A full and frank explanation of the reasoning behind Amnesty International's pay-off packages to Irene Khan and Kate Gilmore has been given by the organisation's international executive committee (IEC) chairman, Peter Pack, in which he describes the payment to Khan of over £533,000 as the "least-worst option".

"A lot of soul-searching" was involved in the decision to pay the former secretary-general of Amnesty's non-charitable trading arm, Amnesty International Ltd (AI), the sum of £533,103, and her deputy, Kate Gilmore, £325,244 to leave the organisation, Pack advised in a letter sent to AI staff around the globe. He described the circumstances around the settlements and advised that the "substantial majority (of the payments) reflected contractual entitlements".

After two terms in post as secretary-general of the organisation, the IEC decided in mid-2008 that it was time for Khan to make way for a change in leadership, Pack advised. This would have seen Khan exit her post at the end of her term on 31 December 2009. But Khan, who now sits on the board of the Charity Commission, disagreed with the committee's decision, and the IEC was forced to consider the options.

Pack said there were three options available to the committee: to change their decision, to dismiss Khan, or to reach a confidential agreement with her. The IEC agreed it could not change its decision and that dismissing Khan "would have done enormous damage to the operations and reputation of AI" having "a major adverse effect on the overall work of AI for human rights", Pack said. So upon consulting with a "highly-regarded London law firm" AI prepared a valedictory payment package for Khan.

Payments broken down

Khan's annual salary upon leaving AI was £132,490.

Breaking down the payments, Pack advised that £168,731 of the total was for salary, overtime and pension due for 1 April - 31 December 2009. A backdated salary increase from 1 March 2008 - 31 March 2009 totalled £58,933, and pension payments, time off in lieu and other back pay items totalled £59,014.

A further £20,000 in unpaid bonus payments from 2006 - 2009, £34,728 in relocation and housing allowances, and a £191,697 termination of employment payment were added.

"The nature of the settlement reached with Irene Khan, including the level of compensation, was in line with other organisations in similar circumstances in the UK," Pack said.

Khan produced Gilmore's settlement 

Following Khan's settlement it was decided in the second half of 2009 that Khan's deputy, Kate Gilmore would also have to leave the organisation, in line with the original intention to change leadership of the organisation. The IEC reached this conclusion, Pack said, "because Irene Khan and Kate Gilmore worked together very closely as a team". Khan was then asked to negotiate a departure package for her deputy to leave at the same time as Khan.

The package included salary and pension due for 1 April - 31 December 2009 of £85,982, a further full-year's salary and pension payments totalling £113,987, holiday and time off in lieu payments of £65,620, and a termination payment of £59,655. 

Lessons learnt

"There has not yet been time for us to absorb all the lessons learnt from the events of recent days," said Pack, "but some points are already clear and several lessons have already been implemented."

The current secretary-general, Salil Shetty, is on a salary of £192, 800 with an additional £7,800 housing allowance. But in employing Shetty, AI drew up terms "with expert legal advice", ensuring that no confidentiality agreement was signed.

Acknowledging the "anger and puzzlement" at the lack of communication with staff internationally, Pack advised that AI will improve its internal communications to "be as sensitive to the interests, needs and concerns of AI members as we are to the demands of external media".

Pack's full letter is available on the Amnesty International website.

The Charity Commission, of which Khan is a board member, issued the folowing statement: "This is a contractual matter between the non-charitable company AI Ltd and Irene Khan. Ms Khan was employed by Amnesty International Ltd, which is not a registered charity in England and Wales. There are two registered charities, Amnesty International Charity Ltd which carries out wholly charitable activities on behalf of Amnesty International Ltd, and Amnesty International (UK Section) Charitable Trust. Such legal structures are sometimes put in place by organisations like Amnesty which carry out some charitable activities and some activities which are not charitable in law. Charities can give grants to non-charitable bodies in furtherance of their purposes.

"Irene Khan, as a Charity Commission board member, was appointed by the Cabinet Office in January 2010. Even though she was not directly employed by either of the Amnesty charities registered in England and Wales, the Commission's framework for managing conflicts of interest ensures that Ms Khan is not involved in making decisions on any case relating to any of the Amnesty charities."

• On 21 March 2011, lawyers for Irene Khan clarified details of the salary and severance package in a letter to Civil Society.  Read the letter here.