Tom Riordan, the chief executive of Leeds City Council, faces having his job axed or diminished if voters opt for a powerful elected mayor.
Government officials have confirmed that new elected mayors will also become the most senior officer in their councils, responsible for staffing.
The revelation comes just days after Mr Riordan announced he is to take a five per cent pay cut from April reducing his annual salary to just over 176,000.
The government is planning to lay an order in Parliament later this year which will turn the leaders of Leeds and Wakefield councils, well as the leaders of 10 other cities, into so-called "shadow mayors".
The shadow mayors will rule until May 2012, when a referendum will be held to decide whether the mayor model of local government should continue.
For areas that vote in favour, mayoral elections will then be held in May 2013.
After the elections, the new mayors would assume much of the work of the current chief executives.
Responsibilities would include the co-ordination of the council's different functions, staffing levels and structures.
A Department for Communities and Local Government spokesman confirmed: "Mayors will move to the mayoral management model and ensure their mayor is their chief executive officer".
An analysis by the Local Government Chronicle claims that England's 12 core cities could have to pay more than 3m in redundancy costs if executive mayors are created and council chief executives axed.
Denis Cooper, associate at law firm Eversheds, predicted outgoing chief executives would receive compensation of between a year and 18-months' salary.
"You will end up with lots of expensive pay outs to chief executives," he said.
Mr Riordan joined the council in August last year from Yorkshire Forward, the regional development agency.
Mr Riordan revealed after two months that he was considering a call by Communities and Local Government Secretary Eric Pickles for highly-paid officials to consider taking pay cuts.