Carillion bosses drove construction firm off a cliff, say MPs

CarillionCarillion’s board presided over a “rotten corporate culture” and was culpable for its “costly collapse”, two committees of MPs have concluded.

They also called for a potential break-up of the big four audit firms, after they “waved though” the indebted construction firm’s accounts.

And they attacked the government for lacking “decisiveness and bravery” to tackle corporate regulation failures.

They suggested the directors should now be banned from other company boards.

Carillion collapsed under a £1.5bn debt pile in January. It employed 43,000 people, about 20,000 of them in the UK, thousands of whom have lost their jobs.

It also held numerous public contracts, such as the maintenance of schools and prisons, all of which had to be brought under government control, at a cost to the taxpayer.

In a damning 100-page report, the Work and Pensions and Beis committees also said:

  • The Big Four accountancy firms were a “cosy club incapable of providing the degree of independent challenge needed”
  • Carillion’s collapse had exposed “systemic flaws” in corporate Britain and showed regulators were “toothless”
  • And warned “Carillion could happen again, and soon”

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.

“And when we had the directors in front of our Select Committee, they seemed to be in total denial about what happened to their company. They seemed almost surprised to be in front of us,” she said.

What are the directors accused of?

In their report, the two committees called Carillion’s rise and fall “a story of recklessness, hubris and greed”.

Carillion: Six charts that explain what happened

Where did Carillion’s problems come from?

They singled out former directors Richard Adam, Richard Howson and Philip Green for particular scrutiny, saying the men had expanded the firm through ill-judged acquisitions while hiding Carillion’s financial problems from shareholders.

“Even as the company very publicly began to unravel, the board was concerned with increasing and protecting generous executive bonuses,” the MPs added.

“Long term obligations, such as adequately funding Carillion’s pension schemes, were treated with contempt.”

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