This meeting has no confidence in the current (at date of this letter) Chief Executive to manage the affairs of our Institution and the operation of the trading subsidiaries
Promoting and implementing a policy of investment in a limited number of 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 and then agreeing to pay “a headline price well beyond financial and industry expectations”
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 properly to manage the trading company acquisitions and then recruiting expensive “consultants” of unproven competence in an attempt to resolve the difficulties
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 in breach of the by-laws and contrary to any reasonable understanding of natural justice
Failure to retain key respected and valued members of staff
The Trustee Board is the governing body of the Institution, with the President as chair of the Trustees, the titular head as defined in clause 11 of the Charter and By-laws 73 and 79, and with additional duties to chair general meetings etc.
Under Clause 73, the Trustee Board is required to manage the property and affairs of the Institution in accordance with the Charter and By-laws from time to time in force
The Chief Executive role is defined in by-laws 81 and 82, in which it is clear he is required to act under the general direction of the Trustee Board.
The President is the CEO’s line manager, and the CEO is required to refer to the President any matters of importance or difficulty requiring urgent attention.
The current CEO was recruited in 2009 and has been in post approximately 9 years. He is also a Fellow of the Institution and is expected to conduct himself in accordance with the Institution’s Code of Conduct
Why do we have no confidence in the current Chief Executive?
The CEO has operational responsibility and has presided over a fast-rising charity deficit and a failed acquisition policy. He has claimed success because the overall reserves have risen, but has not explained that this is due to the injection of nearly £21m from the sale of the publishing arm of the Institution. He has sought to cover up operational losses behind pension accounting gains and the funds derived from the sale of the publishing business.
Extracting the funds from the sale of Publishing from the Consolidated Annual Accounts allows us to see the underlying operating income for the whole Institution. This is a disaster. In effect, the Institution has been loss making since 2011 and in very steep decline.
The accounts are obscure, with accounting methods changing between the charity and trading arms from year to year, thus preventing the true financial position of the Institution being transparent and capable of understanding by the Trustees, members, and external reviewers.
Understanding of role
The relationship between President, as Chair, and CEO as the senior executive is key. The CEO is junior to the President. This CEO has not respected the role of the President or the Trustees and does not appear to understand that he is to carry out his role as directed by the Trustee Board.
He has increasingly driven the Trustees in directions of his choosing and not necessarily compatible with some core requirements of the Institution’s charter. He has made little attempt to adapt to each President’s differing style.
In a recent article (Dec 17/Jan 18) in PE, he asserted that Trustees were out of touch with the needs and wishes of the membership and that the Institution should follow his lead on what is required.
He has overreached his role and shown an inability to work with a number of successive Presidents
Change of staff
Under the management of this CEO, a number of influential and key members of staff have been obliged to leave the Institution despite their personal achievements and delivery of Institution objectives. These staff members were held in very high regard by both members and external bodies (Colin Brown, Helen Meese, Philippa Oldham, Richard Campbell)
Reputation of Institution
The financial losses associated with the acquisition and subsequent closure (liquidation) of the recently acquired training company, Amber Train, are covered elsewhere in this document. There is no escaping the facts that the purchase of Amber Train in the first place and its subsequent closure with its attendant financial and reputational losses occurred under the direction of our current CEO. As a director of the Institution’s trading subsidiary, Professional Engineering Projects Ltd (PEP) and a director of Amber Train, he is directly accountable for all decisions associated with this disastrous venture.
The Times Educational Supplement of Dec 2017 published a damning article in which they highlight the plight of a number of apprentices left stranded with incomplete certified training by the liquidation of Amber Train. Subsequent to the liquidation of Amber Train 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 behavior.
The damage to both our finances and reputation from this failed venture cannot be overstated.
In a recent email to all members, the Trustees / CEO stated not only that the financial affairs of the Institution were all in good order, but also chose to publicise the current inquiry into an unproven grievance by a member of staff, believed to be the CEO, against the President. This should not have been issued, is against natural justice, and indeed could be construed to contravene the Institution’s own code of conduct.
“Members shall be alert to the ways in which their duties derive from and affect the work of other people; respect the rights and reputations of others and shall:
use their leadership and management skills responsibly.
not recklessly or maliciously injure or attempt to injure whether directly or indirectly the reputation, practice, employment or livelihood of another person.
behave with integrity and objectivity in their relationships with colleagues, clients, employers, employees and with society in general.”
Direction of travel
The CEO appears to be dismissive of the roles of Divisions, Groups and Regions, and has managed the Institution increasingly as a commercially orientated business rather than, as his defined responsibilities require, a charity and member organisation under effective financial and managerial control. His autocratic style has increasingly alienated the wider membership
Over the period of his term of office, the CEO has been moving away from the Institution’s purpose, as defined in the Charter, article 7
“The objects and purposes for which the Institution is hereby constituted are to promote the development of Mechanical Engineering and to facilitate the exchange of information and ideas thereon and for that purpose:
(a) To encourage invention and research in matters connected with Mechanical Engineering and with this object to make grants of money or books or otherwise to assist such invention and research.
(b) To hold meetings of the Institution for reading and discussing communications bearing upon Mechanical Engineering or the application thereof or upon subjects relating thereto.
(c) To print publish and distribute the proceedings or reports of the Institution or any papers communications works or treatises on Mechanical Engineering or its application or subjects connected therewith.
(d) To co-operate with Universities, other Educational Institutions and public Educational Authorities for the furtherance of Education in Engineering Science or Practice.”
Time in the role and good governance
In published articles (Harvard Business Review, Fox Business and others) on good governance standards, it has been recognised that a CEO in post for more than 5-7 years will increasingly appoint from a group likely to side with him and become less cognisant of external customer (member) views. There is a body of opinion that open-ended contracts can lead to such styles of dismissive behaviour towards staff, trustees and members who do not share the CEO’s views. This appears to be evident here.
Recent events such as the late presentation of the 2016 accounts, the confusing nature of those accounts, the treatment of the President and the imposition of legal constraints, all suggest that the present Trustees are not able to see the warning signs or are not sufficiently strong to perform their legal duties and responsibilities to challenge the information presented to them, despite the best efforts of the current President to alert them.
This view is reinforced by the actions of some of the most senior Trustees, as covered in evidence leading to motions 4 and 5.
Management of non-charitable subsidiaries
The questionable management of PEP and the purchase of Amber Train and the latter’s subsequent failure have been covered elsewhere in this document. The sale of Amber Train was undertaken on behalf of the then owners by Avondale, who later declared publically that the sale to PEP Ltd “resulted in a headline price well beyond financial and industry expectations”. And yet within a period of some 20 months from the acquisition the company was closed and put into liquidation.
In addition, accounts filed with Companies House on the affairs of PEP Ltd and another subsidiary company (Argyll Ruane) show combined payments of more than £1m entered under the heading of “Directors Remuneration”. Questions raised regarding these payments remain unanswered
Clearly, this must be part of the full and independent review of the Institution’s finances called for in Motion 3.
It is left to the reader to consider the implications of all of the above