Eduserv, a charity that provides IT services to the public sector, agreed to pay its retiring chief executive a settlement totalling £138,303 without the knowledge of the full board, documents seen by Civil Society News show.

Stephen Butcher was the charity’s chief executive for 14 years and his most recent salary band, according to Eduserv’s 2015 accounts, was £190,000 - £200,000. He will turn 65 in February next year.

On 3 March this year, Eduserv posted a statement on its website titled ‘Eduserv to appoint a new chief executive’ which began: “With Stephen Butcher, current chief executive of Eduserv, expecting to retire later this year, Eduserv’s board of trustees has appointed Odgers Berndtson as search consultants for the recruitment of his replacement.”

The statement included the following quote from Butcher: “I have had the privilege of leading Eduserv for over a decade, and am looking forward to handing over to a successor.”

His employment will be officially terminated on 30 September 2016.  His last day in the office was 25 August.

According to a document outlining his departure terms, dated 16 August 2016 and seen by Civil Society News, “Eduserv and Stephen Butcher have concluded a settlement agreement which governs his departure from the organisation.  The agreement, which follows a standard legal form recognised in employment law, lays obligations on both parties.  These include a termination (£25k) in addition to the notice period, and an undertaking not to pursue any related claims on the employee’s side.

“The settlement does not involve an ‘ex gratia’ payment.  There are costs and benefits, rights and obligations on both sides.  Nor does the settlement agreement concede a redundancy situation.”

The document contains a table comparing the amount of the settlement (£138,303) with the cost of his contractual entitlement to six months' notice (£128,335) and a comparable redundancy payment under Eduserv’s standard contract (£158,512).

The document states that the terms of the agreement were approved by the remuneration & appointments committee at a meeting on 3 August.  The terms of reference for this committee includes the delegation of the following responsibility by the board: “to consider and approve the appointment and termination of any member of the executive”.

The document says: “A settlement agreement protects Eduserv’s position, by ensuring no disputes after Stephen Butcher’s departure. Had no such agreement been reached, there could be grounds for a claim to an employment tribunal, leading both to increased costs to Eduserv and to reputational damage.”

The charity obtained legal advice from solicitors Thrings which advised that the “termination payment” of £25,000 is “reasonable in the circumstances to ensure an effective waiver of any potential claims for unfair dismissal and/or age discrimination”.

Background to departure

The document goes on to explain the history of Butcher’s exit from the charity:

“In autumn 2015, informal discussions between Stephen Butcher and (chair of trustees) Philip French suggested that it would probably be in the best interests of all concerned for Eduserv to have a new CEO during the 2016/17 financial year.  This was subsequently discussed with other trustees who were generally in agreement. The process of recruitment for a new CEO was first aired formally at the December 2015 board.”

No specific work was done at that point on exit terms for Butcher, as French “anticipated that he would remain on the payroll until February 2017” even though Butcher had “indicated a willingness to be flexible about his departure date”.

The recruitment for his successor ran quickly, with the main terms of employment agreed at the June 2016 board meeting. The charity’s new CEO, Jude Sheeran, took up his post on 30 August.

On 18 July, Eduserv’s finance director Nevil Durrant emailed French to say that discussions with Butcher “have not been as straightforward as originally envisaged”.

Durrant’s email said: “Stephen argues that his parting with Eduserv is one of mutual benefit and suggests that, had he sought to continue in post, the board would have had to consider different means of changing the leadership in due course. Payment of notice is the contractual minimum Stephen is entitled to.  Stephen’s counterproposal would be pay in lieu of notice + £30k termination.  The £30k is the tax-free maximum available under HMRC redundancy rules. Stephen’s advice has suggested to him that this would be a commensurate amount in light of the mutual benefit of his departure arrangements and that this could be paid as a tax-free redundancy payment from the company.”

The document goes on to say: “This came as an unwelcome surprise…it became clear that Butcher and French had somewhat different recollections of earlier informal conversations and expectations as to what reasonable departure terms would be.

“Butcher indicated that he dislikes the concept of, and has avoided the vocabulary of, retirement as such…it should also be noted that Butcher believes he is in a position amounting to redundancy and has legal advice to that effect.”

French concluded that a settlement agreement would be necessary, and eventually agreed one “roughly equivalent to three months’ net pay”.

Eduserv had income of just under £13m in the year to 31 July 2015 and posted an operating surplus of £420,000. 

Civil Society News understands that once other trustees became aware that the remuneration committee had agreed the settlement, an emergency conference call of the full board took place during which a discussion was held about the possibility of reversing the decision. But this was voted down; instead the board agreed to endorse the settlement and to hold a trustee-only session at the September board meeting to consider lessons learned and any further actions.

Philip French turned down the opportunity to speak to Civil Society News about the terms of the payment but issued the following statement: “Jude Sheeran joined Eduserv as chief executive on 30 August 2016 and Stephen Butcher will leave the organisation on 30 September 2016. The financial aspects of Stephen's departure, which remain confidential, were considered appropriate by Eduserv's board.

“I can add that between the date that Stephen announced his retirement and the date he was due to retire, Eduserv found a new CEO more quickly than they expected and agreed with Stephen, by mutual consent, that he would leave earlier than initially planned.”

Stephen Butcher has not responded to invitations to comment on his retirement payment.

A source close to Eduserv's board told Civil Society News that trustees had been "surprised and disappointed" to learn that any payment was to be made, as Butcher had been expected simply to retire.

"It is completely inappropriate," the source said. "This is a charity and charities are meant to be run for their beneficiaries, not so that retiring chief executives can collect six-figure payoffs."