Nominet warns of government takeover as Namecheap backs fire-the-directors campaign

Nominet has raised the specter of a government takeover of the .uk registry, should members vote to oust five of its top directors at an Emergency General Meeting a week from now.

The warning came as part of the company’s anti-EGM publicity, and at a time when the campaign for a Yes vote has passed 25% of eligible votes, with Namecheap becoming the biggest name yet to support the ouster.

In a blog post, the company refers readers back to the Digital Economy Act of 2010, which in part gives the UK government the ability to unilaterally take over .uk, should Nominet seriously mess up:

It means that the government can step in, if Nominet is ever considered unstable or not capable of governing itself.

Removing five directors, including two of the four independents, and pressuring the remaining directors to install candidates outside normal procedures, as the EGM petitioners seek to do, would be a huge step backwards in terms of good governance. We have been warned that instability will be of serious concern to government. We know it would create a scenario which would make intervention more likely.

That part of the Act was brought in because at the time Nominet was perceived to be at risk of capture by domain investors. It has since reformed its constitution to make this less likely.

The current situation could be seen as a replay of the situation 11 years ago, with many of those most unhappy with Nominet’s recent strategy among the domainer community.

The campaign, PublicBenefit.uk, wants to fire five directors including the chair and CEO and replace them with two new appointments who have promised to lower .uk domain prices and direct more profit to public benefit causes.

As of today, the campaign has 429 member signatories, representing 25.1% of voting rights. This is probably enough to pass its resolutions, which call for a simple majority of members attending the EGM.

Namecheap has become the largest registrar so far to sign up. It’s the seventh-largest .uk registrar, with 201,355 domains under management. GoDaddy, 1&1 Ionos, Tucows, and the others in the top 10 are so-far undecided. Google has said it will abstain.

It’s debatable whether the Digital Economy Act applies here. The Act deems that a registry has failed under two quite narrow circumstances:

(a)the registry, or any of its registrars or end-users, engages in prescribed practices that are unfair or involve the misuse of internet domain names, or

(b)the arrangements made by the registry for dealing with complaints in connection with internet domain names do not comply with prescribed requirements.

Do either of those apply to PublicBenefit.uk’s demands? It looks like a stretch.

The EGM will take place March 22, next Monday, and right now it’s not looking great for Nominet’s top brass.

Nominet declares member coup “invalid”

Nominet has stared fighting back against a plot by some of its members to kick out the CEO, chair and three other directors, declaring part of the plan “invalid”.

The PublicBenefit.uk campaign, which currently has the backing of over 17% of members’ voting rights, wants to replace these five directors with two of its own choosing: former BBC Trust chair Sir Michael Lyons and former RIPE NCC managing director Axel Pawlik.

Nominet confirmed yesterday that it will shortly call the demanded Extraordinary General Meeting, as required by its bylaws, and that the resolution calling for the board cull will be voted on.

But it said it cannot allow the second resolution, which would bring in the two new directors, to go ahead. Chair Mark Wood wrote that such a move would be illegal under Nominet’s own rules on director selection:

we have unequivocal advice that the second resolution, seeking to designate Sir Michael Lyons and Axel Pawlik as Directors is invalid and cannot be put before members. We have reviewed this carefully with our legal advisors, and independent counsel, who have all advised us that this is the case. This is because Members may appoint directors only through the elections process specified by our constitution, articles and bylaws, and the maximum number of member-elected Board seats are already filled.

Wood goes on to say that to remove so many key directors and leave their seats empty would be a further destabilizing factor on the company, which runs the .uk registry.

The risk of leaving Nominet rudderless has been a key theme of the company’s response to PublicBenefit.uk since its petition first emerged last month. Nominet wants the EGM request withdrawn.

The campaign, which is fronted by Simon Blackler of Krystal Hosting, tweeted in response:

We sought legal advice before we started and believe both resolutions are valid.

If you’re truly worried about stability resign and appoint the Directors the members want?

The campaign wants a clean slate on the board in order to have Nominet reduce its wholesale prices, rein in its efforts at product diversification, and start returning more of its profits to public benefit causes.

Wood last week committed to pay £4 million to such causes in the first half of this year, double its 2020 contribution and a return to 2016 levels.

Nominet chair eats humble pie to stave off mass board cull

Nominet’s board of directors has outlined a series of changes it plans to make, including freezing its own pay and .uk domain prices, in an effort to avoid a member move to fire half the board, including the CEO and chair.

They’re also going to bring back the late, lamented member discussion forums.

Chair Mark Wood today wrote that Nominet plans to increase the amount of revenue it gives to “public benefit” purposes, which he said will hit £4 million by June, double last year’s amount.

After 2021, the company will donate 10% if its annual revenue to these causes, he said. That would be roughly £4.5 million a year, based on 2020 revenues, and roughly in line with 2015 levels, when the current senior management took over.

He went on to say that .uk registry fees will be frozen for two years. The last price increase went into effect last year after staying in place for four years.

The board won’t bump up its own salaries for two years either, Wood wrote.

The letter is in response to the member-driven move to fire Wood, CEO Russell Haworth, and three other members of the board, over what they see as mismanagement of the company. Currently, 13.6% of member votes — 196 registrars and individuals — have backed an Extraordinary General Meeting to hold this vote. This may be sufficient to successfully oust the targeted directors.

Among the demands of PublicBenefit.uk, initiated by Krystal Hosting, are an increased focus on public benefit causes, lower prices, improved member communications and a reversal of Nominet’s policy of diversification into non-registry services.

Wood thinks the EGM effort is foolhardy, however. He wrote:

Whatever the intention, the EGM proposal destabilises the organisation and, as a result, is not in the interest of members, registrars or registrants. If the EGM initiative achieves its aims, it will leave the company leaderless and facing an exodus of the highly-skilled staff we depend on to maintain the highly complex registry service we provide. It will erode trust and confidence in .UK, which is part of critical national infrastructure, and put Nominet’s independence at risk.

He’s proposing increased transparency of the cyber-security division, a new Registry Advisory Council, and new communication tools for members, including the launch of a “a well-governed next-generation member forum”.

The old forum was shut down last year, and announced (some members think with a certain amount of glee) by Haworth during Nominet’s Annual General Meeting. The forum was overly hostile to Nominet staff, he said at the time.

Wood now says “the decision to close the Nominet Forum, and the way in which this was done, damaged our relationship with some members in a way we had not intended.”

It’s quite a list of concessions from a board that clearly knows it’s on the ropes, but whether it’s enough to change the minds of large enough number of members remains to be seen.

Nominet boss has epiphany and calls for calm as his job hangs by a thread

Nominet’s CEO has abruptly taken a conciliatory tone with members in a new blog post, as support grows for his ouster.

Russell Haworth today posted that the organization and its members need to change the tone of their often-hostile arguments, and agreed to play his part in doing that in future.

In the next several weeks, Nominet will be forced to hold an Extraordinary General Meeting in which members will try to fire Haworth and most of the board of directors.

He also called for members to be “pragmatic” about Nominet’s strategy, reminding them that the internet is a very different and more dangerous place than the idealistic technology Eden that birthed it 25 years ago:

Nominet was founded at a time when the Internet was a palpable source of hope and optimism, long before it was considered critical national infrastructure, and before the very real challenges all of us now face keeping things running and safe.

We try to manage Nominet for the Internet that we have, even as we keep striving for the world where technology continues to deliver on its potential as a force for good.

As we know, today’s Internet sadly has too many bad actors bent on destruction and equipped with increasingly complex digital weaponry. Managing crucial elements of the UK’s Internet infrastructure requires that we bring a cold realism to the challenge and that we equip ourselves professionally and commercially to succeed.

This appears to be a justification for the company’s venture into commercial network security services, which Nominet’s critics believe is non-core, eating up resources that could otherwise be diverted to public benefit causes.

Simon Blackler of the registrar Krystal Hosting, who launched the petition for the EGM at PublicBenefit.uk, told DI:

He seems to be saying that Nominet needs to protect against bad actors; something we’ve not disagreed with. Of course Nominet should secure critical .UK infrastructure. That’s just a part of the core business. It’s more questionable whether it needs to be making forays in to commercial “cyber defence”, something that’s being covered by the private sector (and presumably Government) already.

One of PublicBenefit’s criticisms has been that spending on board compensation, and Haworth’s pay in particular, has risen even while operating profits have declined.

Haworth’s post goes on to say that Nominet staff are regularly headhunted by other tech firms, which may or may not be a response to this criticism.

Addressing the “tone” of the debate, Haworth acknowledges that Nominet has been at odds with some members for a very long time. Members have been angered by changes such as the decision six years ago to allow direct, second-level registrations, he notes.

Perhaps as a result of the length of some of these disagreements, we all may have found ourselves approaching our interactions with the wrong tone.

In order to make progress, that needs to change. I commit to playing my part to make that happen. Starting now.

The post comes as the PublicBenefit.uk campaign hits 176 supporting members representing 13% of all potential votes.

That not may not seem like a lot, but due to Nominet’s complicated system of vote caps and the fact that EGN turnout is not usually very high, it could well be enough to get the 50%+1 of votes cast required to ouster Haworth and the other targeted board members.

On the “tone” question, Blackler disputes Haworth’s narrative, telling us:

I find it surprising that he feels the need to address “tone”. The campaign I’ve put together is based on fact and where there’s emotion from me it’s to do with the staggering waste of an opportunity with regards to Nominet’s public benefit mandate

He said he talked this week to chairman Mark Wood, who’s also on the EGM hit-list, and the tone was “entirely civil”.

An impetus for the current campaign was Nominet’s decision to close down its age-old web-based member discussion forum, which happened live during the company’s Annual General Meeting last year.

While Haworth described the forum at the time “increasingly become aggressive and hostile” towards Nominet staff, many members took the move as a deliberate slap in the face and an indication the company was no longer interested in engaging with members.

It is now.

Fire the board! Registrars attempt a coup at Nominet

The registrars are revolting — again — at Nominet.

Members representing 12.2% of the .uk registry’s voting rights have put their names to a call for five of the company’s unelected directors, including CEO Russell Haworth, to be fired and replaced with two hand-picked alternatives.

The plan is to shake up the company by slashing wholesale .uk prices and donating more money to worthy “public benefit” causes.

Nominet has warned in response that such a move would be “highly disruptive to our work and our team”.

The campaign, which can be found at PublicBenefit.uk, was kicked off by the registrar Krystal Hosting, which has about 45,000 .uk domains under management.

Signatories want to call an Extraordinary General Meeting that would vote on kicking out Haworth, along with chair Mark Wood, registry managing director Eleanor Bradley and directors Benjamin Hill and Jane Tozer.

Four elected non-exec directors and two non-elected directors would remain.

A second resolution would replace these directors with former BBC Trust chair Sir Michael Lyons and former RIPE NCC managing director Axel Pawlik, who have both confirmed their interest in the positions. Lyons would be chair.

Only 5% of Nominet’s voting rights — calculated largely from how many domains each member manages — are needed to call an EGM. At 12.2%, the campaign has already succeeded in passing that threshold. It would need 50%+1 of those attending the EGM to actually carry the resolutions.

The campaign claims that Nominet has gone downhill ever since Haworth was appoint five years ago.

It claims that the amount of money Nominet donates to “public benefit” causes has shrunk from £26 million ($35.5 million) in the preceding five years to £9.8 million in the five years since. That’s even while its wholesale prices for .uk domains increased 50% from £2.50 to £3.75 a year.

Director pay has gone up by 70% over the same period, it claims.

The registry also stands accused of frittering away money on acquisitions and pointless diversification into non-core businesses. Krystal founder Simon Blackler wrote:

This is not a VC-backed Silicon Valley startup that needs to take risks, make speculative acquisitions, “pivot” or worry about unnecessary diversifications. This is Nominet, the guardian of the .UK namespace and we’d like it back, please.

A second — and arguably more-important, if you’re a cynic — goal is to get the price of .uk domains to come down. This would reduce the carrying cost of portfolios held for resale by some Nominet members.

In response, Haworth has blogged that “an EGM and change of board at this time would be highly destabilising to Nominet and disrupt a range of fantastic programmes that are currently underway or planned”. He wrote:

I understand that there are frustrations and disagreements about how we run the business, and we are open to looking at those and making any adjustments that are in the interests of the company and the wider stakeholder community we serve. More on that to come.

The company has just approved a pricey multi-year investment in improving the registry infrastructure, he wrote.

The board has also approved a new Registry Advisory Council, which would be made up of members and have the ability to make recommendations on pricing, which could address concerns that Nominet has not been especially responsive to its members, he wrote.

Nominet came under fire last year when it unilaterally closed down the discussion forums on its web site, announcing and executing the move during its Annual General Meeting, saying posters had become “increasingly aggressive and hostile” towards Nominet staff.

At time of writing, 153 Nominet members, including four of the top 20 by .uk domain volume, have signed up to the campaign.

UPDATE: This article was updated 1248 UTC to correct the composition of the board and voting thresholds.