Board of Sunderland housing group Gentoo did not approve pay off to executive

The Echo reported last month how the firm was slammed by the Homes and Communities Agency (HCA) after a report said it “does not meet our governance requirements”, adding that there are “issues of serious regulatory concern”.

The HCA report criticised the board over its handling of severance pay outs to executives.

Gentoo chiefs said the criticism was labelled at one particular pay off - although no details of identity were disclosed.

And now bosses have released a statement revealing the board did not approve the deal and are now seeking legal advice about possibly recovering the money.

The revelations come as the company this week appointed a new chief executive - as it continues to recover following axing of 330 jobs in 2015 as part of bid to save £18m by March next year.

Keith Loraine OBE, who is the newly appointed Gentoo Group Board member and chairman, said: “Our independent investigation into this governance matter found that, in certain instances, our procedures and authorisation paths had not been properly followed.

“I can confirm that the Gentoo Group Board did not approve this particular severance payment.

“The group is now seeking legal advice about the possibility of obtaining redress or recovery and it would therefore be inappropriate to comment any further at this point.”

Gentoo operates principally in Sunderland, where the group is based at Doxford International Business Park, while it also has small numbers of homes in Northumberland, Redcar and Cleveland, and South Tyneside.

It owns and manages approximately 29,000 homes.

In addition, it has approximately 900 leasehold and affordable home ownership properties.

As of March, the organisation employed 1,343 full-time staff and its consolidated turnover in the 2016/17 financial year was £193.3million.

The recently published HCA report slammed the running of the company, saying: “The regulator lacks assurance that the board has maintained effective control and exercised its role with appropriate skill or diligence.

“The board has failed to ensure adequate control and scrutiny in discharging its responsibilities.

“It has lacked effective oversight and an appreciation of risk in discharging its responsibilities in line with its own governing documents and scheme of delegation.

“It has failed to ensure that governance arrangements were operating at the most basic level.

“During a significant period of restructuring the board exercised weak governance and internal control when agreeing executive contracts and severance payments to outgoing executives.”

In a previous statement Mr Loraine expressed his disappointment at the report.

“This matter related to the governance of executive remuneration under previous leadership and in particular, a severance payment made to a senior staff member,” he said.

“As a result, the regulator informed us that our governance grading was under review and has now subsequently downgraded Gentoo to G3.

“We are bitterly disappointed that this flaw in past governance practices has led to this downgrade.

“Our historical checks and internal controls in this area have been found to be inadequate.

“We are now seeking further legal advice about the possibility of obtaining redress or recovery.

“Such payments are not in keeping with the Group’s ethics as a responsible business, and it will not happen again.

“We intend to commission further external advice targeted on any weaknesses in our governance structures, and in particular to look at delegations and authorisations.”

As a result of the recent report, the HCA has downgraded Gentoo due to its poor governance.