Ferguson Marine exec bonuses stay despite First Minister objection

The nationalised shipyard has already been criticised for the award of a new wave of executive bonuses in the wake of the ferry-building fiasco with awards reaching over £200,000 in three years.

The bonuses come against a background on the operator of the last remaining shipyard on the lower Clyde, which was rescued from administration by the Scottish Government in 2019, struggling to complete two lifeline ferries Glen Sannox and Glen Rosa which are due to be delivered at least six years late with capital costs expected to more than quadruple from the original £97m contract.

It has emerged that a total of £86,551 was paid in 2022/23 to executives at Ferguson Marine (Port Glasgow) despite past concerns from the First Minister about the payouts.

David Tydeman, the yard's chief executive received almost £40,000 in bonuses, with a further £47,217 paid to eight other staff.

READ MORE: Ferguson Marine: Public cost of ferry fiasco firm at nearly £600m

Ferguson Marine said it amounted to 40% of discretionary bonus.

The payouts were part of a performance related bonus scheme aimed at incentivising and retaining staff.

But Andrew Miller, chairman of Ferguson Marine (Port Glasgow) has confirmed that the bonuses will continue to be paid in this financial year but the eligibility will be "restricted" to only Mr Tydeman.

The continuing bonus culture came despite an outcry over the more than £2000-a-day remuneration, made up of fees and expenses given to Ferguson Marine's previous Scottish Government-appointed turnaround director Tim Hair who left his post in February, last year.

The Scottish Government defended the payments to Mr Hair as being "in the middle of the industry norm".

Auditor General Stephen Boyle has stated his opposition to the bonuses at the company which was rescued from administration by the Scottish Government in 2019. He said it was unclear why they were paid.

A Ferguson Marine said: "The tighter restriction means that only Mr Tydeman has the potential to earn the ‘at risk' element of his salary package, and that depends on stringent Key Performance Indicators being met."

A ferry user group official said it was "bewildering" that the bonuses could still be given as they would be seen as a "reward for failure".

"We need the ferries, but the costs of Ferguson Marine to the public are astronomical and to put the bonuses on top of that is unfathomable," he said.

The Auditor General Stephen Boyle has previously branded the payouts “unacceptable” and deputy first minister John Swinney described them as "reprehensible".

As concerns over the bonuses surfaced, the Auditor General told MSPs he was unsure if the money could be recovered.

When the decision to pay bonuses to Ferguson Marine in 2022/23 emerged in April, Douglas Ross, leader of the Scottish Tories, said: “The two ferries are not fit to sail, the costs continue to spiral out of control, and islanders continue to be left without vital, lifeline services – so First Minister, what on earth could these bonuses be for?”

Responding, First Minister Humza Yousaf said: “I won’t disagree with Douglas Ross or the Auditor General…who made it clear that those bonuses should not have been paid. I agree.

The former deputy first minister (John Swinney) made clear his anger, saying they shared that anger at the fact that bonuses have been paid.

"Those bonuses relate to a decision that was made by Ferguson Marine’s remuneration committee, without consultation with the Government, in November 2022. I asked for those bonuses not to be paid, but the advice that has come back is that they are a contractual obligation.

"With regard to any future discussion about or consideration of bonuses, I have made it clear that bonuses should not be paid in relation to [the ferries]."

But Audit Scotland said that the bonus payments for 2022/23 have come without the express approval of the Scottish Government.

FMPG say appropriate approval had been "sought" from the Scottish Government throughout the bonuses process.

READ MORE: ScotGov warned of ferry privatisation threat after decision 'fudge'

Ferguson Marine refer to the bonuses as "contractual retention payments" and say they form part of the salary package of senior FMPG employees and are a "strategic mechanism for maintaining staff in the UK shipbuilding industry."

They say that of the total potential £142,281 of bonuses that could have been paid out - £95,064 was not awarded due to a failure to meet key milestones for the ferries.

Despite scrutiny over the bonuses, two recipients who do not have a bonus clause included within their original employment contract were invited to join the scheme for the 2022/23 financial year, by letter in December.

The Ferguson Marine chairman, who has been leading a review into the payment structure at the yard, has previously said the firm's future was at risk if it does not retain a competitive bonus system.

The bonuses are part of a 17.5% bonus that is paid to certain members of the management team for performance. The bonus is said to be in two parts, 7.5% to be paid upon delivery of the hull of the Glen Sannox and “a further 10% discretionary element”.

Audit Scotland said that the bonus payments represent a "significant deviation" from the Scottish Government's pay policy.

That is despite the fact that Ferguson Marine is not on the list of publicly funded bodies that have to abide by the rules.

Mr Miller gave evidence to the Scottish Parliament in June in defence of bonuses after it was revealed the secret bill to Ferguson Marine management had reached £134,218 over two years. He denied he was under political pressure to make changes.

He said: "I don't understand the narrative around the term 'bonus'. These are retention payments. They are payments because some of the senior staff have parts of the remuneration at risk and they have to achieve certain targets which are in control of the board in terms of the KPIs [Key Performance Indicators] that we have.

"And these are reviewed regularly before any payments are made. Some of these payments are contractual from employee contracts that go way back over 10 years and they are personal to the individuals and any changes to these contracts.

"But we have to show good regard to employment contracts, employment law and as I say some of these people go way back to prior to the first administration in terms of their employment contracts, which have got to be observed. It would take individual negotiation between the people who do qualify to remove some of these elements. But if these elements are removed, without being competitive the future of Ferguson Marine yard is at risk."

He said the review by the remuneration committee will make sure the terms and conditions of these contracts are "correct and proper as we try to maintain a competitive position in the marketplace".

At the end of April, the deputy first minister and finance secretary Shona Robison confirmed that the first of two installments of £23,609 each had already been processed for 2022/23. This first payment was made in [Ferguson Marine's] April 2023 payroll with the second payment of £23,609 due in June, subject to ongoing discussions involving the board chairman.

A Scottish Government spokesman said: “Despite every effort being made to ensure that no bonuses were paid to Ferguson Marine Port Glasgow (FMPG) senior management in 2022/23, it proved unavoidable due to historic contracts at the yard.

“Contracts for new FMPG employees do not include bonus elements and the First Minister has been clear that new contracts for members of the senior management team should not include bonuses being paid directly for [the ferries].

“Parliament will be updated with full details of a revised remuneration scheme for the senior management team - including the Chief Executive Officer - once it is finalised.”

It comes as the Herald on Sunday revealed that the cost to the taxpayer of the firm at the centre of Scotland’s ferry fiasco is approaching £600m.

Analysis of government budget and other financial statements seen show that spending on scandal-hit Ferguson Marine exceeded budgets by nearly £150m since nationalisation at the end of 2019.

The bill, which includes the Scottish Government payments for the running costs of the struggling yard - does not include the further £25m requested by the yard to secure its future beyond the delivery of the ferries.

Expenditure data shows that for 2022/23 alone the spending on Ferguson Marine was nearly double the budget. It had a £68m budget, but the actual spend was at £131m.

Around £60m of the rise is understood to have been put down to the cost of the declining market value of the ferries that have still to be delivered along with the materials used in construction. Some £3m of the overspend was put down to consultancy costs by Ferguson Marine and the timing of work being completed by the firm and its sub-contractors.