Carillion’s board of directors presided over a “rotten corporate culture”

Managers at collapsed giant Carillion were too busy “stuffing their mouths with gold” to worry about workers and should face the possibility of disqualification, according to a scathing report from MPs.

In the final report of an investigation into the spectacular failure of the company, two select committees also attacked the government for its “lack” of determination and bravery in tackling failures in corporate regulation.

Carillion has become a “giant, unsustainable corporate time bomb,” the Labor and Pensions and Business Committees said.

MPs said following a series of hearings on Carillion’s liquidation, it was clear the board was presiding over a “rotten corporate culture.”

They said the insolvency service should carefully consider whether former directors have breached their obligations under company law and should be recommended for disqualification.

Frank Field, Chairman of the Work and Pensions Committee, said: “A board too busy gorging itself on gold to show it cares about the well-being of its workforce or its employees. retirees.

“They are rightly the subject of an investigation into their suitability to run a business again.

“It’s a shameful example of how our capitalism is allowed to operate, swept away by a comfortable club of listeners, in conflict at every turn.

“The government urgently needs to introduce sweeping reforms to our creaky corporate accountability system in parliament.

“The UK industry is too big to be left in the hands of the likes of the crooks atop Carillion.”

Rachel Reeves, who chairs the business committee, said: “The Carillion collapse was a disaster for all those who lost their jobs and for the small businesses, contractors and suppliers who fought for survival.

“The delusional directors of the company pushed Carillion off the top of a cliff and then tried to blame everyone but themselves.

“Their colossal failure as managers meant that they had indeed pressed the corporate self-destruct button.

“However, listeners should also be on the dock for this catastrophic crash.

“They are guilty of failing to tackle the Carillion crisis, of not insisting that the company paint a true picture of its crippling financial woes.

“The sad Carillion saga is further proof that the Big Four accounting firms prioritize their own profits over good governance in the companies they are supposed to scrutinize under the microscope.”

Ms Reeves said the Autorité de la concurrence et des Marchés should seek to dismantle the so-called big accounting firms – KMPG, PwC, Deloitte and EY – which she added had pocketed millions of pounds for their lucrative audit work.

“It’s a parasitic relationship that makes listeners thrive, regardless of what happens to the companies, employees and investors who trust their control.”

The committee said Ernst & Young received £ 10.8million for “six months of unsuccessful turnaround advice”, while Deloitte was awarded £ 10million to be Carillion’s internal auditor, but that ‘he was “unable or reluctant” to identify failings in financial controls, or “too easily overlooked”.

Thousands of jobs were lost following the Carillion collapse in January.

Former CFO Richard Adam, who was named in the MPs report as “the architect of Carillion’s aggressive accounting policies” and who had previously been accused of “throwing” stocks worth hundreds of thousands of pounds at the earliest possible moment, said in a statement: “Despite my retirement more than a year before Carillion went bankrupt, I am deeply saddened by the events that have hit the company since.

“The reasons for the collapse are clearly complex; however, I reject the unwarranted conclusions reached by the committees regarding my role in the company

“I have opposed the committees over citations that they have wrongly attributed to me. I look forward to contributing to the due process and the conclusion of the various investigations which are still pending.”

Unite union deputy general secretary Gail Cartmail, echoing the report’s summary that Carillion could happen again, and soon said: “Carillion’s downfall was the inevitable result of a business model that embodies a ‘race to the down “on tendering for contracts.

“The public sector can change that. National and local governments have the power to transform the disasters of outsourcing by bringing in-house services where profit is no longer the ideological master and for service contracts that are allowed to. apply quality and labor standards. “

Roger Barker, Institute of Directors, said: “The report confirms that, far from being a natural market failure, Carillion’s demise is the result of individual failures of the company’s board and other actors in the governance chain.

“What makes it all the more painful is that many of those who bore the brunt of its collapse – its employees, suppliers and other stakeholders – were among those who helped keep the company going. business running for as long as it has.

“The Carillion collapse undermined the already low level of public trust in business. The majority of UK businesses and business leaders have little to do with the businesses we have seen fail due to poor governance company in recent years, but unfortunately they are tarnished by the same brush. “

A government spokesperson said: “Our priority has been the continued and safe operation of public services and minimizing the impact of Carillion’s insolvency. The plans we have in place have guaranteed that.

“The government wants to see a strong and diverse supplier base where businesses of all sizes benefit from stable, long-term government contracts.

“That’s why we recently announced a number of measures to support government suppliers – reinforcing our commitment to pay promptly; protecting staff, businesses and small suppliers from irresponsible administrators.

“We welcome the report of the Joint Select Committee and will respond fully in due course.”

Rebecca Long Bailey, fictitious Secretary of State for Business, Energy and Industrial Strategy, commenting on the Joint Select Committee report on Carillion, said: “This report shows that the Big Four must be dismantled.

“It highlighted what industry insiders have long known – that a cabal of four big auditors has too comfortable a relationship with the companies they work for.

“There are a multitude of issues with the Big Four in the insolvency process, such as the insolvency practitioner’s reliance on secured creditors for appointments, which makes them primarily responsive to the wishes of creditors. guarantees and the incentive of large companies to prolong the insolvency process and incur significant costs.

“Millions of people took on debt, thousands of workers lost their jobs and pensions, and supply chain operations were at risk of collapse, not only because company auditors failed to keep up. Carillion officials behave badly, but because the government watched in ignorance at the same time, awarding contracts on contracts to a company that had issued numerous profit warnings. “

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