Newly-revealed documents show that Carillion’s top executives were more concerned with awarding themselves "fat pay and bonuses" than with fixing the company that was crumbling around them, investigating UK MPs said.
Published today, the papers demonstrate "greed on stilts", said the investigating committee’s co-chair, as Carillion’s remuneration committee increased salaries for its top executives despite the dire state of company finances.
The committee approved bonuses for senior managers to entice them to stay after the shock profit warning in July last year, when the company revealed an £845m writedown to cover problem contracts.
Directors enjoyed salary increases, and a fee of £750,000 a year for interim chief executive Keith Cochrane (pictured) – higher than his predecessor’s salary – was signed off by the remuneration committee, minutes show.
Frank Field MP, the Labour chair of the work and pensions committee, which is investigating Carillion’s collapse, said: "It’s greed on stilts, pure and simple."
Joining in the criticism was Rachel Reeves MP, chair of the commons business select committee, which has teamed up with Field’s committee on the investigation.
"These [remuneration committee] papers are further evidence that when the walls were falling down around them, Carillion bosses were focused on their own pay packets rather than their obligation to address the company’s deteriorating balance sheets," she said.
"When even the Carillion RemCo [remuneration committee] considered asking for directors to return their bonuses, the system and culture was so dysfunctional, and the terms and clawback provisions so weak, that even this meek step was ruled out," Reeves added.
The board opted to rule out using bonus clawbacks beyond a number of its most senior directors. The papers show the remuneration committee feared more conservative pay arrangements for particular contracts "would have a detrimental impact on performance".
The revelations came after the UK family-owned engineering firm, Vaughan Engineering, said Friday (23 March) that it faced administration, with the loss of 160 jobs, in Edinburgh, Warrington and Newcastle.
Owed £600,000 by Carillion when the latter was forced into liquidation on 15 January, Vaughan Engineering looks set to be the first major supply chain casualty of the Carillion collapse.
"We have tried everything we can to save our business, despite approaches to Scottish Enterprise, the Scottish Government, MPs, local and national government authorities, no assistance has been forthcoming," finance director Gavin Vaughan said, calling the firm’s predicament a "devastating blow".
Image: Keith Cochrane, who was Carillion’s interim chief executive from July 2017, giving evidence to MPs in February this year