Carillion’s board slammed for "greed" and “recklessness” in damning final report

MPs investigating the collapse of Carillion have today published their final report into the company’s demise with the 100-page report lambasting its board for a “rotten corporate culture” that led to the company’s “devastating and hugely costly failure”.

The extensive report published by the Work and Pensions and Business, Energy and Industrial Strategy (BEIS) committees lists conclusions on how Carillion managed to rack up liabilities of nearly £7bn and just £29m in cash when it eventually liquidated in early January.

The report claims the firm’s fall from grace was down to the board’s “recklessness, hubris and greed”, together with a business model which was nothing more than “a relentless dash for cash, driven by acquisitions, rising debt and exploitation of suppliers” and at best questionable accounting practices that “misrepresented the reality of the business”.

The industry giant had around 43,000 employees, including 19,000 in the UK before its eventual liquidation on 15 January. Many more people were employed in its extensive supply chains and to date, more than 2,000 people have lost their jobs. 

The report also reveals that Carillion owed around £2bn to its 30,000 suppliers, sub-contractors and other short-term creditors, of whom it was a notorious late payer. Much like the pension schemes, its supply chain face the prospect of receiving little back from the liquidation.

Frank Field, chair of the Work and Pensions 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. They rightly face investigation of their fitness to run a company again.  This is a disgraceful example of how much of our capitalism is allowed to operate, waved through by a cosy club of auditors, conflicted at every turn. Government urgently needs to come to Parliament with radical reforms to our creaking system of corporate accountability. British industry is too important to be left in the hands of the likes of the shysters at the top of Carillion."

Three of Carillion’s directors come in for special mention when it comes to the collapse. Richard Adam, a finance director for 10 years is accused of being the “architect of Carillion’s aggressive accounting policies” who “resolutely refused to make adequate contributions to the company’s pension schemes”. Chief executive Richard Howson is castigated for poor leadership and made responsible for a business that careered progressively out of control. Finally, Philip Green, who joined the board in 2011 and became chairman in 2014, is labelled as an “unquestioning optimist”.

MPs have also now called for a potential break-up of the big four audit firms, after they "waved though" the indebted construction firm's accounts. Carillion’s auditor KPMG has been singled out with MPs claiming the firm was “complicit” in the company’s “questionable” accounting practices. The government is not spared attack either for its lack of "decisiveness and bravery" to tackle corporate regulation failures.

Rachel Reeves, chair of the BEIS Committee, said the big four audit forms enjoyed a “parasitical” relationship and demanded the government ensured regulators were “up to the job”.

She added: "Carillion’s collapse was a disaster for all those who lost their jobs and the small businesses, contractors and suppliers left fighting for survival.  The company’s delusional directors drove Carillion off a cliff and then tried to blame everyone but themselves. KMPG, PwC, Deloitte and EY pocket millions of pounds for their lucrative audit work - even when they fail to warn about corporate disasters like Carillion.  It is a parasitical relationship which sees the auditors prosper, regardless of what happens to the companies, employees and investors who rely on their scrutiny. The collapse of Carillion exposed terrible failures of regulation. The government needs to stop dithering and act to ensure regulators are up to the job of intervening before companies fail, rather than trying to pick up the pieces when it is too late."