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Gentoo admits ‘unacceptable’ executive severance payment
Gentoo Group has declared itself “bitterly disappointed” over previous governance structures which led to an “unacceptable” pay-off to a senior staff member.
The 30,000-home Sunderland-based housing association’s governance is currently under review by regulator the Homes and Communities Agency (HCA) in relation to the severance payment.
In a statement today, Gentoo revealed the reason for the governance review but did not name the member of staff who received the payment, or its size.
Gentoo’s board is now considering applying a payment cap in line with the Enterprise Act 2016, which stops any public sector organisation from making a payment of more than £95,000.
The association had reported the issue to the HCA and commissioned an independent investigation from a “leading legal firm”, the statement said.
The report has been shared with the HCA and the spokesperson said the Gentoo board had taken “immediate measures” to make sure that no governance breaches take place in the future.
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The spokesperson said the recent resignation of chief executive John Craggs with immediate effect “means that the group will have an almost entirely new leadership team, promising a new era for the organisation”.
The spokesperson said executive remuneration has reduced by £800,000 and is now less than half what it was in 2015.
The group’s structure has gone through a “radical transformation” over the past two years, the spokesperson said, with headcount reductions of more than 600 staff which cost the group £15.3m. The spokesperson added that this restructure had led to savings of £300m over its 30-year business plan.
Keith Loraine, who took over as chair of Gentoo yesterday, said: “The new Gentoo Group board is bitterly disappointed that this flaw in past governance practices has led to this unacceptable payment. Our historical checks and internal controls have been found to be inadequate. We are now seeking further legal advice about the possibility of obtaining redress or recovery. Such payments are not in keeping with the group’s ethics as a responsible business, and it will not happen again.
“We intend to commission further external advice targeted on any weaknesses in our governance structures, and in particular to look at delegations and authorisations.
“We fully anticipate a speedy recovery from this setback and are working hard to ensure a return to an improved governance grading very soon. I have every confidence in our ability to deliver positive and effective, lasting change.”
In October 2016, Inside Housing revealed Gentoo made payouts totalling £1.1m to 17 departing chief executives in the 2015/16 financial year, with the largest payment in excess of £370,000 including annual pay. Three members of staff received packages of more than £290,000, made up of loss of office payments plus annual pay.
Gentoo has not said these are the payments it is referring to in the statement. The spokesperson said the severance payment did not relate to any of these three people.
The organisation let 330 members of staff go during the 2015/16 financial year, with total payouts reaching £11.3m.
A spokesperson said at the time that none of the staff to leave the organisation "received more than their contractual entitlement".
