BREAKING: Motability Operations CEO to step down as hefty bonus comes to light
Following speculation regarding a substantial £2.2million bonus, a National Audit Office (NAO) report into Motability Operations has confirmed the bonus was due to be received by Mike Betts in addition to his £1.7million earnings. The CEO, whose pay had come under fire before the revelations of the multi-million-pound bonus had come to light, announced he is to step down from the role.
Mobility Operations confirmed Betts would leave his position by May 2020, with the group’s chairman Neil Johnson retiring in April 2019.
NAO report confirms bonus allegations
The NAO’s report into Motability Operations revealed the conditions relating executive bonuses, highlighting five recipients were to be paid to achieve targets the organisation was already exceeding prior to the targets being set.
In a statement from the NAO, it confirms that “in 2008, a long-term incentive plan (LTIP) was implemented which enabled five executive directors to receive £15.3 million over seven years, on the basis of achieving performance targets set below levels that were already being achieved on their introduction.”
With December 2018 being the final year the LTIP bonus is to be paid, the NAO predicts the CEO’s total remuneration will drop from £1.7million to £1.4million in 2019-20.
The additional £2.2million for Mike Betts
In addition to the LTIP, the report states Mike Betts also benefited for an additional five-year incentive scheme, designed to ensure his retention in the post.
The full value of the scheme, which was not previously disclosed to the Committee, was transferred into a new arrangement worth £1.86million in September 2018 and is valued to be worth £2.2million by 2022.
NAO flags executive pay and calls for a review of the scheme
Commenting on the findings, Amyas Morse, Head of the NAO, commented on the 7th December: “Motability Operations has taken an unnecessarily conservative view of risk, holds more in reserves than arguably it needs and has also made large unplanned profits. On top of which there has been an internal view of executive performance as being ‘consistently extraordinary’, with the reward to match, despite pressures from the Charity.”
The report highlights that Motability (the charity) has struggled to reign in the executive pay provided by Motability Operations, noting that it has had difficulty over a long period of time influencing Motability Operations to set executive pay at the levels the charity considers appropriate.
In particular, in the first two years following the introduction of new remuneration arrangements, annual performance bonuses have been paid at close to maximum levels says the NAO.
The NAO has recommended careful consideration is needed relating to the scheme’s governance and Motability Operations’ executive remuneration, as well as regular government review of the value of the support it provides, in light of its objectives for mobility allowances.
Despite the revelations relating to executive pay and large reserves, the NAO acknowledged the high level of customer service provided by the scheme and the work done to turn the organisation around.
Amyas finished: “There is much to be proud of, but we think that stakeholders, including government, need to give far-reaching consideration to the scheme as it now stands, and to its future, in particular, whether its governance and accountability arrangements are robust enough.”
Mike Betts steps down
Following the NAO’s report, a pre-prepared statement from Motability Operations released on early on the 7th December confirmed that Mike Betts was to resign from his role as CEO.
The statement read: “After 16 years in the business, Motability Operations Chief Executive Mike Betts and the Board of Motability Operations Group plc have agreed that, following the implementation of actions agreed as an outcome of the NAO review, and working to help the new Chairman settle in, a suitable successor will be found, and Mike will step down from the Board, no later than May 2020. The Board is clear that recommendations made by the NAO will benefit from Mr Betts’s experience and skills to see them through.”
In addition, the statement confirmed Neil Johnson, Motability Operations Group plc’s Chairman who confirmed he was to retire three years ago, is to be succeeded in April 2019 by The Rt. Hon. Sir Stephen O’Brien – a qualified solicitor with a decade of industrial management at Redland
PLC, and an MP for 16 years, as well as international development minister
Background: Motability Operations’ 2018 financial controversy
Motability Operations, the company contracted by Motability (the charity) to operate the scheme which provides disabled drivers with a vehicle in return for direct access to their £58-a-week mobility benefits, first came under fire by MPs earlier in the year after it was discovered to have stockpiled over £2billion in public funds.
In addition, the organisation was found to have paid its senior management salaries and bonuses up to and above those paid to top executives in FTSE 250 companies.
The company came under public scrutiny, with MPs condemning the executive remuneration paid and public money stockpiled, stating that Motability Operations essentially held a “monopoly” due to VAT and tax exemptions totalling close to £700 million, as well as its direct access to individuals’ disability allowances.
Motability countered the claims of monopoly, stating that only one in three eligible mobility allowance recipients lease through the Scheme and that reserves were necessary to purchase new vehicles and reduce the amount of borrowing required.
Additionally, Motability’s remuneration committee confirmed that pay and bonuses were in relation to substantially improved customer service levels and were competitive against the market.
A joint inquiry held by the Treasury and Work & Pensions Committees into the operation of the Scheme however found that Motability Operations held a privileged market position and judged the organisation’s reserves to be out of proportion with the risks faced operating the scheme.
The Committee also scrutinised Mike Betts and others remuneration packages, highlighting that the organisation does not face the same risks and stresses that FTSE 250 companies and calling the pay packages “out of whack.”
Renewed bonus scrutiny
On the 3rd December, Motability Operations came under renewed scrutiny when the Daily Mail reported that Mike Betts was suspected to receive an additional £2 million bonus on top of his £1.7 million remuneration package.
The newspaper correctly speculated that the £2million bonus was thought to have been agreed five years ago but had not come to light, alleging the bonus had not been disclosed to the Committee earlier in the year.
Motability Operations declined to confirm if the bonus had been awarded leading up to the NAO report but claimed it has not concealed any information relating to executive pay.
MPs call for Bett’s resignation amidst growing controversy
Ahead of the alleged bonus being confirmed by the NAO, MPs across the political spectrum weighed in, denouncing any potential bonus due to Mike Betts, including some calling for the CEO’s resignation.
Former Conservative Cabinet Minister is reported to have said on December 5th: “If reports that Mr Betts was awarded a bonus of £2million in addition to his very large salary are correct, clearly he should consider his position. It is hard to see how it could be justified.”
Frank Field, Chairman of the Commons Work and Pensions Committee whose panel conducted the Motability joint inquiry, added on the 5th: “If it is correct an undisclosed bonus of £2 million is going to Mr Betts, we will need to consider whether to bring Motability back before us for contempt, given that they may not have provided us with full information on salary packages when they appeared before us.
“We will want to ask Mr Betts to clarify the scale of his earnings and whether the full facts were kept from us.”
Adding to the condemnation, Labour peer Lord Rooker commented that evening: “Mr Betts and all the directors should consider their positions. There is no justification for this sort of money being taken for running a public service.”