City & Guilds Executives Awarded Themselves Millions in Unauthorized Bonuses

The Unauthorized Bonus Scheme

An internal investigation into last year's £166m sale of the vocational charity City & Guilds has revealed that its two most senior executives awarded themselves millions of pounds in bonuses without proper authorization. Kirstie Donnelly, the former chief executive, and finance chief Abid Ismail "directly authorised and paid bonuses to themselves" totaling nearly £3m combined, according to the investigation report.

Executive Compensation Details

The investigation found that Donnelly received £1.7m while Ismail received £1.2m in unauthorized bonuses. In addition to these bonuses, both executives received substantial salary increases following the charity's privatization. Donnelly's salary was increased by £100,000 annually to approximately £430,000, while Ismail's base pay rose by 30%—about £70,000—to £300,000. The payouts were part of a broader scheme that distributed an additional £2m to other senior executives and 60 junior colleagues.

Corporate Governance Failure

PeopleCert, the private company that acquired City & Guilds' vocational awards business in October, issued a statement condemning the bonus payments. The company stated that the bonuses "were in direct breach of [Donnelly's and Ismail's] duties and responsibilities as office holders and caused significant harm to the organisation's reputation." Importantly, the payments occurred without the knowledge of either PeopleCert or the former charity owner.

Legal and Financial Repercussions

PeopleCert has announced its intention to take "all action available" to recover the bonus payments from the two executives. The company specifically stated it will seek to recover £1.7m from Donnelly and £1.2m from Ismail, and will make "appropriate referrals to the relevant authorities." While the company will not attempt to recover bonuses paid to the 60 junior colleagues—concluding they were "neither fully aware nor instrumental in the scheme"—it will request repayment of bonuses from other serving members of the executive leadership team.

Regulatory Response

The Guardian's reporting on the bonus scheme prompted the Charity Commission to open a statutory inquiry into various aspects of City & Guilds' operations, including "the sale and bonuses awarded to its executives." Following the investigation's launch, Donnelly and Ismail were temporarily suspended while PeopleCert conducted its internal review. The executives have since been approached for comment, with their lawyer indicating they plan to commence litigation against City & Guilds Ltd regarding the matter.

Historical Context and Future Implications

Founded in 1878 by the City of London and 16 livery companies, City & Guilds developed a national system of technical education and offered qualifications in various fields. The organization was previously owned under a charity umbrella, which claimed it would use financial windfalls from the sale to continue charitable works. However, following the privatization, the new company implemented a £22m cost-cutting drive and reduced its UK workforce, even as executive compensation dramatically increased. The scandal has raised significant questions about corporate governance in the newly privatized organization and may lead to increased scrutiny of similar charity-to-profit transitions.