Foreword

This report was prompted by a number of agreements between public sector employers and their staff, under which an employee agreed to resign in return for a payment of compensation and an undertaking of confidentiality.

"Golden handshake" payments, as they are known, have come regularly to our attention over the past few years. Some – for example those involving members and the chief executive of the New Zealand Tourism Board in 1999 – were subjected to intense scrutiny and public reports. Others we have reviewed, and reported to the entity concerned, without further publicity.

We have identified a number of common themes in these cases. Some involve failures of process – for example, a failure to seek comprehensive legal advice. Others involve defects in substance – for example, unjustifiably high non-taxed compensatory payments. Such failings can expose a public sector employer to intense criticism if details of the settlement are made public. Many of them result, we believe, from an inadequate appreciation of the risks that employers in general – and those in the public sector in particular – face when deciding to enter an employment settlement rather than dismissing the employee and defending any personal grievance that the employee may raise.

At the end of my term of office as Controller and Auditor-General I believe it appropriate to report, in general terms, on the lessons I believe can be drawn from some of these cases.

D J D Macdonald
Controller and Auditor-General

3 May 2002