Nominet faces showdown with British internet industry: Extraordinary vote called to oust CEO, board members

Ex-BBC chairman, former RIPE NCC boss lined up to run .UK registry as caretakers if campaign successful


The UK internet industry has called for the ousting of the CEO and most of the board of Nominet – the organization that operates the .uk registry – accusing them of lining their own pockets at the expense of charitable causes and millions of ordinary Brits.

In a formal notice that will be served on the not-for-profit member-based org on Monday, a group of nearly 40 internet registrars has demanded a special meeting to vote on two measures: the removal of all non-elected members of the board, including CEO Russell Haworth, and the introduction of two caretaker directors to replace them.

Nominet is legally obliged to hold the vote within 49 days of receiving the notice.

It’s an extraordinary step that follows years of complaints that Nominet has spent millions of pounds on failed business ventures funded through its core .uk registry business, while at the same time increasing .uk prices and slashing long-standing donations to charitable causes.

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“The money that should have been heading towards public benefit donations over the last five years has instead been funneled into completely unnecessary ‘diversifications’, expensive acquisitions and directors’ pockets,” Simon Blackler – the man spearheading the showdown and CEO of hosting company Krystal – explains on a website, PublicBenefit.uk, set up to elicit support from other Nominet members.

Those supporting the vote are also unhappy at compensation paid to senior management. The website points to a 38 per cent drop in operating profit between 2016 and 2020, while at the same time the pay of the top three directors, who also sit on Nominet’s board, jumped 70 per cent, from £1m to £1.7m total. Last year, Haworth received a 30 per cent pay rise, bringing his annual compensation to £593,000.

All about the money

Meanwhile, over that same time period, public benefit donations dropped 65 per cent from £5.4m to £1.9m. Nominet's move away from putting its profits to the broader public benefit was marked by the organisation disbanding its charitable trust in 2018.

Since taking over as CEO, Haworth has increased wholesale .uk prices twice, from £2.50 a year to £3.75 and then to £3.90, bringing in tens of millions of additional pounds which ultimately come out of citizens’ pockets through higher annual domain renewals.

“This is completely unacceptable behaviour for a company that has a public benefit purpose, so important it's enshrined in the Articles as the very first thing after the definitions,” Blackler argues.

That’s not all: the ousting campaign gives two more reasons why it feels there is no choice but to disband the board altogether rather than seek reform: that Nominet “ignored members concerns and input,” and “tried to silence critics, the press and members.”

Both points on the campaign website link to articles published by The Register in which we outlined how Haworth had theatrically shutdown the only means of independent communication between members – an online forum – while he was giving a speech at its annual general meeting, and how Haworth had accused us of peddling “fake news” when we reported on a flawed proposition to make millions of valuable .uk domains available to Nominet members instead of the general public (our article was entirely correct.)

Autocratic

Blackler told The Register that the forum being shut down was the final straw: “It was deliberately spiteful. And it was clearly meant to send a signal that members were powerless to stop them. But the signal that was sent and the one that was received were very different. It was an abuse of power, a bully tactic, autocratic.”

Currently, the board has 11 members: three of whom are staff members, four are selected by the board itself, and four are selected by members. Members say this gives management a 7-4 majority vote on all matters and so makes change impossible, even through elections.

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That may not be the current Nominet board's biggest problem in persuading its members to back them, however. As part of its campaign to force a change in Nominet’s direction, PublicBenefit.uk has persuaded two high-profile figures to take over in a caretaker capacity.

The first, former BBC chair Sir Michael Lyons, was hired by Nominet back in 2016 to carry out a review of its membership and corporate structure. Nominet made it plain that it intended the report to help it move in a more for-profit direction, but when Lyons canvassed the organisation’s members, he found that very few of them wanted to do that.

“One of my earliest conclusions was that the company has much work to do in better aligning the interests and ambitions of the current membership before it would be possible to open up discussion of new corporate structures," he wrote in the report, before focusing on ongoing problems at the management and board level.

They included: the lack of a finance director; too many staff members on the board itself; a policy of interfering in elections to promote preferred candidates; and the need to engage much more effectively with its members. But to members’ dismay, the Nominet board withheld the report for three months while it developed its response and released them both together.

In its response, the board rejected all the report’s reform recommendations. Four years later, that report seems extraordinarily prescient.

Safe bet

The other proposed caretaker for Nominet is Axel Pawlik – a former managing director of Europe’s Regional Internet Registry, RIPE NCC – who stepped down from the position in 2019 after 20 years in charge. As a highly experienced, well regarded and knowledgeable member of the internet industry, Pawlik is known personally by many Nominet members and represents a safe pair of hands.

What’s more, the two candidates have provided a manifesto of sorts, published on PublicBenefit.uk, in which they have committed to “re-establish” Nominet’s public benefit mission, reopen communication channels with members, conduct a full review of the company’s strategic direction, review board remuneration, and sign up to the UK Corporate Governance Code.

They have also committed to eschew bonuses, limit expenses, sign a fixed 12-month contract, and work for a capped annual fee as corporate advisers; a clear reference to the financial rewards that Nominet’s current management introduced, and which have made up the majority of their pay increases in the past five years.

The result is that PublicBenefit.uk and Blackler have told us they are “very confident” that a motion to remove the current board and replace them with Sir Michael and Pawlik will be backed by at least 50 per cent of the member vote and thus be carried. They say they already have at least five per cent, the number needed to force the extraordinary vote.

CEO responds

As for Nominet, its CEO told The Register that he rejected the complaints and accusations lodged against him.

Haworth noted Nominet’s work on cybersecurity and argued that under his leadership, it had “looked at where the future of the organisation lent itself to.” He complained that the press had failed to properly report on its focus on three pillars: connectivity, inclusivity, and security.

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The effort to remove him from the job was, Haworth argued, led “by a small amount of minority members,” and that Sir Michael “should be ashamed of himself.” When it came to his remuneration, Haworth noted that the board's renumeration committee sets his pay based on a set of skills they believe are needed for the role.

Asked about why he shut down the Nominet Trust, its charitable arm, Haworth pointed to its £1m operational costs and said it had “spent lots of money on things that were not worthwhile.” Asked why Nominet was only spending £1m a year as opposed to the £6-7m it spent on public benefit activities previously, he questioned our figures and argued that he would “rather spend £2m on something that has a bigger impact” than “chucking money over the fence.”

“We need to do more; we will do more,” he said, although he declined to say how much, when and on what. When we asked why Nominet has been not doing anything for members with respect to the COVID-19 pandemic, despite having had a year to do so and over £90m held in a reserve, he noted that the board had discussed such a measure “just this week.”

We understand, incidentally, that that a board meeting was held on Thursday, the same day that it became aware of the plan to call an extraordinary general meeting and the PublicBenefit.uk website.

When asked about the price rise in .uk domains, Haworth said the additional funds have gone into investing in the .uk registry though when we said we could not find any details regarding that investment, he promised to set up a webinar outlining what had been done. He continued that he welcomed ongoing dialogue, while noting that only 10 people had turned up to the last webinar that he and chair Mark Wood had run.

Pride before a fall?

We asked Haworth whether he recognised any legitimate concerns raised by the PublicBenefit.uk campaign, and he told us: “If you are asking whether it has validity, I don’t agree with it. I won’t be drawn on what they have raised and I’ll make our case at the EGM.”

When we asked whether he expected to win the vote, he told us: “This is down to the Nominet members. I am very proud of what we have done. The staff is proud and I think the members should be proud.”

We asked Nominet’s four elected non-executive directors for their position on the EGM and campaign, as well as about accusations leveled against one of them that he had refused to even respond to members since being elected.

We have heard back from one of them. James Bladel, who represents the world’s largest domain registrar, GoDaddy. He told us: “As a member-elected non-executive director, I have a duty to represent the interests and concerns of Nominet members, while also preserving the stability of the organization. For GoDaddy, our focus is on keeping Nominet as a stable partner to serve our .UK customers.”

New beginning?

In an unusual move, as The Register was preparing this article for publication, Haworth sent an email to Nominet members at 2153 GMT on Friday.

In it he describes plans to set up an elected Registry Advisory Council, to be up and running by the spring, which would have "regular and frequent dialogue on the issues around .UK, including .UK policy matters, involvement in the annual pricing review, challenges facing the .UK registry and those facing registrars," and be briefed on future plans.

In addition, Nominet is releasing a new Member Hub next month to brief folks on industry news and forthcoming events, including a "virtual members coffee meeting" on February 9. It does not mention the call for an extraordinary vote on board members. ®

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