Case number: 99454
Request for the findings and recommendations of the Hay Management Consultants' Report entitled" Evaluation and Market Pricing of Chief Executive Positions in Commercial State Organisations" - whether such release would disclose matter relating to the deliberative process of the Department concerning the approval of proposed increases in the remuneration of Chief Executive Officers and would be contrary to the public interest - section 20(1) - whether such release would have a significant adverse affect on the management of Government pay policy in relation to the commercial State bodies - section 21(1)(b) - whether such release could disclose the negotiating positions of the relevant Departments for the purpose of setting the salaries of the CEOS of semi-State bodies - section 21(1)(c) - public interest - section 21(2) - whether release of the information could prejudice the competitive position of the Hay Group in the conduct of its profession or business - section 27(1)(b)
The requester sought, and was given partial access to the report in question. He agreed to narrow the scope of his request to the findings and recommendations of the report. The Department claimed that release of this information, which it said related to the deliberations by the Department as to whether to approve proposals for increases in the remuneration of Chief Executives of commercial State bodies, would be contrary to the public interest, and so was exempt under section 20(1). It claimed that section 21(1)(b) applied as the release of the information would be detrimental to the role of the Department of Finance in the pay determination process between the board of the semi-State body and the Minister in charge of the Department under the aegis of which the State body comes, because if the full range of salary bands were disclosed, Chief Executives of similar-sized companies would be likely to use the information to argue for a higher placement on the scale of job sizes. It claimed that section 21(1)(c) applied because the recommendations set out the parameters by which the Department and the relevant Ministers make decisions in relation to the pay of Chief Executives, and such disclosure would divulge the negotiation position of Departments and seriously impede their future work in setting the salaries of the CEOS of Semi -State bodies. The Department and the Hay Group both claimed that release of the withheld information could be used to replicate the latter's database, which would severely undermine its consultancy business, and that section 27(1)(b) applied.
The Commissioner accepted that the findings and recommendations of the report related to the deliberative processes of the Department, in that they related to the determination of whether to approve proposals for increases in the remuneration of Chief Executives of commercial State bodies. However, he found that the Department had not put forward any specific arguments to support its contention that such release would be contrary to the public interest and that, therefore, section 20(1) did not apply. He also commented that the findings constituted, for the most part, analyses of the factual information discussed in relation to State bodies, and in any event, did not qualify for exemption under section 20(1) by virtue of section 20(2)(b) of the FOI Act.
The Commissioner was not satisfied that Chief Executive Officers being in a position to know the remuneration of other Chief Executive Officers would have a significant adverse function on the performance of the Department of Finance of some of its management functions. He noted that, to the extent to which the Department can now justify differences in relative pay by reference to an evaluation by an expert group, it was now in a much stronger position vis á vis dissatisfied chief executives, and that section 21(1)(b) did not apply. He found that section 21(1)(c) did not apply because the negotiating position of the Minister for Finance, and the relevant Minister is already known, i.e. the parameters set by the Hay Group's report in respect of that job, and any improvement on the appropriate range would have to be justified by reference to new factors or considerations. He also noted that, in any event, the Department had already made known most of the factual information about the jobs through the release of the edited version of the Hay Report, and he could not see how the release of the findings and recommendations would reveal any further information relevant to the negotiating positions of the relevant Departments. He also said that even if he had considered either 21(1)(b) or (c) to apply, he would have found that the public interest in favour of release would outweigh the public interest factors identified by the Department as militating against release.
He found that release of the report's findings and recommendations, without the release of other information contained therein to which the requester said that he did not want access, would not involve the disclosure of commercially sensitive information concerning the Hay Group, and that section 27(1)(b) did not apply to this information.
Our Reference: 99454
Dear Mr. X
I refer to your application for a review of the decision of the Department of Finance in relation to the request you made on 13 July 1999 under the Freedom of Information Act, 1997 ("the FOI Act"), for a copy of the Hay Management Consultants' report entitled "Evaluation and Market Pricing of Chief Executive Positions in the Commercial State Organisations".
I have now completed my review of the Department's decision in accordance with section 34(2) of the FOI Act. In carrying out that review, I have had regard to submissions from you, the Department, and Hay Management Consultants [hereinafter referred to as "the Hay Group"]. I have also examined a copy of the full version of the Hay report and a copy of the edited version released to you.
In its decision, the Department refused access to all tables in the Hay report, Appendix 2, and the elements of the main body of the report (comparisons between State bodies) that would disclose or indicate the recommended salary range for any Chief Executive Officer (CEO) post or its recommended position relative to other CEO posts. This meant that the text of section IV of the report, "The Evaluation Results", was also rearranged to avoid disclosure of information on the relative job sizes of the State bodies discussed therein. The grounds for refusal were sections 20(1), 21(1)(b), (c), and 27(1)(b) of the FOI Act.
I note that in your submission, dated 26 October 2001, you stated that you seek only the findings and recommendations made in the Hay report, not the details of how the Hay Group reached its conclusions. In a subsequent telephone conversation with Ms. Melanie Campbell, Investigator, you confirmed that you have no interest in the point details given in the report. Accordingly, the scope of this review is limited to the question of whether the Department's decision to refuse to grant access to the findings and recommendations of the Hay report was justified.
For the sake of clarity, I note that I consider the findings as consisting of the conclusions drawn regarding the relative job sizes and the pay rates then in effect. The recommendations consist of the suggested salary ranges found in section VI of the report. In other words, the parts of the report at issue consist of: the deleted portions of section II; the original text of section IV; the deleted portion of the text of section VI; and Table 2 with the exception of the column of Hay points.
I think I can, without prejudice to section 43 of the Act, give a broad outline of what information the Department has refused to disclose as a result of deletions or editing. The paragraphs deleted from section II of the report contain the Hay Group's identification of the largest and smallest chief executive jobs on the basis of the Group's system of evaluation as well as the jobs which carried salary rates most out of line and least out of line with comparable private sector rates. The edited text of section II deleted any reference to the relative position of a particular job in the league table of jobs by reference to the Group's evaluation. The deletions in section VI mirror those in section II, i.e. they identify the gaps between the pay rates in the various state bodies and comparable private sector companies. Table 2, which was withheld in full, sets out for each state body the salary range by reference to market criteria and compares it with the rate previously approved by Ministers.
Under section 34(12)(b) of the FOI Act, a decision to refuse to grant access to a record is presumed not to have been justified unless it is shown to my satisfaction that the decision was justified. Having considered the submissions, I am not satisfied that the Department was justified in refusing to grant access to the findings and recommendations of the Hay report. To explain my reasoning, I will first set out the background of the Hay report and then I will address the claimed exemptions in turn.
According to the Department and sample legislation accompanying its submission, the remuneration of chief executives of commercial State bodies is determined by the individual boards of the bodies with the approval of the relevant Minister and the consent of the Minister for Finance. Since 1969, the Government has relied on the Review Body on Higher Remuneration in the Public Sector to recommend pay levels for higher public servants, including, up to 1997, chief executives of commercial State Bodies. Although the Government retains the right to decide on whether to implement the Review Body's recommendations, the Government has generally accepted the recommendations "with few if any modifications."
Report No. 37, published on 5 March 1997, was the last report of the Review Body to include chief executives of commercial State bodies. Unlike previous reports, Report No. 37 did not recommend actual rates of pay for chief executives of commercial State bodies, but rather a process of initial evaluation and annual reviews by the individual boards of the bodies whereby basic salary would be derived from comparison of the chief executive job with jobs of comparable size across the private sector. For this purpose, the assistance of a common firm of pay consultants appointed by the Minister for Finance was to be made available to each board, and the overall remuneration package proposed as a result was to be submitted to the relevant Ministers for approval.
However, in March 1998, the Government decided to modify the recommended arrangements to operate as follows:
Accordingly, the Hay Group was commissioned, at a cost of £69,445, to carry out the evaluation exercise. Subsequently, in July 1999, the Government decided, among other things, that
As the Department has already disclosed in the edited version of the Hay report released to you, the salary ranges recommended by the Hay Group were set from 80% to 100% of the Median market rate for comparable jobs in the private sector. The Department says that, in practice, its function is to advise the relevant Departments of the recommended salary ranges. The Departments relate this information to the boards of the State bodies, which in turn request the approval of the relevant Minister and the Minister for Finance for a salary level within the range. The request is then assessed by the Department in light of the Hay report.
Although the Hay report is now three and a half years old, the Department says that the report continues to be used in the pay determination process. "The rates recommended by Hay are updated by standard round increases and remain the parameters by reference to which the Department and Minister make decisions in relation to the pay of chief executives of commercial State bodies." The Department also explains how the Hay report is used as the basis for "pricing" new CEO posts in commercial State bodies.
Section 20(1) of the FOI Act allows a public body to refuse to grant a request if the contents of the record concerned relates to the deliberative processes of the public body concerned and the granting of the request would be contrary to the public interest. Deliberative processes involve the consideration of various matters with a view to making a decision on a particular matter. Section 20(2)(b) of the FOI Act excludes from exemption under section 20(1) factual information or analyses thereof.
In light of the information provided by the Department regarding the current use of the Hay report, I accept that the findings and recommendations of the Hay report relate to the deliberative processes of the Department, namely, the determination of whether to approve proposals for increases in the remuneration of chief executives of commercial State bodies. However, the Department, while asserting that release would be contrary to the public interest, has not put forward any specific arguments to support this assertion. It has not shown to my satisfaction that release of the findings and recommendations would be contrary to the public interest, which is a stronger public interest test than in other sections of the Act which require that on balance the public interest would be better served by granting than by refusing release. For the reasons stated below, I am of the view that release would in fact better serve the public interest. In any event, the findings of the report constitute for the most part analyses of the factual information discussed in relation to the State bodies and do not qualify for exemption under section 20(1) by virtue of section 20(2)(b).
The Department claims that section 21(1)(b) of the FOI Act applies in this case, because granting access to the Hay report in full could reasonably be expected to have a significant, adverse effect on the management of Government pay policy in relation to the commercial State bodies. The Department explains that the chief executives are not currently aware of the salary ranges applicable to their counterparts in other commercial State bodies or of the ranking of their positions. The Department contends that if the full range of salary bands were disclosed, chief executives of similar-sized companies would be likely to use the information to argue for a higher placement on the scale of job sizes. In the Department's view, "[t]his development would be extremely detrimental to the negotiating position of the Board, the relevant Minister and the role of the Department of Finance."
In The Sunday Times Newspaper & Others and the Department of Education and Science, Case Number 98104, 3 OIC Dec. 84 (1999), I explained my approach to interpreting the words "could...reasonably be expected to...." in the context of section 21 of the FOI Act. I stated that "in arriving at a decision to claim a section 21 exemption, a decision maker must firstly identify the potential harm to the functions covered by the exemption that might arise from disclosure and having identified that harm, consider the reasonableness of any expectation that the harm will occur."
Having considered the Department's arguments, I am not satisfied that its expectation of harm is reasonable in this case. Up to 1997, previous Review Body reports included details of the remuneration rates recommended for each chief executive, yet the Department does not argue that this resulted in the type of harm anticipated here. Indeed, the Department faced a more difficult situation prior to 1997 since it had no access to the job evaluations made by the Review Body to support that Body's recommended rates, unlike the position now when it has available to it the Hay Group's evaluations. As I stated in Mr. Martin Wall and the Department of Health and Children, Case Number 98078, 2 OIC Dec. 116 (1999), "[a] general prediction without any supporting evidence is, in my view, not sufficient to satisfy the requirement that disclosure could reasonably be expected to have a significant adverse effect on the performance by the Department of any of its functions relating to management."
I further note that remuneration information about top-level public servants, including chief executives of commercial State bodies, is now commonly published in the annual reports of the bodies. Chief executives can also look to the factual information available in the edited version of the Hay report, the annual reports of the State bodies, and other relevant publications in order to estimate the job sizes of their counterparts in relation to their own. No doubt, information may be exchanged from time to time between chief executives. The key question is, however, whether or not if all chief executives knew each other's remuneration, this would have a significant adverse effect on the performance by the Department of Finance of its management functions. It may be true that some chief executives will be dissatisfied with their relative position. But to the extent that the Department can now justify differences in relative pay by reference to an evaluation by an expert group, it is in practice in a much stronger position vis-à-vis dissatisfied chief executives. Therefore, I consider that the release of the findings and recommendations of the Hay report could not reasonably be expected to have a significant impact on the pay determination process.
The Department invokes section 21(1)(c) based on its claim that the full release of the Hay report could disclose positions taken, or to be taken, or plans, procedures, criteria, or instructions used or followed or to be used or followed, for the purpose of any negotiations carried on or being or to be carried on by or on behalf of the Government or a public body. More specifically, the Department argues that, as the recommendations in the Hay report sets the parameters by which the Departments and Ministers make decisions in relation to the pay of the chief executives, "[t]he disclosure of these recommendations would divulge the negotiating position of Departments and seriously impede their future work in the context of setting [the salaries of the CEOs of semi-State bodies]." The Department also explains that some pay proposals from the State bodies and their parent Departments exceed the allotted range. In this situation, the Department refers to the job descriptions, etc., in the Hay report to determine whether the range is still applicable and whether new factors are present which would justify a departure from the recommended range.
While the information before me indicates that the relevant role of the Minister for Finance is limited to considering the proposals put to him following consultation between the Minister of the parent Department and the chairperson of the State body concerned with a view to giving his consent or approval where appropriate, it is possible that a degree of bargaining may occur. The chief executive or the board of a public body may look for more than would be justified by reference to the appropriate Median market rate. This may or may not be supported by the Minister in charge of the Department under the aegis of which the state body comes. However, the negotiating position of both Ministers is already known, i.e. the parameters set by the Hay Group's report in respect of that job, and any improvement on the appropriate range would have to be justified (as the Department concedes) by reference to new factors or considerations. Claims for improvements made simply by reference to the salaries of other chief executives would be much more difficult to justify if the job remains the same.
Moreover, the Department has already made most of the factual information about the jobs available through the release of the edited version of the Hay report. I therefore do not see how the release of the findings and recommendations of the Hay report under FOI would reveal any further information relevant to the negotiating positions of the relevant Departments.
As I am not satisfied that the findings and recommendations of the Hay report qualify for exemption under either section 21(1)(b) or (c), it is not, strictly speaking, necessary for me to address the issue of the public interest as it arises under section 21(2) of the FOI Act. Nevertheless, I consider it worthwhile to emphasise that the public interest in favour of releasing the findings and recommendations of the Hay report would outweigh the public interest factors identified by the Department as militating against release.
As my staff explained to the Department in a preliminary view letter, the need for openness and accountability in relation to the decision-making process of the Department is particularly strong in this case. Regardless of whether the chief executives are paid directly out of public funds, they are responsible for the quality and efficiency of the commercial State sector. The Hay report itself discusses the breadth of the services covered. The public therefore has a strong interest in being informed of the basis upon which the pay of the chief executives is determined. As a related matter, the public also has a strong interest in knowing whether the rates of pay are, on the one hand, sufficient to attract and retain high-calibre candidates for the positions and, on the other, not excessive given that the jobs are in the public sector. There is also a public interest in openness about the nature of the public service, including the relative job sizes of the chief executive positions of both commercial and non-commercial State bodies.
In your submission, you identify yet another public interest factor favouring release. The Hay Group was paid £69,445 of public money for their report. Accordingly, there is a significant public interest in openness about the report to ensure that the public obtained value for money. In other words, the public should have sufficient information about the report to determine whether its money was well spent.
The Department argues that the information already available about the remuneration of chief executives is sufficient to satisfy the public interest in openness and accountability. I disagree. The purpose of the Hay report was to evaluate and "price" the chief executive positions; without its findings and recommendations, I do not consider the available information sufficient to determine whether value for money was obtained for the report.
I think it is also important that chief executives of state bodies should have some assurance that their salaries are being set in a fair way by reference to the importance of the jobs they hold. I do not believe that the basis for the Department's decision making in relation to the pay proposals put to it can be properly understood without the benefit of the findings and recommendations of the Hay report. Indeed, I am surprised that, almost four years after the commencement of the FOI Act, the Department seeks to shield the findings and recommendations of such a report from public scrutiny, especially as the Government decision following consideration of the report was taken over two and a half years ago. The Hay Group is a private firm of consultants that is not accountable to the public. Yet, the Department relies on the Hay report in making important decisions about the pay of public servants. Without public scrutiny of at least the findings and recommendations of the report, the public is not in a position to determine whether the Department's decisions are well founded.
For instance, it is my understanding that two CEOs with what may appear to be similarly-sized jobs may receive significantly different rates of pay on the basis of the Hay Group's evaluation of their actual job sizes. Appendix I of the Hay Group report (which has been released to the requester) set out the core elements of the Hay system of job evaluation. However, unless the relative job sizes as determined by the Hay Group are disclosed, the public may not be able to understand why the Minister for Finance gave his approval to seemingly inequitable rates of pay. Without knowing the recommended salary range for the positions, the public may also be unable to determine whether the approved rates fall within 80% to 100% of the Median market rate to make them sufficiently competitive.
Of course, the Department may not welcome public scrutiny of the findings and recommendations of the Hay report insofar as it may result in challenges to their validity. However, I would not consider such challenges to be against the public interest. If the findings and recommendations are not adequately supported or robust enough to withstand public scrutiny, then I fail to see how protecting them from such scrutiny could serve the public interest even if it would make the Department's role in the pay determination process easier.
Both the Department and the Hay Group initially argued that the information deleted from the edited version of the report released to you should be protected under section 27(1)(b) of the FOI Act, which provides for the exemption of information whose disclosure could reasonably be expected to result in a material financial loss or gain to the person to whom the information relates or could prejudice the competitive position of that person in the conduct of his or her profession or business or otherwise in his or her occupation. More specifically, the Hay Group stated that "the related data of job size and remuneration levels can be combined to deduce trends and patterns which form the essence of this aspect of [its] consulting work."
In response to a preliminary view letter, the Hay Group has clarified its arguments with respect to section 27. The Hay Group states that the combination of the details of the remuneration data and the job sizes given in its report could be used to replicate its database, which would severely undermine its consultancy business. The Hay Group explains as follows:
The report sets out in some detail the component parts and total score of the job sizing exercise (using Hay job evaluation methodology) which we carried out in respect of each of the 27 positions. Each job size then carried a pay level recommendation based on market data which was similarly sized using the Hay method. The result is not merely presented in a rank order of 1 - 27 but in a sequence in which point details are provided. It is a very simple matter for the two sets of variables (job size and remuneration data) to be combined together in a regression analysis to produce a set of line formulae. This can be achieved using any one of a number of standard spreadsheet applications. The critical part of our argument is that our job sizing methodology in conjunction with a data base which has been built up over many years, based on confidential relationships with clients, provides the basis of our reward consulting work.
In addition, there is a further sensitivity in relation to senior executive data (the subject matter of the report) in a market such as Ireland which is relatively small. In general, companies are reluctant to disclose such information and our access to it constitutes a significant commercial asset which would be seriously undermined if the data were disclosed accompanied by job size."
However, the Hay Group does not appear to contend that the findings and recommendations of its report are commercially sensitive without the point details, which are no longer at issue in this review. Alternatively, the Hay Group concedes that the release of the relative job sizes in rank order (i.e., on a 1-27) basis) without the job size scores, together with salary details provided, would "satisfy the public interest requirement is a way that recognise[s] our commercial interests" (section 27(3) refers).
I note that the findings in section IV of the report give some meagre point information, e.g., that one job was evaluated at a step above or below another, but does not give the job units or total scores. I consider it unlikely that release of this information could cause any harm to the Hay Group's consultancy business. However, as you have confirmed that you have no interest in the point details given in the report, it is unnecessary for me to decide whether the words "about one Hay step" or similar words should be deleted. Subject to this, I conclude that the findings and recommendations of the Hay report are not commercially sensitive, and, in any event, should be released in the public interest.
Having carried out a review under section 34(2) of the FOI Act, I hereby vary the decision of the Department and direct that you be granted access to the findings and recommendations of
the Hay report, i.e., the deleted portions of section II; the original text of section IV subject to my comment above regarding such words as "about one Hay step"; the deleted portion of the text of section VI; and Table 2 with the exception of the column of Hay points.
A party to a review, or any other person affected by a decision of the Information Commissioner following a review, may appeal to the High Court on a point of law arising from the decision. Such an appeal must be initiated not later than four weeks from the date of this letter.