Auditor concerns over shake-up of bonus culture at Ferguson Marine

He said that spoke to the "lack of clarity" over how the Scottish Government expected Ferguson Marine to operate.

He said he doubted the controversial bonuses paid to bosses at Ferguson Marine can be recovered and described the payments as “unacceptable”.

READ MORE: Ferguson Marine: ScotGov ferry fiasco firm pays £47k more in bonuses

The payments were made despite the Scottish Government's public sector pay policy maintaining a suspension of performance related bonuses since the shipyard firm was nationalised in 2019.

🔴 Save on a full year of digital access with our lowest EVER offer.

Subscribe for the whole year to The Herald for only £24 for unlimited website access or £30 for our digital pack.

This is only available for a limited time so don't miss out.

👉 Click here to subscribe

It did not apply to the shipbuilding firm, because ministers decided it did not have to comply, and remains off the long list of public sector bodies that are covered by the pay rules.

This was confirmed in an agreed operations framework with the shipbuilders.

Richard Leonard, convenor of the Holyrood Public Audit Committee said to Mr Boyle: "I think for us, the question is not just that these things happened, but that they were allowed to happen. And where is the sponsorship team and where is the government's oversight of this? It seems to me to be a quite fundamentally important question."

Mr Boyle said: "I agree. There has been a prolonged ambiguity about the government's intentions and manifesting itself with the duration of the framework agreement to be agreed. It still contains sections that are open to interpretation. It suggests that there needs to be real clarity provided as quickly as possible, bearing in mind of course, that while Ferguson Marine may be operating as a commercial entity, it's almost exclusively funded by public funds."

The bonus row came despite an outcry over the over £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".

The yard, which was rescued from administration by the Scottish Government in 2019, has struggled to complete two lifeline ferries, with further delays also announced by the yard in March. pushing the delivery date for the Glen Sannox and as-yet-unnamed hull 802 to the end of this year and 2024, respectively, five and six years later than originally planned.

At Holyrood’s Public Audit Committee on Thursday, Mr Boyle re-stated his opposition to the bonuses and said it was unclear why they were paid.

READ MORE: CalMac ferry remains sidelined months after rust and engine issues

“We consider it unacceptable that £87,000 was paid in bonuses,” he said.

“Not in an ideological perspective, but the payments were made without a clear [key performance indicators] framework, that was designed to support the payment of bonuses.”

He said the payments were “relatively unusual” in the public sector, but where they are made “there needs to be clear KPI, clear governance arrangements and we draw attention in today’s report that these factors weren’t in existence when these amounts were paid”.

George Crookston – one of those who benefitted from the bonus scheme – left his post in mid February, after being appointed in March 2020. He is also no longer a member of the board, which serves as its governing body.

Mr Crookston, received incentive payments as part of the controversial bonus scheme of approximately £17,500 in 2021/22.

That was on top of a remuneration package made up of approximately £122,500 in salary and £6500 in pension benefits.

Asked by SNP MSP Willie Coffey, who claimed it “beggars belief” bonuses could be paid at the yard – if the money could be recovered, Mr Boyle said: “I don’t know if those amounts are recoverable, that would have to be a judgment made by others in terms of the specifics of it, in terms of conditions that existed for those senior managers, what their contracts said.

“We draw attention to these amounts because the amounts were paid without effective governance by the remuneration committee being discharged before the amounts were paid.”

He added that it was a “matter of public interest” that bonuses were paid by the yard.

The bonuses were recommended by the yard’s former turnaround director Tim Hair, who was brought in by ministers after the yard was nationalised in August 2019.

Mr Boyle said the bonus was in two parts, 7.5% to be paid upon delivery of the hull of the Glen Sannox and “a further 10% discretionary element”.

“The governance and decision making around that was based on a recommendation from the former turnaround director, chief executive, through the remuneration committee to make those payments,” Mr Boyle added.

“In our view that wasn’t sufficiently robust, it wasn’t clear whether the KPIs had been met and again speaks to real ambiguity around progress and process.”

Shona Robison, the deputy first minister and finance secretary has confirmed that Ferguson Marine is currently undertaking to reform the remuneration and reward arrangements and that governance associated with that will "help achieve that".

She said: "The [Ferguson Marine] chair of [Andrew Miller] is continuing to lead the development of new governance arrangements for senior staff remuneration through a programme of work aimed at rebalancing reward and remuneration for the senior management team."

She said that this will "help fulfil the commitment" made by her predecessor John Swinney in March "to ensure that arrangements and commitments entered into for 2023/24 onwards are done so with the appropriate governance and transparency expected of a public body".