Published: Wed, May 16, 2018
Global News | By Blake Casey

Carillion's board presided over 'rotten corporate culture', say MPs

Carillion's board presided over 'rotten corporate culture', say MPs

Carillion collapsed under a £1.5bn debt pile in January. Running to 100 pages, it is a no-holds-barred account of the toxic combination of greed, arrogance, incompetence and aggressive accounting practices that combined to bring the business down. The report was released on Wednesday May 16.

The MPs said that following a series of hearings into Carillion's liquidation, it was clear that the board presided over "rotten corporate culture".

The Rt Hon Frank Field MP, Chair of the Work and Pensions Committee, said: "Same old story". "British industry is too important to be left in the hands of the likes of the shysters at the top of Carillion".

What are regulators and the government accused of?

The report also slams Carillion's former chairman Philip Green, who they say "interpreted his role as to be an unquestioning optimist, an outlook he maintained in a delusional, upbeat assessment of the company's prospects only days before it began its public decline".

PwC variously advised the company, its pension schemes and the Government on Carillion contracts, but was still the least conflicted of the Four.

"We welcome the report from the joint select committee and will respond fully in due course".

Not surprisingly, Carillion directors, who were allowed sight of the report on Monday, have a different take on events.

The Financial Reporting Council has gone as far as to open an investigation into KPMG over its audits of Carillion under the Audit Enforcement Procedure.

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The report concluded that Richard Howson, Carillion's chief executive from 2012 until July 2017, was at the head of a business model that was "doomed to fail" and stated his "misguided self-assurance obscured an apparent lack of interest in, or understanding of, essential detail, or any recognition that Carillion was a business crying out for challenge and reform".

The committees also accused the big four accounting firms - which also include PwC, KPMG and Deliotte - of operating a "cosy club". EY and Deloitte said they were "disappointed" at the MPs findings.

There's an equally damning assessment of the regulators - the accounting watchdog and the pensions regulator - which the report says were "united in their feebleness and timidity".

A scathing MPs" report into the collapse of Carillion has revealed the stricken construction giant paid nearly £4 million to "an array' of City firms in the days before it was declared insolvent.

A Cabinet Office spokeswoman said: "We have recently announced a number of measures to support government suppliers - strengthening our commitment to prompt payment; protecting staff, businesses and small suppliers from irresponsible directors".

The report has some heavyweight recommendations, key among which is that the audit market be referred to the competition authorities with a view to a break-up of the Big Four.

The MPs added that regulators should now consider banning the former directors from serving on other company boards.

'The government wants to see a strong and varied supplier base where companies of all sizes benefit from long term and stable government contracts. The collapse of Carillion exposed awful failures of regulation. And the stark warning from MPs today is that if the lessons of Carillion are not heeded, it could happen again - and soon.

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