Motion 2

 

This meeting considers that the governance of the Institution by the Trustee Board has failed, that the Trustees have not fully understood the financial state of affairs and, as a consequence, have not been able to discharge their responsibilities.

 

  • Allowing a policy of narrow investment in small companies rather than a broad spread of investments, thereby subjecting the Institution’s finances to unnecessary risk
     

  • Failing to understand that the warning signs were already evident at the time of the acquisition of Amber Train
     

  • Ignoring the consequences of putting Amber Train into liquidation resulting in a large number of apprentices being in possession of worthless training certificates and significant numbers of unsecured creditors, all severely damaging the reputation and standing of the Institution
     

  • Failing to make available to members fair and transparent accounts thus inhibiting an understanding of the true financial position
     

  • Instigating (and then making public) action against the current President contrary to any reasonable understanding of natural justice

 

The Institution’s document “Trustee Role Profile” spells out the statutory duties of a trustee and is the standard against which the behaviour and performance of the Trustee Board should be compared.  The statutory duties for a trustee include:

 

To ensure that the Institution complies with its governing document, charity law, company law and any other relevant legislation or regulations”

“To ensure that the Institution pursues its objects as defined in its governing document”  

“To ensure the Institution uses its resources exclusively in pursuance of its objects: the charity must not spend money on activities which are not included in its own objects”  

“To contribute actively to the board of trustees' role in giving firm strategic direction to the Institution, setting overall policy, defining goals and setting targets and evaluating performance against agreed targets” 

 

“To safeguard the good name and values of the Institution” 

“To ensure the effective and efficient administration of the Institution”  

“To ensure the financial stability of the Institution”  

“To protect and manage the property of the charity and to ensure the proper investment of the charity's funds”  

“To appoint the chief executive officer and monitor his/her performance”  

 

 

Why do we believe that the Trustee Board have failed in their responsibilities?

 

Annual Accounts

 

Annual accounts must be set out in a way to assist all members to easily and logically understand the true financial position.  Our annual accounts are very difficult to understand without considerable experience of company accounts. Inconsistent allocations of central costs between our charitable activities and commercial activities makes overall trends impossible to discern. The financial health over a 3-year rolling period should be measured by applying consistent standards and show a steady and reliable picture of prudent financial management.  Our annual accounts fall considerably below the required standard for such clarity and openness.  The Trustee Board has clearly failed to insist on having clear accounts from which they can monitor and interpret the financial state of our Institution.  This has directly led to the Trustees being unable to make sound judgements on the financial state and the impact of their policies on the financial health of the Institution.

 

 

Membership / Communication

 

The membership must feel their annual fees of £10m are giving value for money to them and to the wider mechanical engineering community within the objects of our Charter. The role of the Council, Technical Strategy Board, Regional Strategy Board, and the other member boards is important in this regard. It is vital there is regular and open communication with them on all strategic and current issues throughout the year.

 

Issues raised by many member groups (e.g. Midlands Region, Railway Division) are reported to have been unheard or ignored. Our representatives for this vital role are the elected Trustees and their contacts with the membership at large seem very spasmodic.  We have become very centralized in our decision making and are being controlled by a very small core of people.

 

Indeed, recent replies from the Trustees and CEO to the many questions from several parts of our membership have been economical with the truth and we have been left to wonder why central management is defending its fortress so energetically.  Recent experience indicates that communications directed to Trustees are read in advance by the CEO in order for the CEO to prepare a response.

 

The Trustee Board has failed to see this happening and to counter this trend towards “management by an inner circle”. 

 

Governance

 

As a body, the Trustees have been, in our opinion, over-dependent on the Investment Board and the Audit and Risk committees without realizing they cannot completely delegate these responsibilities outside of the Trustee Board. All Trustees are personally responsible in certain cases to the matter under debate at the time and thus their own ear to the ground is vital when sensitive issues are in play.

 

Trustee responsibilities are time consuming and onerous and Presidents, in particular, generally arrange a sabbatical year so as to fulfil their duties with the time and energy needed. It is all the more surprising therefore that our President has been subject to such disproportionate treatment by the Trustee Board for what appears to be a personal dispute with a tiny number of Institution staff. The fact that this dispute is now public knowledge and in circulation around the world membership is highly regrettable and very injurious to our third-ever woman President in our history.

 

The Trustee Board has failed to consider a proportionate approach to resolving this issue and has allowed the engagement of an expensive external QC to mediate on what should have remained an internal matter.

 

 

PEP Ltd / Amber Train

 

The Amber Train fraud and consequent liquidation has affected our standing as a reliable service provider to a high-profile section of the engineering society (viz training of apprentices).  The fraud appears to have been detected by external quality agencies and not by our own management. Bad luck is one thing but bad management is certainly avoidable.

 

The financial losses associated with the acquisition and subsequent closure (liquidation) of Amber Train are covered elsewhere in this document but the damage to the reputation of our Institution is even more concerning. The Times Educational Supplement of Dec 2017 published a damning article in which they highlight the plight of more than 70 apprentices left stranded with incomplete certified training by the liquidation of Amber Train. (LINK).  Subsequent to the liquidation in July 2017, no provision was made by the Institution to arrange for completion of their courses and both the Institution and the Chief Executive are strongly condemned in this article for this behaviour.

 

The CEO is in the unique position of being the only director left in Amber Train, plus a director of PEP and finally CEO of the Institution.  His responsibility for actions surrounding the Amber Train affair is obvious but the Trustees have a duty to bless his appointments and to monitor his performance. The Trustees have clearly failed in this duty.

 

As the governing body for the Institution, the Trustee Board must bear overall responsibility for this disaster. To allow the reputation of the Institution to suffer in this way and to make no attempt to recover the situation in a timely manner is inexcusable.

 

This is a major failure by the Trustee Board.  

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