This article first appeared on Post Office Scandal – please click to view

Heather strongly supports the Postmasters in their continued fight for justice. The journalist Nick Wallis kindly asked her for her comments based on her experience of the corporate reporting world and Heather was happy to assist. The link will also take you through to Nick Wallis’ site where more information can be found on this.

When it transpired the Post Office had chosen to award itself bonuses for co-operating with the public inquiry into the Horizon IT scandal, it caused something of a storm.

The somewhat crass idea that the Post Office should reward itself for co-operating with the inquiry was bad enough. Even worse was the fact the bonus metrics were said to have been met with approval from Sir Wyn Williams, the inquiry chair.

This was entirely false. Sir Wyn Williams had done no such thing. He wasn’t even aware the Post Office had a bonus scheme related to his inquiry.

To compound matters, the Post Office stated in its annual report that the inquiry was over, when it wasn’t.

Once this latest scandal broke, the incoming chair of the Post Office’s remuneration committee, Amanda Burton, was tasked to write a report detailing how the inquiry bonuses came about and why the false statement about them ended up in the Post Office annual report.

I’ve read the report a number of times. In short, Burton believes that it was fine for the Post Office to offer incentives to its executives for their work on the inquiry, but she (says she) was unable to get to the bottom of how the falsehoods about the inquiry metric being achieved found their way into the report.

Burton did not explain how the Post Office came to believe Sir Wyn Williams had signed off the metric, nor did she really get to the bottom of how the idea the inquiry was already over ended up in the PR’d, legalled and signed annual report.

Burton also failed to mention that the external agency the Post Office used to assure itself that the bonuses for work on the inquiry were deserved, was Herbert Smith Freehills, the Post Office’s lawyers to the inquiry.

In fact Ms Burton was so incurious, or just inept, that whilst she identified that each bonus metric had an “owner”, she failed to find out who at the Post Office was responsible for monitoring the inquiry bonus metric, something picked up in a recent hearings (see Question 64), by the Chair of the Business Select Committee, Darren Jones MP.

It is, in my view, a desperately inadequate piece of writing, which fails to properly articulate what happened or single anyone out for getting things wrong. Burton is not, apparently, an idiot, so it must be deliberate. Or maybe I’m wrong.

In order to get a secondary view, I asked Heather Rogers to give the Burton report a fisking. I have never met Heather, but I am aware she a) a corporate type and b) takes a keen interest in the Post Office scandal. Heather is a director, accountant and tax practitioner with nearly 40 years’ experience in her field. She is a member of the Expert Witness Institute and the Institute of Directors as well as being the current Tax Expert for This is Money. She has worked in the corporate world for national and international companies, and has run her own company – Aston Accountancy – for nearly 30 years. She tells me she has reviewed countless board reports, minutes and financial statements in her long career.

When I asked her to take a considered look at the Burton report, she very kindly agreed. What follows is a slightly edited version of what she sent back to me, with apologies to Heather for taking so long to post it up.

Heather Rogers’ view of the Burton Report.

“There was outrage when the Post Office board paid itself bonuses relating in part to its co-operation with the Public Inquiry into the Post Office Scandal. A review into this was conducted by Amanda Burton, a former General Counsel and COO at Clifford Chance LLP as well as, according to her Linked-In page, an experienced Chair and Non-Executive Director. She also lists corporate governance as one of her skills.

The review into the bonus scheme is extremely badly-worded, lacks sense and would’ve been better written by ChatGPT. If you want to know how bad it is, just read the paragraph “terms of reference.” It is without a doubt the worst review into any corporate document I have ever read. It belongs in the Post Office’s shredder.

By the way, none of the appendices to which her review refers “as attached”, have been published, including the terms of reference for the report she has written. Always a bad sign. If they are part of the report, they should have been published with it. Why haven’t they been? [good question. I have asked the Post Office for them and I know they have been FOI’d. Hopefully they will surface soon – ed.]

In 2020/2021 the Post Office suffered such a reduction in profits and a downturn in its business, the normal bonus schemes to “incentivise” its execs were not going to be payable. These were: annual bonus scheme and long-term bonus scheme. The Post Office therefore needed a new way to calculate bonuses to pay its execs to incentivise them to work.

It came up with the TIS, (Transformation Incentive Scheme) which is not based on profits but non-monetary results. There were several designs of the scheme but the board and the Remuneration Committee eventually settled on four (to use Ms Burton’s words) “metrics”, the second being cooperation with the Inquiry. They were as follows:

(1) Delivery of a step change in Postmaster engagement through delivery of key milestones and metrics aligned as part of the culture change programme. Measure the effectiveness through delivery of top priority areas identified from the feedback and ensure this represents a significant change by January 22 vs. the existing feedback from the Postmaster Consultation with Quadrangle.

(2) Delivery of all the required information and support for the Horizon inquiry satisfying the requirements of Sir Wyn Williams, ensuring that there is a clear measurable plan created to demonstrate action on improving the overall culture to be Postmaster centric and to ensure processes for Postmasters are addressed in line with recommendations from the inquiry. Any actions or plans must have been endorsed by the inquiry and the Board.

 (3) Create a Board approved SPM plan and business case to move off Horizon dependence (first version by March 21, final by December 21) and deliver a prototype to operate an ‘express’ proposition fully outside Horizon by 31/12/22 with ability to subsequently scale across the POL network.

(4) Delivery of an improved organisational design and lower cost operating model through the successful implementation of Tranche 1, 2 and 3 of the organisational change plans. Measured by improving metrics on spans and layers (in accordance with the McKinsey key metrics on spans and layers and best practice), making the organisation flatter and more aligned to the Postmaster.

The original cost of all this “incentive” was expected to be £3.56m for 52 people. There was also an additional 5% funding (amount unspecified), to be made available for consistent high performers, those rated 4 and 5 on their assessment. The scheme would be available for those rated 3 or above. This changed later to 41 eligible employees “bringing the total to £1.97m.” However, in the end the amount accrued in the accounts, according to her report, is £2.5m for 47, including two who left. Burton states: “I have not been able to establish why the numbers of recipients changed, as the relevant HR people have left the Company.”  Really? Do they not have records? Perhaps the shredder has been active again.

Burton further states:

“The original estimate of £3.56m (discussed in November 20) presumably included the 5% “pot” and also presumably included NICs. Perhaps this is a question she should have asked. Oh and also the pension contributions which would have gone along with this payout, no doubt. She continues:

The actual base awards made totalled £1.66m, with an additional £144k paid out for the “pot” plus £249k NICs (a total of £2.05m) so well within the accrual of £2.5m. I have not been able to determine the original amount of the “pot” as the Reward Director at that time has left . Did he take his calculations with him?

The Remco minutes do not show any discussion as to the modelling but they did approve the multipliers of 1.75 for the CEO and 1.5 for the other high performers, which was disclosed in the paper tabled at that meeting. The CEO was not present when his performance ratings were discussed.”

It seems that written records aren’t a thing at the Post Office.

The scheme was the brainchild of Nick Read, the Post Office CEO, presented as a paper written by the Pension and Rewards Director, although he is not mentioned by his actual name in the report. Burton gives the names of the directors who have left the Post Office:

“I have sent the final draft of the review to Ken McCall, (Chair of Remco until December 2021), Tim Parker (Chair of POL at the relevant times), Lisa Cherry (CPO who went on maternity leave in May 2021 and chose not to return) and Angela Williams (Interim CPO from May 2021), all of whom have left the Company as they are specifically mentioned in this report.”

But there is no mention of the name of the apparent author of the bonus scheme in the report, other than to advise us that he’s also left the Post. Office, so presumably they’ve lost his employment file as well.

The TIS took so long to draw up, that the bonuses calculated under it were not paid until March 2022. These were paid alongside the normal bonuses which came back into force in 2022, the annual and long term bonuses. So the board received in March 2022, three bonuses: the normal two for 2021/22 and the “one off” – TIS from 2020/21. This gave the CEO Nick Read a whopping £455K in bonuses which is more than his salary of £415K for the 2021/22 year. The CFO received bonuses of £238K.

According to Burton’s report, the TIS was approved by not only the government representative on the board, Tom Cooper, but also by the then minister for BEIS [now DBT], Paul Scully. Considering the number of people under whose eyes this scheme passed, it’s hard to understand how it wasn’t picked up, or if it was, why someone didn’t raise hell.

All this against a backdrop of the fact that so many of the postmasters affected by the egregious scandal, are still waiting for their compensation and also disclosure documents from the post office to assist them in their claims.

Some of the conclusions drawn by Burton’s report are eyewatering. Amongst her conclusions;

“TIS was a one off scheme. This wasn’t unusual during 2020, many organisations felt they could not put in place sensible targets as there was so much that was unknown. At the same time, POL was facing a great deal of public scrutiny as a result of the Inquiry, and was directed by Government to move away from dependency on Fujitsu. The CEO had been appointed in September 2019 and needed to motivate his immediate team against a background where previous scheme awards had been reduced. I therefore can understand why a Transformation Incentive Scheme was proposed.”

It sounds from her interpretation that, as it was a “one off” scheme, that makes everything fine.  It doesn’t seem to occur to Ms Burton that the investigation is into the terms of the scheme itself – the fact it was devised in the first place. The fact it is a “one off”, is quite simply irrelevant.  Her phrasing concerning “public scrutiny” of the Post Office is also rage-inducing, as is her attempt to defend the bonus scheme further, by saying that the CEO needed to motivate his team. These people are employed to do a job. The team is there to steer the company through rocky times and to expect to have to take appropriate action to respond to the needs of the business. That’s their collective responsibility.  This can include taking a pay cut, never mind a bonus.

“The Remco was mindful of corporate governance best practice and as far as applicable aimed to follow the UK Corporate Governance Code issued by the FRC (which is applicable to public companies). Many aspects of the TIS followed the Code eg predictability, proportionality, alignment with culture and shareholder engagement. However, there were issues with clarity and simplicity.”

If Ms Burton thinks the only thing wrong with this bonus scheme is the “clarity and simplicity” then she needs to go back to college. I also doubt that anyone with any idea of corporate governance would think that the bonus scheme aligned with any of the code given the circumstances the Post Office has created.

“In hindsight it was clearly inaccurate to suggest that Sir Wyn would be in any way involved in determining whether any part of the bonus had been achieved. There was no deliberate intention on anyone’s part to mislead the role of Sir Wyn in this matter. Having said that, numerous people both inside and outside POL saw the wording over many months, and no one questioned it”

Why was this included in the accounts and annual report? Can incompetence alone cover it? I feel even Ms Burton has doubts here and struggles to continue what I see as a thread throughout this report, to defend, rather than criticise, and to excuse rather than investigate.

“In conclusion, the rationale for the TIS looks sound”

Of course it doesn’t. How can she even write this?

“…I will be recommending that Remco exercises its discretion not to award the element of bonus specifically relating to the Inquiry. Any variable pay schemes going forward should not include any metrics relating to the Inquiry.”

She is just recommending it exercises its discretion. That’s all. I had to read this sentence twice. There really is no sense here by the new Chair of Remco and author of this review that such an award is so palpably insulting to the postmasters and the public and so completely at odds with good corporate governance,  that this should have been condemned in the strongest terms possible and struck from scheme with immediate effect.

Ms Burton’s review of the TIS is like all matters relating to the Post Office, deplorable in its attempts to defend its behaviour, to excuse and justify its actions with no sense of shame or wrongdoing and refusing to learn anything from its recent history. It is quite simply a moral vacuum, a company that seems to put the needs of the few over and above its responsibility to act with good governance, to accept its responsibilities and to work to improve. It is a stark reminder of what can happen when people who do not have the company’s best interests at heart are allowed free reign with no one to challenge them.

No further bonuses should be paid until the postmasters compensation is fully paid out. There’s an incentive for the Post Office’s senior executives.”