RICS to issue apology to dismissed non-execs after damning Levitt findings

RICS is set to publicly apologise to four non-executives dismissed in 2019 as well as the governing council of that year, among several major recommendations set out in Alison Levitt QC’s report into a treasury management audit. Levitt’s full report “entirely exonerates” the non-executive directors, who had raised “legitimate concerns” that a critical audit had been suppressed but were “wrongly dismissed” from the board. Members of the GC2019 group were also found to be “incorrectly threatened with legal action”. RICS has offered to reimburse both the non-executives’ and GC2019’s legal fees. Chief executive Sean Tompkins, chairman of the management board Paul Marcuse and president Kath Fontana are all set to step down from their roles as an outcome of the report. Tompkins will not receive any ex-gratia payments. Their departures come after former chief operating officer Violetta Parylo’s sudden exit in June, as well as managing director Matthew Howell’s departure last month and news of interim governing council chair Chris Brooke’s impending exit. ‘A sad and depressing episode’ Levitt said that there was “no evidence” of financial criminal misbehaviour in the events that took place in 2019, but that the incident brought “serious” governance issues to light. “The chief executive and his team had become used to operating with little effective scrutiny,” said Levitt. “Although they believed they were acting in the best interests of RICS, they were resistant to being challenged.” Levitt added that “this was not a cover-up in the traditional sense”, but a “power struggle” between the executives and non-executives at the time. She went on to describe the events as an “accident waiting to happen” and a “sad and depressing episode in the life of a great institution”. RICS’s next steps The institution is now seeking to hold an extensive external review into governance, purpose and strategy. Levitt suggests this could be led by a “retired civil servant of impeccable reputation”. Senior executive structure and reward arrangements will be reviewed. The organisation also said it plans to outsource whistleblowing, with the complaints process going through an external party. RICS has also vowed to be “more transparent” on costs incurred and how the organisation allocates its spending. “There’s nothing to be hidden now,” said Nick Maclean, chair of RICS’s governing council. “The level of expenditure that we will go through, going forward, will be made available to members.” There will additionally be a framework for seeking advice from external law firms, which will be limited to “genuinely legal” matters and not those relating to strategy. How events unfolded According to Levitt, the origins of what went wrong lay in RICS’s governance structure. A lack of clarity about the roles and responsibilities of the boards, senior leadership and management left “cracks” that allowed Tompkins and Parylo to operate “with little effective scrutiny”. The events that transpired in 2019 stem from a cash shortfall at RICS, which forced the organisation to almost double a £4m overdraft facility in 2018. One of the causes was “an apparently unexpected £400,000 discretionary bonus paid to Tompkins, according to Levitt, which seemed “completely unexpected and unbudgeted for”. This coincided with BDO’s internal audit. Levitt’s report found the audit, which raised serious concerns about treasury management controls, was received by Parylo as chief operating officer in December 2018, but not shared with the management board until seven months later. When the four non-executives insisted they should have sight of internal audit reports and refused to back down, it became a “them or us” situation, said Levitt. Meanwhile, the organisation’s governing council was unaware of the report’s existence until it learned of the non-executives’ dismissal in November 2019, and was not shown it until January 2021. Contrary to what was later claimed publicly, Levitt found the governing council was not kept fully informed. Levitt said that because the constitution and structure were the root causes of what went wrong in 2019, there is a “real risk that if it is not dealt with something similar could happen again”. RICS updated the industry on Levitt’s findings in a press conference today (9 September), held by Maclean and Levitt. Levitt’s 467-page report and recommendations have been published in full on RICS’s website – click here to read them.   To send feedback, e-mail pui-guan.man@eg.co.uk or tweet @PuiGuanM or @EGPropertyNews Photo by Jeff Blackler/Shutterstock