.UK overseer Nominet abandons its own charitable foundation – and why this matters

Non-profit org mutates into investment firm

Over the lifetime

Suspicions were heightened when Nominet refused to release any further financial details on the matter, and Haworth told members at the company's general meeting in 2016 that the contracts "make sense over the full term of the contractual period."

The launch of hundreds of new generic top-level domains – like .cooking and .horse – has not been as successful as the domain name industry expected, making it increasingly likely that Nominet is continuing to run approximately 30 dot-word registries at a loss.

At the same time as Haworth's aggressive market moves appear to be backfiring, the company has become increasingly opaque. In August last year, the organization announced it would no longer provide minutes of its board meetings, and would no longer publicly distribute the internal reports it uses to make decisions.

Critics observed that would also mean that conflict-of-interest statements from board members would no longer be published – a critical issue since, due to Nominet's unusual voting structure, several board members represent the largest companies in the domain-name market and those same companies possess an effective veto on board decisions.

The end result is that the finances and decision-making of what is supposed to be a member-friendly organization are largely invisible to anyone but board members and staff.

The potential for self-dealing is significant. And many continue to be alarmed at inflation-busting staff salaries and bonuses, as well as director remuneration that the organization awards itself year after year.

Since 2007, staff salaries have increased on average 7.3 per cent a year – compared to average inflation of 2.5 per cent. Director pay has increased a remarkable 14.5 per cent each year since 2002.

In the most recent available financial statements for 2016, staff salaries and bonuses went up again by 10 per cent and director remuneration went up 19 per cent. Haworth was awarded a bonus of £155,000 on his £215,000 salary. In a recent board "update," it is clear that further salary increases are coming in 2018.

New direction

The unilateral decision to effectively kill off the organization's charitable foundation, with no consultation of members, has further raised concerns that Haworth is running what is supposed to be a steward of the UK's internet space as an investment vehicle, using the revenue from over-inflated .uk domain prices to fund a personal interest in security software.

In the same email as he announced the decision to withdraw from the Nominet Trust, Haworth announced the creation of a new Cyber Advisory Panel – to be chaired by himself – that would be "targeting both government and enterprise business, supported by a marketing programme, and potentially an acquisition to help accelerate our progress."

To that end, the company recently announced the appointment of a new senior vice president of cyber security services who will "develop the sales strategy and new market focus" for a "suite of cyber services, building on Nominet's heritage of DNS expertise."

We contacted Nominet to discuss the situation, and received only the short statement included above. We also contacted all three members of the Nominet Trust who resigned this week, and received no response.

Someone who was willing to talk was Nominet member Andrew Bennett of registrar Netistrar. He was concerned about the decision to ditch the trust and the direction that Nominet was heading in:

For ten years the Nominet Trust has been the mechanism for Nominet UK to spend its excessive operating profits. Where are all future operating profits going to be spent? Nominet is currently limited by guarantee and doesn't have shareholders. Are we going to see Nominet UK separate in to two entities with share options for the executives that run the commercial arm?

This latest decision may be the spark that leads Nominet members to follow through on an earlier threat to lodge a formal complaint with the UK's Competition and Markets Authority (CMA) accusing the registry of abusing its position as a dominant market force to introduce predatory pricing, and use price inflation to allow for cross-subsidization of products.

Either way, the decision to effectively shut down the Nominet Trust represents the end of any pretence that the Nominet remains a member-based organization focused on the .uk internet registry space. ®