna as Recruitment advisers. It would have been open and transparent if the fact that they operate in a partnership had been noted but we have to find these things out for ourselves.

Yours frugally

Mr Mustard