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Serco chief quits ahead of investigation into electronic tagging charges Serco chief quits ahead of investigation into electronic tagging charges
(about 5 hours later)
Serco, the services company facing an investigation into its government contracts, has begun an urgent search for a new chief executive after Chris Hyman quit in a desperate attempt to rebuild the company's reputation. The boss of government outsourcing group Serco quit to allow a new boss to be appointed from outside the troubled company.
After allegations that Serco overcharged the government for electronic tagging of offenders, the operator of hospitals, prisons and railways around the world needs to improve its relationship with the UK government, which provides 25% of its revenue. Serco is scrambling to restore its reputation following a series of debacles ranging from failing to provide enough doctors in Cornwall to charging the government for electronic tags on dead prisoners.
Hyman, who is leaving after 20 years with the firm and 10 years as chief executive, said: "At this time, nothing is more important to me than rebuilding the relationship with our UK government customer. In recent weeks it has become clear to me that the best way for the company to move forward is for me to step back." Chris Hyman, left with immediate effect on Friday after 20 years with the operator of hospitals, prisons and railways. He said he would "step back" from his chief executive role, held for 11 years, to allow relations with the government to be rebuilt.
The company, chaired by Alastair Lyons, said a new chief executive would be appointed from outside the group but in the interim named Ed Casey, head of the Americas division since 2005, to take the helm. He received £2.5m last year, when bonuses are included, and he is expected to walk away with £1.6m and a £2m pension pot. He has options over shares, that if he were to cash in today would be worth an additional £2m.
Less than 24 hours earlier rival G4S, also caught up in the controversial electronic tagging fiasco, parted company with the head of its UK and Irish operations Richard Morris. The G4S chief executive, Nick Buckles, left in May. A government spokesman welcomed his resignation – discussed with the Cabinet Office in advance and announced just weeks before the government is expected to decide whether to allow Serco to bid for future contracts .
Serco generates a quarter of its revenues from government work and is attempting to placate the government after claims it had overcharged the Ministry of Justice by "tens of millions" of pounds for electronic tags for criminals.
Last month Serco was put on notice it could be investigated by the Serious Fraud Office after charging the government for tagging criminals who were either dead, still in prison or who had never been tagged in the first place.Last month Serco was put on notice it could be investigated by the Serious Fraud Office after charging the government for tagging criminals who were either dead, still in prison or who had never been tagged in the first place.
The government said it would take "full account of all the changes Serco have made".
"Whilst it is early days in their programme of renewal, this is a positive move by Serco and a step forward," the government said.
But Keith Vaz, the Labour MP who chairs the home affairs committee, said: "I am surprised by the resignation of Mr Hyman who has always maintained that there is nothing untoward with the contracts that Serco holds with the government, even after the company was referred by secretary of state for justice to the SFO."
Shares in Serco, which was demoted from the FTSE 100 last month after its shares fell sharply following the allegations over its tagging contracts, rose 1p to 557p after the surprise departure of Hyman.
Hyman said: "At this time, nothing is more important to me than rebuilding the relationship with our UK government customer. In recent weeks it has become clear to me that the best way for the company to move forward is for me to step back."
Underlining the scale of the task involved in repairing relations with the government, Alastair Lyons, the Serco chairman, said a new chief executive would be appointed from outside the group. In the interim, Ed Casey, head of the Americas division since 2005, will take the helm.
The management upheaval came less than 24 hours after rival G4S, also caught up in the controversial electronic tagging fiasco, parted company with the head of its UK and Irish operations Richard Morris. The G4S chief executive, Nick Buckles, left in May.
Both companies are being subjected to a government-wide review of every one of their contracts and have been ordered to prove they are taking steps to improve their operations.
Serco, which was transformed into a major international firm under Hyman, is embarking on what it describes as a "renewal programme".Serco, which was transformed into a major international firm under Hyman, is embarking on what it describes as a "renewal programme".
The UK and Europe division is to be split in two to focus on the "UK government customers" and the other on activities in the wider public sector. Three new non-executive directors are to be appointed along with a new general counsel. A board committee for corporate responsibility is also to be created. The UK and Europe division is to be split in two, with one section to focus on the "UK government customers" and the other on activities in the wider public sector.
Serco did not immediately release details of any payoff to Hyman, who was brought up in apartheid Durban. Three new non-executive directors are to be appointed along with a new general counsel. A board committee for corporate responsibility is also to be created.
Despite the hastiness of Hyman's departure, Lyons paid tribute: "As CEO since 2002, he has taken Serco from a predominantly UK business with a turnover of £1.3bn to the £5bn international services business it is today. He leaves with our very best wishes." Despite Hyman's rapid departure, Lyons paid tribute to the outgoing boss: "As CEO since 2002, he has taken Serco from a predominantly UK business with a turnover of £1.3bn to the £5bn international services business it is today. He leaves with our very best wishes."
Brought up in apartheid Durban, Hyman is a Pentecostal Christian and was one of only a few non-white students at his university. He has previously told the Guardian that he donates a biblical tithe – or 10% of his annual income – to his local Pentecostal church in Surrey and fasts every Tuesday, as he has done every week of his life.
He worked for Arthur Anderson and Ernst & Young before joining Serco in 1994.
Andre Spicer, professor of organisational behaviour at Cass Business School, said Hyman may have become a scapegoat. "Typically, CEOs at companies that face a scandal are often pushed out to clear the air. This tends to lead to some short-term confusion, but pays off in terms of an increase in corporate performance. But in some cases it can be a fatal distraction where companies feel they have addressed the big issues by changing the leader."
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