The House of Commons’ Work and Pensions and Business, Energy and Industrial Strategy Committees have launched a  joint inquiry into the collapse of construction firm Carillion.

The select committees said they would be investigating how a company that was signed off by KPMG as a going concern in Spring 2017 could crash into liquidation with a reported £5bn of liabilities and just £29 million left in cash less than a year later. Despite a rising pension scheme deficit, the committees noted that Carillion paid in only £51 million in 2016, three million lower than the previous year, and £27.9 million less than it allocated for dividends over the same period.

The first session to collect oral evidence will take place on 30th January with witnesses including Stephen Haddrill, chief executive, Financial Reporting Council and Robin Ellison, chair of trustees of Carillion defined benefit pension scheme.

Meanwhile, the public sector trade union UNISON said its investigations had shown that Blackrock, with over US$6 trillion of clients’ savings to invest, was betting on the stock market against Carillion, whilst at the same time running their defined contribution pension scheme. This it believes could be seen as a significant conflict of interest.

UNISON’s national officer for pension investments and governance Colin Meech asks: “Did the board of Carillion pay enough attention to whether their pension schemes were adequately managed and resourced?

“And did the trustees of the pension schemes, led by the Chair of the Trust, do enough to ensure they were fulfilling their statutory duty to run them in members’ best interests?”

UNISON said it believes it is imperative that all institutions involved in the governance chain are held to account.

Writing in a recent edition of The Observer (21st January) the prime minister Theresa May suggested that the government would be taking tougher action on directors in order to protect pension schemes. She wrote: “In the spring, we will set out new tough new rules for executives who try to line their own pockets by putting their workers’ pensions at risk – an unacceptable abuse that we will end.”

Responding to May’s article Roger Barker, head of corporate governance at the Institute of Directors, said: “If the fallouts from BHS and Carillion have taught us anything, it is that pension schemes often suffer when companies collapse and something needs to be done to safeguard those who have contributed to them. However, significant policy decisions should never be made in the heat of the moment.

“If the Prime Minister is serious about these proposals, there needs to be extensive consultation with involvement from industry to ensure we strike a balance that safeguards all stakeholders including current employees, pensioners and shareholders. As ever with these proposals, the devil will be in the detail – but we must ensure there are no unintended consequences that might impact the health of currently successful companies.

“On the issue of clawbacks, the UK Corporate Governance Code as it stands has little to say about the circumstances in which they should occur. In its forthcoming response to the current consultation on the Code, the IoD will propose that the collapse of the company should always be included as a trigger for bonus clawbacks in the employment contracts of top executives.”

Last Updated: 26 January 2018