Ferguson Marine: Ministers seek to veto ferry fiasco exec bonuses

The questions were raised after the Herald revealed that nationalised Ferguson Marine plans to plough ahead with controversial bonuses in 2023/24 despite the First Minister stating his expectation was they would not be paid.

It has been confirmed to the Herald that chief executive David Tydeman who received almost £40,000 in bonuses in 2022/23 will be eligible for more in this financial year in the wake of an internal review over the perks.

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.

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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.

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

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."

It comes as the board of loss-making Ferguson Marine admitted that a lack of financial support from ministers has cast a "significant doubt" on the firm's ability to continue operations.

The directors of Ferguson Marine (Port Glasgow), which has made a net loss of £1.3m in 2022/23 pointed to a failure to get a committed investment of £25m to support future work at the Inverclyde after the delivery of two long-delayed and over-budget ferries.

They have admitted that the lack of investment to upgrade shipyard facilities as part of a five-year business plan puts at risk its hopes of extra work from BAE Systems which is delivering City Class Type 26 frigates on the Clyde.

Ferguson Marine was taken over by the Scottish Government four years ago after its financial collapse under the control of tycoon businessman Mr McColl as a row erupted over long delays and mounting costs over the delivery of the vessels.

Quizzed by Scottish Conservative shadow transport minister Graham Simpson about the payments and further bonuses, Mr Lochhead said: "Despite every effort being made to ensure that no bonuses were paid to Ferguson Marine (Port Glasgow) senior management in 2022/23, it proved unavoidable due to historical contracts at the yard.

"The CEO's contract entitles him to some bonus elements only when stringent key performance indicators are met. Scottish Government has been clear that these should not involve a bonus being paid directly for vessels 801 and 802. Contracts for new FMPG employees do not include bonus elements. Parliament will be updated with the details of a revised remuneration scheme once it is finalised."

But Mr Simpson said it shows that "no-one pays any attention to what the First Minister wants".

"Now today, which is the sixth anniversary of the fake launch of the Glen Sannox, we should be clear that nobody at the yard should be getting a bonus. Humza Yousaf said in April that there should be no bonuses paid. But there were. Audit Scotland said while Scottish government approvals were sought FMPG did not have an explicit approval prior to payment. So who sanctioned the latest bonuses? And why is David Tydeman in line for more?"

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Mr Lochhead said: "As the First Minister said because of the cost overruns and delays any bonuses would be unacceptable and shouldn't be paid. And that's currently what Scottish Government are working on. Now there's an arrangement where FMPG board have to consult the Scottish Government and these discussions are ongoing over the future remuneration packages.

"As I said before the [wellbeing economy] cabinet secretary [Neil Gray[ will bring the final details of that package to Parliament in due course. But the Scottish Government has made its views clear there should be no bonus elements in relation to the two vessels. I think that's in line with public expectations."

Mr Simpson responded: "You could possibly argue at a stretch that Mr Tydeman should get some credit if he turns the yard into a viable business. But we've learned this week that they've stopped work on a project for the Royal Navy because the Scottish Government, Neil Gray, refused the request for £25m investment for a new plating line... and better computer software. So how much extra is the government prepared to invest in the art in order to turn it around?"

Mr Lochhead said: "The cabinet secretary laid out the current position. But in that statement, the cabinet secretary said that his discussions with the the yard are ongoing and discussing their business proposition. But of course any proposition has to be in line with subsidy control regulations. And also value for money. These discussions are ongoing.

He added: "There should be no doubt that the government does remain committed to shipbuilding on the Clyde and the dedicated men and women at Ferguson Marine who we know are doing their utmost to deliver these vessels. So we do stand behind the workforce and we're working with the service management and board to try and secure a prosperous future for the yard.

SNP MSP for Greenock and Inverclyde Stuart McMillan agreed that bonuses should not be paid and added: "The people who should be most angry here actually are the workforce on the tools who have been attempting to build these vessels for some time, taking the flak, the political flak and been used as a political football posts while management which has changed regularly has received unwarranted bonuses."

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.

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.

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.

Ferguson Marine declined to comment.