The joint inquiry by the House of Commons Work & Pensions and BEIS committees has today published papers from Carillion’s remuneration committee (RemCo) that appear to support the analysis by Amra Balic, head of stewardship at BlackRock, that Carillion’s board was more concerned with "how to remunerate executives rather than what was going on with the business".
Carillion directors received hefty bonuses based on financial results that have subsequently been revealed as not as substantial as previously claimed. But there was not mechanism in place to claw back these bonuses.
It appears that the RemCo helped to protect executives’ bonuses from being clawed back in the event of malfeasance, underperformance or re-evaluation of performance.
Alison Horner, chair of Carillion's RemCo Chair, told the committees that they took legal and remuneration advice but the company’s remuneration advisor, Deloitte, denies that it ever provided such advice.
In September 2017, after Carillion's first profit warning, the Remco looked again at the clawback conditions and agreed to extend them to instances of serious reputational damage and failures of risk management. However, the MPs have been unable to find any evidence that the RemCo sought to enforce these, despite the dire state of the company’s finances.
The RemCo did at one point consider asking directors to return their bonuses from 2016, but the agreed terms made this impossible.
Frank Field MP, chair of the Work & Pensions select committee, said: "It's greed on stilts, pure and simple."
Rachel Reeves, chair of the Business, Energy & Industrial Strategy (BEIS) select committee, said: "These RemCo papers are further evidence that when the walls were falling down around them, Carillion bosses were focussed on their own pay packets rather than their obligation to address the company’s deteriorating balance sheets. While these directors could still walk off with bonuses intact, workers were left fearing for their jobs and suppliers faced ruin.
“Carillion had a notorious reputation for late payments to suppliers. But while suppliers were waiting up to 120 days to be paid, Carillion directors were doing their upmost to ensure there was no impediment to their receipt of fat pay and bonuses. Finally, when even the Carillion RemCo 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”.