In their final report into the demise of Carillion, MPs have called on the Government to carry out an ambitious and wide-ranging set of reforms to reset systems of corporate accountability.
Jointly produced by the Work and Pensions Committee and the Business, Energy and Industrial Strategy (BEIS) Committee, the report concludes that successive governments have avoided addressing the regulatory failures that allowed Carillion to become a “giant and unsustainable corporate time bomb”.
MPs lambast members of Carillion’s board for presiding over a “rotten corporate culture” and for pursuing a business model based on “a relentless dash for cash, driven by acquisitions, rising debt and exploitation of suppliers”.
The report also criticises auditors used by Carillion for failing both to tackle the crisis and to insist that the company paint a true picture of its crippling financial problems.
The Big Four accountancy firms are prioritising their own profits ahead of good governance at the companies they are supposed to be putting under the microscope, BEIS Committee Chair Rachel Reeves said.
Not surprisingly, Carillion’s former directors are in the firing line, with a call for the Insolvency Service to consider whether they breached their duties under the Companies Act and should be recommended to the Secretary of State for disqualification.
Responding to the report for the Institute of Directors (IoD), Roger Barker noted that it confirms that, far from being a natural market failure, the company’s demise was a result of individual failings by its board and other actors in the governance chain.
For the Federation of Small Businesses (FSB), chairman Mike Cherry called for Project Bank Accounts (where money for public projects is held in trusts not by Tier 1 contractors) to become the norm.
Kevin Ellis of PricewaterhouseCoopers (PwC) said that the firm takes its responsibilities extremely seriously and adheres to professional standards, ethical codes and regulatory guidance.
The full report can be found at https://bit.ly/2IrDwTw.