Carillion bosses ‘too busy stuffing mouths with gold’ to prevent firm’s collapse, say furious MPs
The directors of doomed construction giant Carillion were “too busy stuffing their mouths with gold” to save the firm from its spectacular collapse earlier this year, a hard-hitting joint report by MPs has said.
Carillion - which was mired in debt and owed billions to its suppliers - went bust at the start of the year, with more than 2,000 staff laid off so far.
The firm sank with one of the biggest pension deficits of any FTSE 350 company.
A scathing joint report from two Commons committees brands the company’s collapse “a story of recklessness, hubris and greed” and blasts company bosses for misrepresenting the reality of the business as they ramped up dividends and treated long-term obligations like pensions “with contempt”.
The report accuses Carillion’s board of directors of being “both responsible and culpable” for the company’s failure, despite presenting themselves as “self-pitying victims” of “unforeseeable mishaps”.
The MPs tear into the company’s former finance director Richard Adams - who sold all of his shares just months before the firm’s collapse - and its “misguidedly self-assured” ex-chief executive Richard Howson over the company’s nosedive in fortunes.
They also dismiss former chairman Philip Green as an “unquestioning optimist” who failed to challenge bad decisions, and urge the Insolvency Service, which is probing Carillion’s downfall, to consider disqualifying the trio from serving as directors again.
Work and Pensions Committee chairman Frank Field said Carillion’s collapse was “a disgraceful example of how much of our capitalism is allowed to operate”.
He fumed: “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. They rightly face investigation of their fitness to run a company again.”
Mr Field urged ministers to bring forward “radical reforms to our creaking system of corporate accountability”, adding: “British industry is too important to be left in the hands of the likes of the shysters at the top of Carillion.”
AUDITORS 'SHOULD BE IN THE DOCK'
Rachel Reeves, chair of the Business, Energy and Industry Strategy Committee meanwhile trained her fire on audit firm KPMG, which vetted Carillion’s accounts for almost two decades before its collapse.
She said it and other members of the so-called 'Big Four' group of accounting giants - PwC, Deloitte and EY - should be "in the dock for this catastrophic crash".
Ms Reeves warned: "They are guilty of failing to tackle the crisis at Carillion, failing to insist the company paint a true picture of its crippling financial problems. The sorry saga of Carillion is further evidence that the Big Four accountancy firms are prioritising their own profits ahead of good governance at the companies they are supposed to be putting under the microscope.”
The committee is urging the Government to refer the accounting giants to the Competition and Markets Authority or risk “a crisis of confidence in the audit profession”.
Labour’s shadow business secretary Rebecca Long-Bailey went further, however, calling for the “cabal of four big auditors” to be “broken up”.
She said: “Millions racked up in debt, thousands of workers losing their jobs and pensions, and supply chain business at risk of collapse, because not only did the corporate auditors fail to hold Carillion's misbehaving managers to account, but because the Government looked on in ignorance at the same time, proceeding to award contract after contract to a firm which had issued numerous profit warnings,” she said.
A government spokesperson welcomed the joint report and said ministers would “respond fully in due course”.
They added: “Our priority has been the continued, safe running of public services and to minimise the impact of Carillion's insolvency. The plans we put in place have ensured this. “