Carillion - "Hubris and Greed

Carillion's board presided over a "rotten corporate culture" and was culpable for its "costly collapse", two committees of MPs have concluded. The Work and Pensions and Beis committees called Carillion's rise and fall "a story of recklessness, hubris and greed. Its business model was a relentless dash for cash, driven by acquisitions, rising debt, expansion into new markets and exploitation of suppliers..

Rachel Reeves MP, chair of the business (Beis) committee, said: "The company's delusional directors drove Carillion off a cliff and then tried to blame everyone but themselves."

Frank Field, who chairs the work and pension 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.”

The two select committees also attacked the big four accounting firms for approving Carillion's accounts despite its spiralling debts, saying, "However, the auditors should also be in the dock for this catastrophic crash. They are guilty of failing to tackle the crisis at Carillion, failing to insist the company paint a true picture of its crippling financial problems." They said Ernst & Young was paid £10.8m for "six months of failed turnaround advice", while Deloitte received £10m to be Carillion's internal auditor, but was either "unable or unwilling" to identify failings in financial controls, or "too readily ignored them". They also said KPMG had failed to question Carillion's financial judgements and had been “complicit” in signing off Carillion’s “increasingly fantastical figures”, while PwC was "continuing to gain" as its official receiver "without adequate scrutiny".

They singled out former directors Richard Adam, Richard Howson and Philip Green for particular scrutiny, saying the men had expanded the firm through ill-judged acquisitions while hiding Carillion's financial problems from shareholders.

"Even as the company very publicly began to unravel, the board was concerned with increasing and protecting generous executive bonuses," the MPs added. "Long term obligations, such as adequately funding Carillion's pension schemes, were treated with contempt." They said the directors had presented themselves during parliamentary hearings as "self-pitying victims" of "unforeseeable mishaps".

The MPs also accused regulators of being too "passive" in tackling Carillion's problems, adding that the government had "nurtured" an environment in which the collapse of an outsourcing firm was "a distinct possibility".

"When swathes of public services are affected, close monitoring of exposure to risks would seem essential...we have a semi-professional part-time system that does not provide the necessary degree of insight for government to manage risks. " the report said.