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Those guidelines cited for the Golden Handshake

The severance package adhered to the guidelines set down by the Department of Finance“, they say. They being Tanaiste and Minister for Enterprise, Trade and Employment Mary Coughlan, Taoiseach Brian Cowen, Minister for Justice Dermot Ahern, Minister for Finance Brian Lenihan and various other senior Government figures, including some Greens.

The guidelines they refer to are from a memo sent by the Department of Finance’s Head of Public Service Management and Development to all other government departments on the 26th of May 1998. It was titled “Severance and Early Retirement for Chief Executives of State Sponsored Bodies”.

You can read it below yourself, the bolding is my own. For your information, the Tribune has Mr Molloy listed as 53 as of 2007, making him around 55 or so upon the end of his contract. Also remember that Mr Molloy was head of the Institute of Public Administration until last week, which is a part-publicly-funded body, though he was unpaid (which makes it a grey area in employment law).

A Chara,

Severance and Early Retirement for Chief Executives of State Sponsored Bodies

1. I am directed by the Minister for Finance to say that he has considered the issue of severance/early retirement payments for Chief Executives of State Sponsored Bodies (SSBs). This consideration has had particular regard to the fact that it is becoming more common for Chief Executive Officers of State Sponsored Bodies to be employed on fixed term contracts, and that there may be times when the Board of a State Sponsored Body and the relevant Minister may conclude that it is in the best interests of the efficiency and effectiveness of the SSB concerned to terminate or not to renew the contract of an incumbent CEO.

This need not necessarily arise as a result of any dissatisfaction with the performance of the individual concerned, but perhaps because a new and fresh approach needs to be introduced. In such circumstances, the Minister will not object to the application of special early retirement/severance provisions, subject to certain conditions and safeguards.

2. The Minister has therefore decided that this Department will not object to the making of severance payments or grant of early retirement terms to Chief Executives of State Bodies within the following maximum limits and subject to the conditions specified, from a current date. Departments may deal with cases within the guidelines and limits without reference to this Department except where such reference is specifically required (drafts of any consequent changes in the relevant pension schemes would need to be cleared in the normal way).

a) Payment of pension and lump sum, based on actual reckonable pensionable service, increased as appropriate in accordance with paragraph (b) following, may be allowed at age 55 for a CEO who retires from that position, who has served at least 6 years in that capacity and who has at least 15 years actual service overall in the public sector

b) In determining the pension and lump sum to be paid, one added year of pensionable service may be granted for each year in excess of 15 years overall actual service in the public sector1 (i.e. including service in capacities other than as a CEO) subject to a maximum of 5 added years;

c) Actuarially reduced benefits may be made available without age restriction – this means that a person might receive a pension benefit or lump sum before age 55, provided that the cost of providing these benefits at the earlier age are entirely offset by a reduction in the amount of benefits payable: the amount of such reduction would require to be determined by the relevant scheme’s actuaries;

d) Where an immediate pension (other than on an actuarially reduced basis) is not payable, a severance payment of four weeks pay per year of continuous service, up to a maximum of 26 weeks pay, may be made. However, where pension becomes payable within 26 weeks of retirement, the amount of the severance should be reduced to the amount of salary which would have been payable between the date of retirement and commencement of pension.

3. Application of the foregoing terms would be strictly conditional on completion of contract, unless the Board, in agreement with the appropriate Minister and the Minister for Finance, decides to terminate the CEO’s employment before the termination of the contract. It is not therefore appropriate to make such payments where the initiative for the termination of a contract comes from the CEO concerned.

4. Application of these terms would also be conditional on there being no re-employment, direct or indirect, of the individual concerned by the body from which s/he is retiring, or another public sector body in the same sector.

5. Where subsequent employment is obtained in the public sector such that pension plus pay in the new job exceeds the equivalent of the retirement salary on the basis of which the pension is payable, then pension will be abated to bring the total down to the level of that salary. This abatement will not apply in relation to work after age 65. Where pension rights are acquired in respect of post-retirement work, the original pension (if based on actual service plus added years) would be reduced and based on actual service only. In such circumstances the uprated portion of the lump sum attributable to the added years would be required to be repaid. It should be explicitly stated that any grant of early retirement terms would be subject to these conditions.

6. The terms set out above are intended to be maximum ones, and a Board would be free to apply lesser benefits or not to apply early retirement benefits at all. Early retirement benefits might be denied, for example, if the Board wanted the contract renewed for a further term. It is not, therefore, intended to interfere with the freedom of Boards in this area, but rather to indicate the maximum limits which the Minister would be prepared to approve.

7. Adjustment to the terms set out above will be necessary where a retiring CEO has already availed of a severance or early retirement package from a public sector body, and in such cases this Department should be consulted.

8. The arrangements set out in this letter should be allowed strictly on the basis, accepted in writing by the CEO, that they are in full and final settlement of any claim which the CEO may have in relation to the early retirement or termination or non-renewal of a contract.

9. The Minister does not anticipate approving any improvement on the terms set out above, even in individual exceptional cases, other than on foot of a Government decision.

10. It is essential that Departments should convey to the Pensions Section of this Department details of each case dealt with under the terms of this letter. The contact point in this Department for telephone queries is…

What do you make of it?

It seems he received the absolute maximum benefits possible, to my untrained eye, despite the fact the Government essentially admitted he was reckless and verging on incompetent. It also seems Mr Molloy would have had to have been sacked rather than decide to resign, to be entitled to such benefits (see section 3). He resigned, did he not?

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8 Responses

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  1. Daniel Sullivan says

    I think you mean the end of section 3, not section 4.

  2. jakobyte says

    If a tax in children’s shoes brought down Bruton’s Government, then this debacle has Cowen right in the cross-hairs.

    If he had the guts to hang Coughlan out to dry, he could probably weather the NAMA and Budget challenges, but without scapegoating her and drawing a line in the sand, his goose is cooked.

    It’s somehow delicious that it’s the golden circle (cabinet buddies included) which he holds so dear, will be the thing to bring him down. But seriously, if you can’t even play by your own crooked rules, that your skivvies cobbled together for you, you’re clearly too stupid to retain power.

  3. cymorg says

    b…b…b… banana republic. If the No to Lisbon crew are correct we could end up with a federal Europe in a few weeks time. Federation could possibly mean we end up being governed by Don Vito Corleone. I would welcome this as a positive departure from our current gov. The Don understood respect – our guys and gals keep kicking us in the teeth and blaming others for the situation they have created and are entirely responsible for.

  4. Jack says

    This controversy has done nothing but highlight the fact that Mary Coughlan is unsuitable for her position. If the threat of legal action (which she has acknowledged was only ‘implicit’ in negotiations with Molloy) was on the table, why not counter this? Could he really expect any court in the country to find in his favour were he to claim wrongful dismissal? Most likely not. He probably would have settled out of court for a sum far inferior to his increased pension. Instead, Coughlan panics and pays off. An immature reaction which may well contribute to the fall of this government.

  5. steve white says

    so they couldn’t fire with him without paying unless he did something wrong, which they weren’t willing to officially admit, i think they think still media hatchet job as do the rest of the board, is it?

  6. SerialComplainer says

    Just a point of detail – The IPA is NOT a public body. It receives about 20% of its income from the Govt, and the rest is raised commercially.

    • Mark Coughlan says

      Cheers, updated the post.

Continuing the Discussion

  1. Revisiting Rody Molloy’s golden handshake – The Story linked to this post on July 23, 2010

    [...] were the first to question whether Mr Molloy’s pension did in fact fall within the guidelines cited… when we published them in full on this website. It wasn’t until two weeks later that the [...]



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