When Dan Walsh stepped down from his post as chief executive of the Beverly Hills Chamber of Commerce last week, it may have seemed sudden. But insiders said it was a long time coming.

During his five years at the chamber, Walsh drew criticism for his hefty salary. He also alienated elected officials and staff members at City Hall who wanted more information about chamber finances. And he didn’t recruit members when it was necessary to do so. That characterization of his tenure was drawn from several sources, some of whom spoke off the record.

“He lost the confidence of people at City Hall,” Mayor Jimmy Delshad said.

Walsh did not return several calls to his cell phone seeking comment.

The turning point came when he was unable to prevent the city from splitting off the Convention and Visitors Bureau from chamber control two years ago. As a result of the split, the chamber lost more than half its budget. He subsequently was unable to convince the City Council to restore $450,000 of the lost funding.

To his critics’ dismay, instead of recruiting new members to offset the shortfall, he launched a failed effort this month to make up for the lost funding with plans to require all businesses to join the chamber. First he tried to do this by asking the council to establish an assessment district. When council members blasted that idea, he proposed a vote of all businesses to require membership. No council member supported that plan, either.

(The forced membership plan was the subject of an article in the Nov. 15 Business Journal headlined “Businesses All In In Beverly Hills?”)

The failure of the plans for assessments and mandatory membership was a clear indication that his influence at City Hall had evaporated. The proposals were dropped just 10 days after Walsh introduced them.

The main role of a chamber’s chief executive is to represent the interests of the business members to the community at large and to local government officials. Without the respect of city officials, the person in that position can’t be effective.

Chamber board President Todd Johnson, general manager of Lawry’s Prime Rib Restaurant, said the primary reason for Walsh’s departure was the chamber’s precarious financial position.

“We’re now having to look out of the box for ways to make the chamber’s finances work,” Johnson said.

Johnson said Walsh agreed to cuts in his salary twice in the past year. Two years ago, Walsh was criticized in the local paper for drawing a salary of about $250,000, much higher than the pay of chamber executives in other small and midsize cities. But Johnson noted that Walsh was not recently asked to take any further salary cuts and salary issues were not a factor in his departure.

Johnson acknowledged, however, that the recent assessment proposal was a factor, but would not elaborate.

CVB split

Other chamber observers, including Delshad, said that city officials’ loss of confidence in Walsh began about three years ago.

The city ordered a performance audit of the chamber in order to determine whether it was running the Convention and Visitors Bureau efficiently, or whether the CVB should be split from the chamber. L.A.-based KH Consulting Group, recommended the split, arguing that it could do a better job of marketing the city to tourists.

Delshad said that council members were frustrated when Walsh resisted efforts to make the chamber’s finances more transparent during the audit. It was a sore point because the city at the time was providing more than half of the chamber’s funding.

Delshad last week also said that once the CVB was split from the chamber, city officials expected the chamber to become more self-sufficient. “We were hoping to see the chamber recruit more members.”

Instead, chamber membership fell from about 770 two years ago to the current level of roughly 700, a drop of nearly 10 percent.

The recession has been a major factor in declining chamber membership as companies everywhere have cut back on voluntary expenditures. According to recent Business Journal lists, most of the county’s major chambers have lost members in the last two years, with some member rolls dropping more than 20 percent.

Then Walsh came up with a plan to require membership through an assessment district in which all of the city’s 9,600 licensed businesses would have to pay to support the chamber. Delshad said that’s when council members and chamber officials concluded that things weren’t going to work out.

Delshad said the proposal was fundamentally undemocratic.

“There needs to be a way for the chamber to grow its membership without forcing businesses to join against their will,” he said.

Delshad said that as Walsh struggled with the plans for required fees and memberships, pressure built from inside City Hall and from the business community for the chamber to change course. Key to that was new leadership.

The chamber will launch a search to replace Walsh. The chamber has appointed a committee to help manage the organization in the interim. Members are Johnson of Lawry’s, Bruce Schulman of Mercedes-Benz of Beverly Hills, Jim Jahant of Brooks Bros. and Corrine Verdery of Oasis West Realty.