For the past year, the company that runs the UK’s Internet registry has been the unlikely location for a corporate soap opera, complete with scandals, villains, twists and turns, allegations of corruption, resignations, grand plans thwarted at the last minute and some nasty in-fighting that has left people alternatively amazed, entertained and worried.
The dust finally began to settle in January this year when a second director resigned (loudly) from not-for-profit Nominet and ever since the management team has been frantically trying to tidy up. In an effort to avoid the same problems emerging further down the line, a big spring clean was ordered and an independent expert brought in to assess what had gone wrong and what needed to be done.
Last week, that expert – Professor Bob Garratt – delivered a surprisingly frank and blunt assessment. In it, he told Nominet – and Nominet’s members – that they had to sort out a list of issues, and they had to sort them out fast.
In effect, he gave Nominet three months to live. If the warring tribes can’t find a settlement before then, Garratt warns, the UK government is going to step in and Nominet as it has existed since 1996 will cease to be.
It now rests on the shoulders of Nominet’s CEO, Lesley Cowley, to make enormous progress within an extremely short period of time, and persuade groups that were until recently at war with another to come together and rebuild the organization.
Here’s what needs to be done and how Cowley says she is going to do it.
How the review came about
It was back in November 2008 that Professor Bob Garratt was selected to carry out an independent governance review of Nominet. The decision to have such a review was agreed to, and effectively ordered, by the UK government in a letter to Nominet [pdf] a month earlier.
Lesley Cowley and Nominet’s chairman Bob Gilbert had visited the head honcho at the Department for Business, Enterprise & Regulatory Reform (BERR, formerly the DTI), David Hendon, on 8 September. Hendon and the UK government have been on very friendly terms with Nominet for a number of years, often working side by side on Internet issues.
It’s not known exactly what transpired during that meeting, probably a combination of gentlemen’s agreement and a governmental warning.
Bob Gilbert no doubt explained his previous efforts to fix the overriding problem of Nominet’s corporate rules where too few people have too much power. And where an impossibly-high required voting percentage means that Nominet’s management is effectively hamstrung from making changes to keep the company up-to-date in a rapidly changing industry.
David Hendon would no doubt have noted that the first effort to fix this – back in March 2006, incredibly – led to an embarrassing defeat of all three votes, and, in many respects, fired the starting pistol on Nominet’s current problems. At a second EGM in November 2006, Nominet tried to make much smaller changes and got them through by the tiniest of margins.
Not only that but both before, during and since, the company was beset by controversial elections for Board members and Policy Advisory Body members that saw not one but two directors elected to the Board who openly and publicly opposed the plans of the CEO and Chairman. It was the accumulation of two years’ of rising tension.
The only solution was a government-ordered and independent root-and-branch review of Nominet’s structure, Hendon, Cowley and Gilbert agreed and so while Cowley and Gilbert returned to Oxford to start looking for the right person, Hendon and his team set about drawing up a letter outlining what they felt needed to be reviewed and decided.
The Garratt and Mutuo Reports
So Garratt prepared his report and handed it to Nominet in January. Unfortunately, as he himself recognises in a subsequent overview letter, much of this work became moot when the Nominet Board entered trench warfare with itself.
One director – Jim Davies – was actively working against the remainder of the Board and, the Board suspected, providing confidential information to others. So the Board tried to strong-arm Davies into complying with rules that would force him to declare any conflicts he might have. Davies fought back. All this prompted a second Board member – and one that backed up Davies in many respects – Angus Hanton, to resign. More fighting ensured both inside and outside the Board and eventually Davies also resigned in January this year.
What Nominet realised at this point – or perhaps it was prodded by Garratt – was that an external third-party making recommendations wasn’t going to cut it. The organization had to ask the members themselves what they thought and bring them along with any plans for reorganization.
And so, a week or so after Davies’ resignation, the company announced it had hired research firm Mutuo to “research stakeholders’ views” on the issue of Nominet’s governance.
It was a very rushed affair but it might be the one thing that saves Nominet. The Mutuo report [pdf] spoke to eight focus groups and 21 individual interviews with stakeholders, and told everyone what they already knew: that Nominet was widely respected for the work that it did, but that it hadn’t evolved as a corporate entity in line with the changing Internet world, and that much of that was down to the fact that due to its corporate rules caused it to be predominantly owned and controlled by private commercial customers.
But what the report also did was say the unsayable – that there was a huge amount of mistrust between certain key groups, particularly Nominet’s staff and “domainers” – those that make a living from buying and selling domains.
It also did a crucial thing that Nominet had not done enough of, and for which it has suffered considerably, and it asked people for their views and then accurately reflected them. Now, it didn’t talk to enough people and the report suffers from being written extremely quickly, but the Mutuo report had three strong and useful impacts:
So, what Nominet ended up promoting when it released the results of all of this work was a rather unusual and surprisingly frank 16-page letter [pdf] from Bob Garratt in which he himself recognises that he is stretching beyond the remit he was given.
Garratt is quite clear that he believes that the UK government will step in if Nominet’s members can’t sort out the problems themselves (something that the CEO Cowley also has no doubt about).
And Garratt comes to many of the same conclusions that were reached by Nominet chairman Bob Gilbert over three years ago:
Garratt also suggests a range of measures to make sure the Board is more accountable for this increased level of power:
When it comes to Nominet itself and its difficult structure (which was designed in a very different Internet era), Garratt crucially makes it extremely plain that the solution lies with the members and NOT with the Board.
Nominet needs to:
Garratt sums all this up at the end by saying that his “fundamental recommendation” is that Nominet and its members “engage in an urgent, positive and thoroughgoing dialogue on all the constitutional and corporate governance issues which I have set out earlier, with a view to making appropriate changes as soon as reasonably can be made”.
In order words: you need to bury the hatchet and sort these problems out – and do it quickly.
So what is Nominet going to do?
So it all falls down to Nominet’s CEO, Lesley Cowley, to make sure this happens. On top of an official Nominet statement that outlined the next steps as:
Lesley was good enough to answer some questions from me:
What consultations are you running to make sure the members are heard?
In addition to the meetings specifically on this topic, it will be covered at:
We plan to promote these discussions and meetings via the website, direct email, telephone calls etc. We’re also doing PR to raise awareness. We plan to do an online consultation too.
How are you going to fix the high level of suspicion and mistrust between staff and domainers as identified in the Mutuo report?
By discussing it and how it might be resolved – and I hope that the domainers who feel this way will be willing to do so too.
Will the autumn EGM aim to give the Board the broader “normal” powers that Garratt suggests it needs? And to get some non-execs on the Board? And to try to fix the high percentage approval needed (again)?
We don’t know yet. As you are aware, previous attempts to do these things have not had sufficient member support – and there is a 75 percent vote in favour required for many of these. For example, the introduction of independent non-execs was actually supported by 60 percent of those who voted last time, but that was not enough to ensure it happened.
What will be put to the vote in the Autumn depends on what members indicate they would support via the consultation and debate.
What does making the PAB more “outward facing” mean in reality?
I’m not entirely sure. My take on the statement would be that more diverse inputs are needed into the policy process for .uk and the PAB’s role could be to seek and channel those views more actively.
Do you think there is a real threat that the UK government will step in if this process doesn’t work out?
Absolutely. It is very clear indeed that the Government will step in to regulate/legislate both Nominet and this industry if the current issues are not satisfactorily resolved.
Are you going to open up and/or moderate Nom-Steer?
We do need to look at better ways of broadening membership participation and engagement and we are continually working on improving member communication.
How are you going to broaden the membership?
Firstly we need to hear from the members whether they agree with the suggestion that membership should be broadened.
So, a personal summary of all of this:
So there you go. As someone who has followed Nominet for years and as an individual deeply committed to the UK’s Internet industry, I sincerely hope that everyone sees the logic in working together and so ensuring that Nominet survives this and comes out stronger as a result.
The Garratt overview letter:
The Mutuo Report
The Garratt Board evaluation study:
Nominet stories on this blog:
A quick timeline:
20 Apr 09: Garratt report, Mutuo report and Garratt overview published
29 Jan 09: Survey company Mutuo starts research into stakeholders’ views on governance
20 Jan 09: Jim Davies resigns as a director
25 Nov 08: Bob Garratt chosen to head independent review
18 Nov 08: Six registry CEOs send letter of support for Nominet CEO and chairman
13 Nov 08: Board decides to take legal action against director Jim Davies
29 Oct 08: Nominet announces Corporate Governance Review
15 Oct 08: UK government sends letter to Nominet outlining its “unresolved concerns” about Nominet’s constitution and structure
8 Sep 08: Nominet CEO and Chairman visit BERR (UK government) in London
1 May 08: Jim Davies voted onto Nominet Board
21 Apr 08: Nominet puts out extraordinary memo warning members about several of the individuals put up for election to the Board
22 Nov 06: Second EGM votes scrape through
16 Mar 06: EGM votes collapse