Notes on a scandal: How failed governance humbled RICS
August 2023

A full-bodied governance scandal is not what you would normally associate with the Royal Institution of Chartered Surveyors (RICS), the 153-year-old body best known for setting property standards and industry qualifications.
That was until this September, when a brutal 418-page report lifted the lid on a genuinely extraordinary governance scandal several years in the making. The four most senior heads at the organisation have rolled, including chief executive Sean Tompkins and president Kathleen Fontana, while governing council chair Chris Brookes and management board chair Paul Marcuse have also exited. RICS, meanwhile, has had to make a series of embarrassing apologies.
The scandal erupted over financial management, an internal power struggle and the ousting of four non-executive directors in 2019, after they discovered and raised the alarm over the existence of a 2018 financial report by accountant BDO which warned of the risk of “unidentified fraud, misappropriation of funds and misreporting of financial performance”.
Growing furore prompted the appointment in April this year of QC Alison Levitt to carry out a review and since her report public apologies have been made to the non-executives and GC19, a group of previous members of the body’s governing council, while RICS has also promised far-reaching cultural change, accepting all 18 of Levitt’s recommendations.
Timeline: RICS governance scandal
December 2018: Controversy began during a quarterly management board meeting in which papers announced that the RICS overdraft facility had been extended from £4m to £7m for a 45-day period because of inaccurate cash flow forecasting. Members of the management board expressed concern and COO Violetta Parylo, who resigned in June this year, promised there would be no future surprises. However, she did not reveal that BDO had conducted an internal audit of RICS’ treasury management, which Levitt said made for “extremely unhappy reading”.
February 2019: Non-exec directors Simon Hardwick and Amarjit Atkar learned from RICS’ director of risk, who reported in to Parylo, about the BDO report. A month later, at the management board’s next quarterly meeting, the board was not given a copy of the BDO report, nor was it referenced in board papers. Hardwick was told that a re-audit had been commissioned and that both reports would be shared at the next quarterly meeting.
July 2019: The management board was finally shown the original BDO report but not the second BDO re-audit.
August 2019: At a special meeting of the management board, the chair announced an internal governance review into the handling of the report, chaired by RICS general counsel, who reported to Parylo. Requests for an external review were rejected.
September 2019: The review concluded that there had been no failure of the governance framework and the governing council had been “properly informed and updated”. The findings were not accepted by the non-execs, who shared their concerns at the September management board meeting. Draft minutes recorded the matter as “concluded” but the non-execs disagreed.
November 2019: Then-president Chris Brookes received a letter on behalf of all four non-executives with a chronology of the events. Brookes wrote to each, informing them that their positions were being terminated.
April 2021: Amid increasing media and membership pressure, RICS appoints QC Alison Levitt to carry out a review.
September 2021: Levitt concluded that the underlying issues lay in RICS governance structure and a lack of clarity about the roles and responsibilities of boards, senior leadership and management. She said that RICS’ executive “hid behind the governance structure when it was convenient, but circumvented it for much of the rest of the time”.
Governance needs structure and clarity
The full implications of what happened at RICS would take some lengthy unravelling but, in brief, what it clearly shows is the need for those responsible for running organisations to do a lot more, to ensure the governance framework of their organisation is regularly reviewed and is fit for purpose.
Levitt said in her report that: “The origins of what went wrong in this case lay in the governance architecture of RICS. The constitutional structure has led to a lack of clarity about the roles and responsibilities of the boards, the senior leadership and the management. That lack of clarity has, in turn, bred tension and led to stress on the system. RICS has, in effect, two Boards: in the cracks between the two, the chief executive and his team have become used to operating with little effective scrutiny.”
The ‘election vs ‘selection’ problem
Most membership organisations are run by their members, who are elected to serve on the governing council/board and not selected on the basis of their skills and experience. The size of these governing councils is sometimes too unwieldy to carry out the proper role of a board of directors, they are also often regionally dispersed, don’t meet often enough and are filled with members who lack experience in what it takes to be a director of a large, complex organisation. Consequently, they have no idea how to hold the executives to account.
A board or a governing council, elected by members, sometimes erroneously believes their main role is to represent their members’ interests and concerns. While it is important for the views of such a significant stakeholder body (members) to be represented at board level, there are other ways this could be achieved.
The UK corporate governance code states: “The board should include an appropriate combination of executive and non-executive (and, in particular, independent non-executive) directors, such that no one individual or small group of individuals dominates the board’s decision-making.”
Board composition
Another important principle is the need for a skilled and diverse board with the relevant experience to lead the organisation, which also avoids the pitfall of ‘group think’, a major risk when the board is made up of people with similar characteristics.
Levitt said in her report that she: “Sensed genuine exasperation when the CEO told me that it was really absurd for anyone to think that it was appropriate for an international organisation with a multi-million-pound turnover to be run by 27 chartered surveyors…however good they might be at their day jobs, most of them do not have the experience, expertise or capacity to administer a large business, not least because they are located in a number of different countries and only meet twice a year.”’
Levitt also requested the Governing Council commission an over-arching statement emphasising that culture and behaviours such as openness, transparency, ethical conduct (including fairness to all members, whether employees or non-executives), accountability, collegiality, cooperation and openness to change are as important as governance structure.
The UK corporate governance code states that: “The board should establish the company’s purpose, values and strategy, and satisfy itself that these and its culture are aligned. All directors must act with integrity, lead by example and promote the desired culture.”
In order to ensure good governance within any organisation, it is important to ensure that the values are agreed and publicised, which helps to determine the culture of an organisation, which in turn be used to develop codes of conduct for the board and staff.

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