Carillion collapse: 'Directors too busy stuffing their mouths with gold'
MPs blame financial immolation of construction giant on greedy, reckless bosses.
Greedy and incompetent directors who only cared about their own financial rewards helped wreck Britain's second-largest construction company, a damning report into the collapse has alleged.
Two parliamentary select committees published a double-barreled blast at a "rotten corporate culture" that included the board members, the government, accountants and regulators.
The construction giant crashed into liquidation under a debt pile of £1.5bn on 15 January, putting around 43,000 jobs at risk. It managed a huge variety of public sector and private projects around the UK and its collapse was likened to the crisis that a decade ago rocked the banking sector worldwide.
Frank Field, who chairs the work and pension committee, said: "Same old story. Same old greed. A board of directors too busy stuffing their mouths with gold to show any concern for the welfare of their workforce or their pensioners," reported The Guardian.
Rachel Reeves, chair of the business committee, told BBC Radio 4's Today programme: "The directors are culpable for the mess that Carillion got into and drove the company off a cliff."
She accused them of a "relentless dash for cash" by taking on low-margin contracts which didn't make money.
The 100-page report also took aim at the big four audit firms, after they "waved through" the indebted construction firm's accounts. "They were cosy club incapable of providing the degree of independent challenge needed," it said.
The government has come under intense pressure to explain why it handed Carillion huge contracts, despite the fact that the company had issued three profit warnings in the 12 months to November.
The Wolverhampton-based firm is a key government supplier on the High Speed 2 (HS2) rail projectand of numerous education and health construction contracts. The group also maintains half of the UK's prisons and is the second largest supplier to Network Rail.
The directors remained confident until the very end that a rescue deal could be pushed through. Their plans, however, came unstuck when efforts to sell part of the struggling business failed and banks said they would agree to lend funds under new and stricter conditions.
On 31 December, Carillion's directors met government's representatives and submitted a "formal request" for financial support. The company wanted the latter to "guarantee" funding for an extra four months, while allowing Carillion to continue its restructuring process and allowing it to defer payments. Both requests, however, were knocked back.
Richard Howson, the former chief executive of Carillion, received £1.5 million in salary, including bonuses and pension, last year. Howson was still being paid £660,000 plus £28,000 in other benefits until as late as October, despite several profit warnings being issued in relation to the company's finances. Zafar Khan, another director, is set to bank a £425,000 base salary until September of this year.
Meanwhile dividend payments to shareholders have increased at Carillion for many years while the company simultaneously racked up a huge pension deficit.
In 2016 top brass at the company appeared to introduce rules which would make it harder to take bonuses back from directors - so-called clawback provisions - in cases of company mismanagement.
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