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Complaint no. LA/NL/744 concerning an alleged contravention of the Councillors’ Code of Conduct by Councillor Barry McCulloch of North Lanarkshire Council

1. Complaint number LA/NL/744 alleged a contravention of the Councillors’ Code of Conduct (“the Code”) by Councillor Barry McCulloch (“the respondent”).

2. It was alleged that the respondent had contravened the Code, in particular, the key principles of Duty, Selflessness, Integrity, Objectivity, Accountability and Stewardship, Openness, Honesty, Leadership and Respect, as set out in section 2 of the Code, and paragraph 2.2 of the Code relating to Respect.

3. Councillor Alan O’Brien (“the complainant”) alleged that Councillor Barry McCulloch had breached the Code by supporting the appointment and remuneration of a political colleague as Chairman of the Campsies Centre Cumbernauld Ltd, attempting to curtail the complainant’s public criticism of his conduct, and directing disrespectful comments at the complainant.

4. The Council, as successors to the former Cumbernauld Development Corporation, owned land in and around Cumbernauld town centre which was vested in a company known as the Campsies Centre Cumbernauld Ltd.  The purpose of this company may be summarised as the redevelopment of Cumbernauld town centre by the promotion of business activity.  The company was originally formed by the Development Corporation and incorporated on 22 January 1996.  It was subsequently transferred to the Council which remained the sole shareholder.  There were six directors, all of whom were elected members appointed by the Council.  At the period to which this complaint referred the Board comprised the respondent Councillor McCulloch (Labour), the complainant Councillor O’Brien (SNP), and Councillors Carrigan (Labour), McElroy (Labour), Brooks (Labour), and Homer (SNP).  Councillor McElroy was the Chair, having taken over that position from the respondent.  The directors were nominated in the first instance by their political groups, and the political allocation of the appointments was in accordance with the structure of the Council.  The identification and nomination of Councillor McElroy as a director and possible Chair of the Board arose from internal discussions within the Labour Group.

5. At the first statutory meeting of the Council on 17 May 2007, the respondent intimated his resignation as Chair of the Board of the Campsies Centre Cumbernauld Ltd due to the workload arising from his new appointment as Convener of the Housing and Social Work Services Committee.  The respondent remained as a director. 

6. The first meeting of the Board of Directors of the Campsies Centre Cumbernauld Ltd following the Council elections took place on 6 June 2007.  At this meeting the respondent, Councillor McCulloch (Labour), seconded by Councillor Carrigan (Labour), proposed that Councillor McElroy (Labour) be appointed to the Chair. 

7. A counter-proposal by the complainant Councillor O’Brien (SNP), that Councillor Homer (SNP) be appointed as Chair was unsuccessful as it did not attract a seconder.  (Councillor Homer was not present at this point in the meeting.)  Councillor McElroy was accordingly appointed as Chair with effect from 17 May 2007.

8. As in a related complaint against Councillor McElroy (LA/NL/745), the complaint alleged breaches of the key principles set out in section 2 of the Code.  These principles underlie the interpretation of the Code and are intended to be read in tandem with the substantive provisions contained in sections 3 to 7.  I gave consideration however as to whether the allegations conflict with principles to such an extent that they could, in the specific circumstances of this case, be regarded as amounting to a substantive breach of its terms.

9. The first point to be considered was whether the Code extends to the actions of councillors while acting in their role as directors of a company – the Campsies Centre Cumbernauld Ltd – which was a separate legal entity from the Council.  Paragraphs 3.18 and 3.19 of the Code refer to appointments made to partner organisations and state that Councillors so appointed a) will be bound by the rules of conduct of those organisations and that responsibility for their actions in that role will be to that organisation; b) must continue to observe the rules of the Code in carrying out the duties of the organisation to which they have been appointed; and c) when nominated as a director of a company should seek advice on potential conflicts of interest between their responsibilities to the company under the Companies Acts and their responsibilities to the Council as elected members. 

10. In this case it was a matter of fact that the directors of the company held their positions as nominees of their respective political groups and appointees of the Council.  While the term ‘partner organisation’ is not defined within the Code, the transfer of the Campsies Centre Cumbernauld Ltd from the former Development Corporation to the Council, which was the sole shareholder, the vesting of public monies within the company, and the involvement of council officers in its operational management, left me in no doubt that the company acted effectively as an arm of the Council.  It was therefore my view that the terms of paragraphs 3.18 and 3.19 of the Code applied to those elected members who are appointed by the Council as directors of the company.  

11. The rules of the company were set out in the Memorandum and Articles of Association.  The former document detailed the aims of the company and the application of income and property.  The latter dictated the powers of the directors, the terms of their appointment or removal, and the procedures to be observed at Board meetings.  I considered that compliance with the terms of these documents would be consistent with the Code, and that non-compliance would require close scrutiny to ascertain whether or not this also conflicted with the Code.

12. Where issues such as the appointment of the Chair and payment of remuneration to a director could give rise to an external perception of political bias, or possible conflict with the terms of the Memorandum, Articles of Association, or Councillors’ Code of Conduct, it would be appropriate that professional advice (such as from the appropriate officers of the Council and the company) should be sought to consider and resolve any potential conflicts of interest.

13. In this case the motions, amendments and votes in relation to the appointment of the Chair, his substitute, the payment of remuneration and its extent, divided in accordance with political allegiance, and thus potentially gave rise to a perception that they were influenced by political loyalty.  No evidence was adduced to show that advice was sought on the nomination of the respondent as Chair, or of the original proposal that directors’ fees be paid.  Indeed these proposals were raised initially by the Labour Group Business Manager rather than from within the Board.  In this context reference is made to Regulation 91 of the Companies (Tables A to F) Regulations 1985, as amended, which empowers the directors to appoint their Chair, and the absence of any contrary provision within the Articles of Association.  While Article 12 of the Articles of Association gave the Council, as the holders of the majority of the issued shares, power to appoint or remove directors, no reference was made to a similar power to nominate the Chair.  However, as sole shareholder in the company the Council both appointed the directors and had a legitimate expectation that the Board would act in accordance with wider Council policy in relation to the commercial activities of the company, and I considered that the appointment of the respondent as Chair did not conflict with the company rules.

14. The situation was further complicated by the status of the Campsies Centre Cumbernauld Ltd as a legal entity in its own right, and the perception of the directors, endorsed by the Executive Director of Corporate Services, that their decisions as Board members were constrained, or at least subject to confirmation, by the Council as sole shareholder in the company. 

15. The complainant, Councillor O’Brien, listed the key principles which he alleged had been breached by the respondent, Councillor McCulloch.  To ensure clarity in my consideration of the complaint it is appropriate to examine the terms of his complaint as they referred to the principles which he identified. 

16. Duty: The complainant alleged that the respondent arranged for the appointment of an under qualified political colleague – Councillor McElroy – as Chair of the Board, and that this appointment was not in the interests of the Council or community. 

17. The evidence to support the complainant’s allegations was largely a matter of perception rather than fact.  The Memorandum and Articles of Association made no requirement for the Chair to have any specific qualifications or experience.  Article 10 of the latter document stipulated that the holder of the majority of the issued shares - which in this case was the Council – could appoint any person as a director but was silent as to qualifications or experience and made no reference to the method by which the Chair was to be selected.  In the absence of any specific requirements within the company documents I did not consider that any exception could be taken to the nomination of Councillor McElroy as Chair.

18. As a matter of fact I noted that Councillor McElroy held an Honours Degree in Economic History, had relevant work experience, and extensive service as an elected member dating back to 1979 which involved the chairmanship of major decision-making bodies.  Prior to his appointment as a director of the Campsies Centre Cumbernauld Ltd, Councillor McElroy served on the Boards of three organisations, including Cumbernauld Development Corporation. This record was not supportive of the complainant’s assertion that Councillor McElroy lacked the appropriate qualifications and experience to undertake his role as Chair of the Board.

19. It was a matter of record that the respondent moved the appointment of Councillor McElroy as Chair and that this was countered by a proposal from the complainant that his political colleague Councillor Homer should be appointed.  The complainant’s nomination fell as it did not attract a seconder and the appointment of Councillor McElroy went ahead as a result.  A view might have been taken that, as Councillor Homer was not present at that point in the meeting, the selection of Chair should have been deferred until all directors were present, but there was no requirement for this and the appointment of Councillor McElroy was properly made in terms of the Memorandum and Articles of Association.

20. The issue of financial remuneration was originally proposed to the Board by the respondent Councillor McCulloch and intended to apply to all six directors.  The justification for such payment was however restricted to the Chair who, the respondent stated, would require to spend considerable time on company duties.   Clearly the remuneration could only be paid from the company funds and was permissible under the Articles of Association. It should be noted however that the decision as to payment was referred to the Council (in its capacity as sole shareholder), firstly for advice as to the appropriate level of remuneration, and secondly for approval to make such payments.  I did not consider that acceptance of a payment which had been recommended for approval by a professional officer and was broadly in line with that paid for similar public appointments could be regarded as conflicting with the Code.  The decision itself was entirely within the remit of the Council acting as sole shareholder.

21. The complainant made reference to Councillor McElroy having appointed the respondent Councillor McCulloch – a political colleague - to chair the meeting on 29 October 2007 during the discussion on payment to the Chair. Councillor McElroy took the view that he should withdraw from the meeting during the discussion of remuneration to the Chair, and it was therefore necessary to appoint one of the remaining directors to the Chair in his absence. While no criticism could be made of Councillor McElroy in this respect, I did not however consider that this was a necessary step. Paragraph 5.8 of the Code permits discussion by councillors on their own allowances or services provided to them without the necessity of declaring an interest and this principle can be extended to outside bodies. It should be noted however that the directors were being called upon to consider the remuneration issue as individual directors and required in that capacity to apply their minds to the interests of the company rather than be unduly influenced by political allegiance. 

22. The respondent accepted the nomination as Chair and acted as such during the initial discussion on the propriety of payment to the director fulfilling that role.  No objection was put to the respondent chairing the meeting for this purpose until after the Company Secretary had spoken to her paper and discussion had ensued.  The complainant then raised a question as to whether the respondent had been competently appointed as Chair.  This challenge was somewhat late but nevertheless the directors accepted that the solution was to invite Councillor McElroy to resume the Chair and then vote on the issue as to which of them should preside while the decision as to payment was under discussion.  Councillor McElroy was entitled to vote in favour of the respondent.

23. The subsequent votes on the principle and amount of the Chairman’s fee were tied in accordance with political allegiance and the complainant took the view that the respondent acted inappropriately by exercising a casting vote in favour of Councillor McElroy.  I considered however that no objection to this could be raised in terms of the Articles of Association or the Code.

24. I considered the respondent’s actions in regard to the appointment of Councillor McElroy as Chair, and the subsequent decision to award payment to this post, against the terms of the Code.  I considered that the respondent acted lawfully and in accordance with the rules of the company, and I therefore found that he had not breached the key principle of Duty. 

25. Selflessness:  The complainant asserted that the respondent Councillor McCulloch was motivated by self-interest in proposing the appointment and payment of his political colleague, Councillor McElroy, as Chair.   The involvement of the respondent was a matter of public record and the process was undertaken openly and subjected to an appropriate voting procedure within the Board. 

26. The complainant’s attribution of motive to the respondent was not supported by evidence, and while as a matter of fact it was undeniable that the respondent and Chair were political colleagues it would be unsafe to draw any inference from that connection in terms of the Code.  Accordingly I found that the respondent had not breached the key principle of Selflessness. 

27. Integrity:  The complainant alleged that the respondent had breached the principle of Integrity by linking his actions as a director with the appointment of Councillor McElroy as Chair of the Board.  I had considered as above the respondent’s involvement in the nomination, appointment, and remuneration of Councillor McElroy, and found that these actions did not conflict with the Code.  The complainant claimed that Councillor McElroy left Board meetings early, and had voted to exclude from the minutes criticism of the complainant by the Chair.  I did not consider that either assertion could be regarded as improper or in breach of the key principle of Integrity.  I found accordingly.

28. Objectivity:  This element of the complaint relied on an assertion that Councillor McElroy did not have the appropriate experience to act as Chair of the Campsies Centre Cumbernauld Ltd.  The complainant alleged that the respondent supported his appointment regardless of Councillor McElroy’s suitability.  

29. In contrast to the complainant’s view of Councillor McElroy’s suitability to fulfil the role of Chair I noted once again that he had a relevant degree and considerable previous experience as a director of public agencies with commercial functions.  Most relevantly he was a director of Cumbernauld Development Corporation under whose auspices the Campsies Centre Cumbernauld Ltd was established.

30. The assertion by the complainant that the respondent was motivated to propose remuneration for the Chair as a means of compensating Councillor McElroy for loss of a responsibility allowance he had received under the previous Council was supposition.  In any event it was clearly not supported by any lack of appropriate experience on the part of the current Chair.  There was no evidence that Councillor McCulloch had breached the key principle of Objectivity, and I found accordingly.

31. Accountability and Stewardship:  The complainant made no specific allegation in relation to this key principle but expressed a view that the alleged breaches of Duty, Integrity, Selflessness and Objectivity also impacted on the observance of Accountability and Stewardship.  As I had found that breaches of the other key principles had not occurred it followed that the respondent had not breached the principle of Accountability and Stewardship.  I found accordingly.

32. Openness:  In support of this aspect of his complaint Councillor O’Brien alleged that the respondent had attempted to restrict him from making public comment to the media by saying that this would not be in the interests of the Board, and in this connection by lodging effectively a counter complaint with the Chief Investigating Officer.  The complainant also alleged that this approach to his criticism of the Board, and the restriction of minutes to provide a record only of decisions made, were examples of a lack of openness.

33. The consideration of reporting the complainant in relation to his comments was open to the respondent and I did not consider that this impacted on the key principle of Openness in any way.  The precise format and contents of the minutes of Board meetings was a matter for the directors and provided they adequately disclosed the business conducted it was not necessary to make a verbatim record.  The style of minute kept by the Board of the Campsies Centre Cumbernauld Ltd had tended towards a verbatim record, and the adoption of a more abbreviated format was both in line with other comparable Council bodies, and acceptable as a record of business.  I did not consider that the respondent had breached the key principle of Openness and found accordingly. 

34. Honesty:  No evidence was adduced to show that any relevant interest had not been declared, or that the respondent’s declared interests conflicted with his role as a director of the Campsies Centre Cumbernauld Ltd. I accordingly found that the respondent had not breached the key principle of Honesty.

35. Leadership:  I did not consider that there was any evidence that the respondent had breached the key principle of Leadership in relation to the circumstances of this complaint, and found accordingly.  It was essential however that, while acting in his capacity as a director of the Campsies Centre Cumbernauld Ltd, the respondent (and his fellow-directors) should draw a clear distinction between that role and their status as elected members of the Council.  The split in political allegiance between the members highlighted this point and it was important that the directors, individually and collectively, recognised that their responsibilities were to the company and its shareholders, and not improperly influenced by political considerations.  The fact that the Council held all the shares in the company did not alter this responsibility and the directors should apply their minds independently to the interests of the company and irrespective of political considerations.

36. Respect:  The complainant referred here to the conduct of the respondent at the Board meeting held on 24 January 2008 (cited wrongly in his complaint as 2007), which he described as an aggressive and threatening attack, and a similar event at a subsequent training day.  On both occasions he alleged that the respondent referred to him in critical terms.

37. Courtesy and restraint in expression are desirable at any formal meeting, and it is self-evident that excessively critical or abusive remarks are not conducive to the conduct of business or working relationships.  I noted the heated atmosphere engendered by the content of the complainant’s submissions to the press, as recorded in the minute of the meeting of 24 January 2008.   It was not in my view necessary or helpful to minute a verbatim account of meetings, and I did not consider that an ulterior motive could be attributed on the part of the respondent, or any other member of the Board, in agreeing to adopt a more abbreviated style of minute.

38. While councillors are required to observe the rules of the Code in conducting the business of external organisations to which they have been appointed or nominated by the Council, and this would extend to Board meetings of the Campsies Centre Cumbernauld Ltd, the conduct alleged by the complainant took place in a somewhat confrontational context and did not in my view amount to disrespect such as would constitute a breach of the Code.

General Comment

39. As detailed above I found no evidence that the respondent, acting in his role as a director of the Campsies Centre Cumbernauld Ltd, had breached any substantive term of the Councillors’ Code of Conduct.  The complainant had attempted to attribute motivation prompted by self-interest or political allegiance on the part of the respondent, (as was also the case in his related complaint against Councillor McElroy) but in the absence of specific evidence to establish this, the complaint relied on interpretation rather than fact.  The reality was that the Board of Directors of the Campsies Centre Cumbernauld Ltd was made up of six members who were drawn from the Labour and SNP political groups on the Council, and it was difficult to distinguish this political affiliation from their separate and non-political role as directors and in particular their ability to act as a cohesive Board.  I noted and endorsed the attempts by the Company Secretary to remedy this by arranging training sessions and encouraged the Board as a whole to strive to achieve a modus operandi that acted in the interests of the company.

40. Having considered the information that arose from my investigation, I concluded that Councillor Barry McCulloch had not contravened the Councillors’ Code of Conduct.

D Stuart Allan

Chief Investigating Officer

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