Restoring Nominet to a public benefit organisation

For many years, we here at Freethought have been voicing our concern about the way in which the UK registry operator Nominet has been run, which is why we are proud to lend our support to the Public Benefit campaign, which on the 2nd of February submitted notice to Nominet to call an Extraordinary General Meeting (EGM) in an effort to steer Nominet back into the not-for-profit, public benefit organisation that it was always intended to be.

Who are Nominet?

Nominet have run the .uk namespace since they were founded in 1996. When you buy a domain that ends in .uk, your registrar (for example, Freethought) deal with Nominet behind the scenes.  There are a couple of exceptions to this, like .gov.uk and .ac.uk which are managed by another registry.

Essentially this means that almost every website or email address that ends in .uk relies upon Nominet, who provide the registration services, technical infrastructure, and support necessary to run one of the most reliable, trusted, and popular top level domains (TLDs) in the world.

As a general rule, Nominet do an excellent job of running the registry; whilst there is the inevitable bureaucracy from time to time, the registry itself is reliable, the staff are friendly and competent, and they get the job done extremely well. We have as a rule no criticism to level towards Nominet in terms of registry operations, it is near enough faultless.

What's the problem with Nominet?

If the registry is well run, then what is the problem? Put simply, it's the leadership team and their overall direction for the organisation, which is in stark contrast to what was created by the original founders.

Nominet is a not-for-profit organisation - this is enshrined in the articles and defines the organisation's entire purpose. Being not-for-profit doesn't mean that Nominet can't make a profit, but instead it means that the profit cannot be distributed back to the members as it would be to the shareholders of a normal for-profit company. Instead, it should be re-invested in the company or used to reduce prices. Over the last 5 years, Nominet has made a total of just over £46m pre-tax profit - that's an average of £9.2m per year! As a result, they are currently sitting on a healthy bank balance as well as almost £92m of investments.

Under the current management though, Nominet has moved to describing itself as a "profit with a purpose" organisation and since 2015 has increased revenue by almost 56% (helped by with multiple price increases), whilst simultaneously decreasing the amount if spends on public benefit and increasing director pay.

Historically Nominet has disposed of surplus profit by donating it to the Nominet Trust, a charity which it established in 2008 and donated over £44m to before abruptly ending its involvement in 2018. Since then Nominet has spent just £4.371m in three years... So where is the money going instead?

When Russell Haworth became Nominet's CEO in January 2015, Nominet had investments of £40.660m, and was spending £1.136m on Directors. Fast forward to 2020 and the investments have grown 126% to £91.893m, whilst Nominet is spending £2.080m on directors, an 83% increase.

In contrast the previous CEO's salary along with bonuses and benefits came to £273k total. In Russell's first full year, he was paid a total renumeration of £409k, 50% more! In 2020 Russell's total renumeration has swelled to £593k, that's 45% higher than when he started, and 117% higher than the previous CEO!

To make matters worse, Russell has pushed Nominet on a path of "diversification", where money from the .uk registry is being used to fund new ventures which are not only completely unrelated to the core purpose of Nominet, but also compete with both members and registrants. The lack of transparency and accountability of the Nominet board means that even members don't know how much has been spent on these pet projects so far, but the latest accounts show that they contribute just 15.8% of revenue and 0% of the profit. In fact, Nominet had to lend £4.108m to the subsidiary companies in the group in order to prop them up. Unfortunately a lot of Nominet's side projects never come to anything and are shut down or sold off.

Nominet's push into cyber-security has seen their headcount and payroll bill swell from £10.120m on 155 staff in 2015 (average £65,290 each) to £20.610m on 229 staff in 2020 (average £90,000 each). They even spent £4.9m acquiring the loss making CyGlass.

Nominet don't listen

These are not new issues; members have tried to raise all of these matters with Nominet repeatedly for a long time, but the board have always dismissed any concerns as being from a minority of troublemakers or just simply said that they don't agree. The executive know full well that many members are not happy about these things, but because power has been systematically stripped away from members over the years, they feel that they can get away with ignoring members and their criticism.

Nominet has commissioned reports on their governance by independent experts such as Professor Bob Garratt in 2008 and Sir Michael Lyons in 2015, but then ignored the findings when they didn't say what they wanted to hear.

Nominet used to operate a Policy Advisory Board made up of non-executive directors, members and appointed organisations, but this was shut down in 2010. Policy development now happens entirely internally inside Nominet, with the only external influence being via token consultations which ask leading questions and where only a summary of responses are published, if they get published at all - the .UK Expiring Domains Consultation closed on the 14th of August 2020, but aside from an "initial response" blog post published on the 27th of August, we haven't even received the usual summary of responses, let alone Nominet's report.

The long-standing Nominet mailing list for members was converted into a member forum, however Nominet staff stopped contributing to it (rendering it somewhat useless) and then suddenly shut down in the middle of the last Annual General Meeting (AGM) without any warning.

We believe in the founding principles of Nominet

We ultimately believe that Nominet should be a not-for-profit organisation run for the benefit of the UK internet community. Nominet should be proud to be guardians of a valuable national resource, not funnelling profits from that resource into the pockets of its directors or their start up commercial projects. Above all, Nominet should once again be run as efficiently as possible on a cost-recovery basis with any surplus profit donated to projects that benefit the public as a whole.
We aren't the only ones who believe this either - three of Nominet's original founders have come out in support of the EGM!

Unfortunately the current executive team at Nominet have shown that this is not something which they are willing to deliver, and so we wholeheartedly support the Public Benefit EGM to remove 5 of the 11 board members and replace them with two highly respected individuals who have a history of public service; Sir Michael Lyons, former chairman of the BBC Trust, and Axel Pawlik, former managing director at RIPE NCC (another member owned, not-for-profit organisation responsible for key internet infrastructure and resources).

Sir Michael and Axel will take the interim positions of Chairman and Vice-Chairman respectively, with fixed term 12 month contracts that preclude any bonuses and require re-election by the membership at the AGM in September 2021.

Contrary to what Nominet may have claimed, this has absolutely nothing to do with rebates or cutting our costs. All of our domains are priced at a fixed markup, so if the wholesale price changes as a result of the new board eradicating the significant waste and excess, then we would immediately pass any savings straight onto our customers, as we do with every other TLD that we sell. This is about doing the right thing for registrants, registrars, and the public in general.

We signed the EGM proposal on the 24th of January before it even went public in order to ensure that it reached the 5% required to be valid, and we will support the proposals when it comes to a vote. Not only that, but we will continue to urge our fellow registrars to do the same so that together we can bring about real change at Nominet for the benefit of everyone.

You can read more about what is being proposed on the Public Benefit website.

What can I do?

The call for the EGM has already been submitted to Nominet, so the key thing now is to make that as many members as possible vote in support of the two motions at the EGM. As it stands, there are already 209 members with just over a million votes supporting the Public Benefit campaign, which is an amazing level of support given that just 145 members voted in total at the last AGM. Even so, nothing is certain and Nominet are doing their best to pressure registrars into voting against the resolutions at the EGM.

If you are a registrar we urge you to read the Public Benefit website and decide for yourself.

If you are a registrant, then please let your registrar know if you support the principles of the Public Benefit campaign and urge them to vote in favour of them. If they won't, then consider transferring your domain to any of the registrars that do support the proposals (even if it isn't us). Voting rights are determined largely by the number of domains a member has, so by transferring your domain to a registrar that supports the Public Benefit proposals you give that registrar more voting power to hopefully enact change.