Carillion bosses in firing line as MPs launch inquiry into collapse

Richard Howson, who headed the company from 2012 until July 2017, pocketed £1.5m in 2016

Ravender Sembhy
Wednesday 24 January 2018 12:03 GMT
Thousands of workers remain in limbo about the future of their jobs
Thousands of workers remain in limbo about the future of their jobs (AFP)

A string of top bosses at collapsed construction giant Carillion are to be grilled by MPs next month as the political fallout from the debacle rages on.

Parliament’s Work and Pensions Committee and Business, Energy and Industrial Strategy Committee launched a joint inquiry on Wednesday into the group’s demise, which has cast doubt over the future of thousands of workers on jobs ranging from hospital construction to school meals and cleaning.

Carillion’s liquidation left in its wake a £900m debt pile, a £590m pension deficit and hundreds of millions of pounds in unfinished public contracts.

The committees confirmed that they will call several Carillon bosses as witnesses to evidence sessions on 6 February.

They include former chief executive Richard Howson, chairman Philip Green, interim boss Keith Cochrane and ex-finance chiefs Richard Adam, Zafar Khan and Emma Mercer.

The inquiry comes after anger surfaced about Mr Howson’s bumper pay packet during and after his tenure, as well as that of Mr Khan and Mr Cochrane.

Mr Howson, who headed the company from 2012 until July 2017, pocketed £1.5m in 2016, which included a £122,612 cash bonus and £231,000 in pension contributions.

As part of his departure deal, Carillion had agreed to continue paying him a £660,000 salary and £28,000 in benefits until October 2018.

A similar deal was struck for Mr Khan, who left Carillion in September but was set to receive £425,000 in base salary for the following 12 months.

Interim chief executive Mr Cochrane was in line to be paid his £750,000 salary until July.

Labour MP Rachel Reeves, chairwoman of the Business, Energy and Industrial Strategy Committee, said: “In the wake of the BHS scandal, Carillion has the hallmarks of another corporate governance failure, with directors asleep at the wheel while the business went off a cliff, in this case leaving jobs, pensions and public services under threat and a host of suppliers out of pocket.

“As a committee, we will also want to explore the executive pay arrangements at Carillion, the potential cost to the taxpayer of the insolvency, and the role of both directors and non-executive directors in the company’s collapse.”

Carillion introduced the “clawback” provision as part of its pay policy in 2014, which would allow the company to demand executives return cash and share bonuses for up to two years after payment – a move it said brought the business in line with the updated UK Corporate Governance Code.

However, those terms were relaxed by 2016 when Carillion’s remuneration committee added stipulations that the clawback provision could only be triggered if the firm’s results were misstated or the executive was “guilty of gross misconduct”.

The committees will also probe the role of Carillion’s auditor, KPMG, which signed off the group’s 2016 accounts.

The Insolvency Service, which last week ceased payments to Carillion executives, and the Financial Reporting Council will also be called at an earlier hearing next week as questions remain over the strength of corporate governance at the company.

Robin Ellison, chairman of trustees of Carillion’s pension scheme, will also be grilled.

Work and Pensions Committee chairman Frank Field said: “Another day, another company goes bust hot on the heels of a clean bill of health from a Big Four financial services firm.

“The particularly nasty twist in this now grimly familiar tale is the mountain of debt and giant pension deficit this public services contractor leaves in the wreckage of its collapse – with an accompanying massive hit to the public purse.

“It must also be time now for the auditors who cosily signed off this disaster-in-the-making as a ‘going concern’ less than a year ago to begin to account for themselves.”


Join our commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies


Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged inPlease refresh your browser to be logged in