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April 19, 2024updated 24 Apr 2024 2:31pm

Open Democracy could have been ‘insolvent by June’ without 40% cost reductions

Turmoil at the top of Open Democracy has led to legal letters being sent.

By Bron Maher

Open Democracy could have gone into liquidation by June had it not made a 40% cut to costs, according to the non-profit news provider’s leadership team.

That financial projection was included in an email sent by management to Open Democracy’s NUJ chapel in March after unionised staff passed a vote of no confidence in chief executive Satbir Singh and board chair Suzanna Taverne.

The announcement of a redundancy round at Open Democracy in early March appeared to take staff by surprise, with one describing the cuts as “huge and out of the blue”.

Approximately ten roles were ultimately made redundant, representing around a third of the organisation’s staff and six of its 18 or so journalists. Roles cut included head of news, news editor and political correspondent.

The need for a 40% cost reduction marks an abrupt turnaround for Open Democracy, which reported an operating surplus of £110,000 on revenue of £3.44m in its 2022 annual report, the most recent figures available.

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The difficulties come after an organisationally turbulent period for Open Democracy, which has changed chief executive twice since 2021 and seen two periods without a CEO. 

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Long-serving editor and chief executive Mary Fitzgerald left the organisation in May 2021 and was not replaced by successor Peter Geoghegan until August of that year.

Geoghegan, who had previously founded The Ferret in Scotland, stayed in that role until July last year, but spent the second half of 2022 and some of 2023 stepped back from Open Democracy after he contracted a severe bout of long Covid, which he has previously written about on his Substack.

Current chief executive Singh, who joined Open Democracy as managing director in April 2022 and had not previously worked in journalism, covered Geoghegan’s commercial duties during his absence. Press Gazette understands recent years have been accompanied by high turnover among the organisation’s staff responsible for fundraising and finance.

Open Democracy’s current leadership has attributed the financial problems to a mix of scheduled lapses in previous funding agreements, a more unexpected global pullback in philanthropic organisations granting new awards, and inflation-driven cost pressures.

The extent of the funding crisis only became apparent to the board in February, when a meeting of its finance and audit committee “recognised there was an urgent need for a fuller assessment of how realistic the pipeline and projections were”, according to the board’s March letter to the NUJ.

Questions remain among staff as to how these issues emerged so suddenly.

The bad blood within the organisation has escalated to legal letters, with former chief executive Geoghegan currently engaged in “legal correspondence” with the board and his successor Singh, Geoghegan told Press Gazette.

Initial panic over whether company could honour redundancy terms

In its March no-confidence letter, Open Democracy’s NUJ chapel said it accepted an occasional need for redundancies at non-profits owing to “the volatile nature of grant funding”, but that “this cannot entirely account for the scale and suddenness of the redundancies announced last week.

“We are alarmed that Open Democracy cannot abide by the terms of a redundancy policy which the board had agreed to just months before and that there is uncertainty over whether it can even fulfil its statutory redundancy obligations.”

Open Democracy staff with whom Press Gazette spoke said they believed the organisation ultimately raised the funds necessary to fulfil some of the terms in its redundancy policies, and Press Gazette understands laid-off staff ultimately received statutory redundancy pay of £700 for each for each year's service plus a £1,150 uplift - less than half of what they say was guaranteed in company policy. (The company disagrees, saying the more generous offer had not yet been enshrined in policy.)

Laid-off staff with more than a year's service, but less than two, received the same statutory pay as those with two years' service. In its 2022 annual report Open Democracy said it typically raises approximately £6,000 in reader donations each week.

Open Democracy’s board responded to the union’s letter saying it had “full confidence in our chair and CEO and are not considering any changes to the composition of the board”.

The board, which counts among its members the vice chair of the Joseph Rowntree Reform Trust, the former chief financial officer of Dods Group and a king’s counsel, said in the letter that it attributed the redundancies to “cumulative over-spending and lower-than-expected short and medium-term income in a very challenging funding environment”.

It added that the organisation’s deficit had been worsened by the now-closed Open Democracy Russia, which it claimed had been under-funded, and that the UK news team had been unfunded altogether under the terms of existing grant funding. The news team bore the brunt of last week’s cuts, with the UK investigations team now left as Open Democracy’s main editorial unit.

How did Open Democracy's funding dip?

Open Democracy’s headcount, and thus its costs, have grown significantly in recent years.

Figures disclosed in Open Democracy Limited’s Companies House accounts indicate that the average number of full-time staff rose from ten to 26 between 2016 and 2022, and the number of “team members” - presumably including non-salaried workers - have fluctuated between 56 and 61 in the past three years according to OD’s listed annual reports.

Most of Open Democracy’s funding is restricted, meaning it must be used for specific purposes agreed with the benefactor.

In 2022, for example, Open Democracy’s funding included £750,000 from the social justice-promoting Oak Foundation, disbursed over a period of 36 months, for work including “exposing the backlash against women’s and LGBTIQ rights”.

In recent years Open Democracy has also raised increasingly large sums of unrestricted reader revenue, which in 2022 accounted for nearly a fifth of its income.

Grant funding remains the bulk of the publisher's income however, and the board argued in its letter that growing costs had been met with a squeeze on grant funding.

“Some major funders have undertaken strategic reviews and changed their priorities,” the board wrote to Open Democracy’s union last month. “Others have their own financial challenges with higher costs due to inflation and worsening endowments; the rebuilding of some neglected relationships is slow and, in a climate of uncertainty with major elections forthcoming, many funders are deferring decisions.”

Open Society Foundations, the progressive philanthropic fund founded by billionaire George Soros, told staff last year that it planned to end much of its funding activity in Europe. Over the course of 2022 Open Democracy received four separate lines of funding from OSF, including: $600,000 (£480,000) over 33 months “for exposing threats to sexual and reproductive health and rights”; $340,000 (£273,000) over 24 months to support work on covering corruption and money laundering in the UK; $155,000 (£125,000) over 19.5 months to support its Latin American coverage; and $160,000 (£129,000) over 27 months to cover rights and social issues in “the post-Soviet space”.

Press Gazette understands another major funder, Luminate, has also not renewed funding. A two-year grant worth a total of $650,000 (£520,000), and which could be used for the broad purposes of supporting Open Democracy’s “agenda-setting investigative journalism”, appears to have elapsed in mid-2023.

'Job losses are always heartbreaking'

Several Open Democracy staffers with whom Press Gazette spoke expressed dissatisfaction with the way cuts were handled by management, arguing there had been a lack of internal communication both leading up to and during the redundancy process.

One said: “Ironically for Open Democracy there’s been a lack of transparency around how we got into this mess. But, predictably, the people at the organisation responsible are keeping their jobs, while lots of really talented journalists lose theirs. This has ripped the heart out of OD.”

After Press Gazette approached Singh for comment, Open Democracy responded: “Job losses are always heartbreaking and we deeply regret the departure of our talented colleagues. We are a small not-for-profit organisation with limited resources and, like many others, we have been buffeted by cost pressures and income volatility.

“In recent years, we have worked consistently to consolidate and strengthen Open Democracy’s often precarious financial position through improvements in financial management and fundraising, reductions in overhead and better resource utilisation. We have engaged positively with our local union chapel and provided periodic updates on our finances, as is our practice, throughout this period.

“These redundancies come after a period of consultation during which union and non-union staff were briefed in detail on the urgent need to reduce costs further to get the organisation back on a path to sustainability. Alongside, there has been a substantial reduction in management costs and non-staff overhead costs.

“We have consistently endeavoured to be as transparent as possible in all our communications with everyone at Open Democracy. While we are saddened by the departure of so many talented colleagues, we are confident that our teams of investigative journalists here in the UK, the Americas and Africa will continue to produce exceptional journalism.”

Geoghegan said Open Democracy had been “in a really strong place when I left, financially and editorially. I really hope OD is able to rebuild and grow again. Journalism like this is needed now more than ever…

“During my tenure as CEO/editor-in-chief, OD had record revenues, record funding from readers (just under £750k pa) and won more awards for its journalism than ever before (including the 2022 British Journalism Award for campaign of the year.)”

Funding streams 'constrained' since Covid

Some Open Democracy insiders clearly blame leadership, both past and present, for its current predicament.

But a member of staff on operations, who worked directly with many of Open Democracy’s key players over recent years, offered Press Gazette a view that the leaders had all “tried to really cushion the blows and really protect the staff”.

“Post-Covid the funding streams have been really constrained," they said. "Open Democracy had fundraising, and then didn't have fundraising, and now there is a dedicated fundraising person. 

“I think anybody who works for any kind of not for profit… would understand that you’ve got to have a [funding] pipeline for several years to actually keep flowing…

“To try and juggle editorial things as well as business stuff on a day-to-day basis can be very, very challenging, especially when there's so many different income streams.”

They said they did not “necessarily think that [the redundancies were] anything to do with mismanagement. I do just think that it's the nature of the beast that is not-for-profits. 

“I think the bottom line is if there is no funding, there’s going to be no end to the number of redundancies that are going to happen.”

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  • Head of Department/Function
  • Manager
  • Non-manager
  • Retired
  • Other
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