On January 15, Carillion plc, a U.K. construction and facilities management firm, entered into compulsory liquidation, following months of earings warnings and predictions of the multinational firm’s imminent demise. The Carillion collapse comes after a string of other scandals among private, publicly listed and public sector supplier companies, including BHS, RBS, Northern Rock, BT, Tesco, GKN, Serco, G4S. It again shows that compliance with the U.K. Corporate Governance Code, either the one in existence or the one proposed, can still do nothing to prevent bad actors from making bad decisions. The story has everything to enrage the public: mismanagement, ever larger dividends for shareholders and boardroom pay excess which together led to job losses, pension cuts for former and existing employees, and bankruptcy or major losses for smaller suppliers, public services and the taxpayer.
The collapse was apparently caused by badly priced contracts (which later became too expensive with cost overruns), along with poorly managed risks and too much debt. Why for example, would a company with an already enormous pension deficit spend too much money servicing debt and too much money paying out 16 years of unbroken dividend growth? But all this is just bad management, it doesn’t indicate a lack of compliance necessarily.
