Carillions' "Rotten Corporate Culture" Castigated by DWP Select Committee

Wednesday 16 May, 2018 Written by  IoD
Carillions' "Rotten Corporate Culture" Castigated by DWP Select Committee

MPs have launched a scathing attack on former directors of collapsed contractor Carillion.

In a report following a joint inquiry by the Business Energy and Industrial Strategy Committee and the Work and Pensions Committee, the MPs castigated the company's board and "rotten corporate culture".

The report also called into question the auditing at the firm, and the wider auditing market. It recommended that the Government look into breaking up the big four firms.

Roger Barker, Head of Corporate Governance at the Institute of Directors, said: "The Joint Committee report today confirms that from being a natural market failure, the demise of Carillion came about as a result of individual failings by the company's board and other actors in the governance chain. What makes this 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 on its feet for as long as it did.

"The lack of regard to stakeholders and the apparent unwillingness of the directors to consider the company's long-term interest has raised questions around the adherence to company law in this case. The report suggests that Carillion's directors seemed unfamiliar with their statutory duties and this underlines the need for the professional development of directors in large companies. All too often the directors of large listed companies feel they are the 'finished article' in terms of knowledge and expertise. While there must be caution in rushing to implement further legislation, greater emphasis must be put on the importance of director training. "Carillion's collapse undermined the already low level of public trust in business. The majority of UK businesses and business leaders bear little relation to the companies we have seen fail due to poor corporate governance in recent years, yet unfortunately they are tarnished by the same brush."

Carillion's former Finance Director rejected the claims in the report, and objected to quotes he claimed were misattributed to him. Former chair Philip Green said "the board always sought to make decisions based on the best available information and with the best professional advice."

ABC Comment: Politico points out that the report also points the finger at every single one of the Big Four accountancy firms, which MPs say pocketed huge fees for a variety of roles but with few tangible results. The FT splashes on calls for the Big Four to be broken up.

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