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Carillion directors were too focused on their pay, investors tell MPs

money

Carillion investors have slammed what they described as the big remuneration payments company directors prioritised for themselves as the construction giant spiralled into liquidation.

Bosses at investment funds Kiltearn Partners, Aberdeen Standard Investments and Blackrock were quizzed by MPs over when and why they began divesting stocks at the latest hearing of the joint parliamentary inquiry into Carillion’s collapse. 

Blackrock managing director Amra Balic told the committee: “The board was focusing more, thinking again, how to remunerate executives rather than actually what is going on with the business. There was definitely to much focus at times, at the board level, around remuneration.”

At the AGM in May last year Kiltearn voted against a remuneration report that suggested increasing the then chief executive Richard Howson’s total remuneration by 17.7% because of concerns over the “level of [Howson’s} remuneration relative to the company’s level of net income”.

It emerged during the hearing that investors were kept in the dark about Carillion’s troubled financial situation. Balic added: “Before the collapse was announced we did not feel we were being misled. Having said that, with hindsight, a lot of new information has come out, pretty much since the beginning of your work, and I think the board and the management have some questions to answer.” 

Kiltearn Partners chairman Murdo Murchison told the joint work and pensions committee and business committee inquiry the £845M July write down came as a shock. Murchison said he is “extremely frustrated” with the audit of Carillion’s accounts and unhappy with the timeliness and level of disclosure from Carillion.

The construction giants accounts were given the all clear by KPMG, which had audited the accounts annually since 1999, in spring last year. When the company crashed into liquidation the following January it had just £29M left in cash. 

Last month Kiltearn Partners, which held 10% of Carillion’s shares in February and May last year, said it believed “there are clear grounds for an investigation into whether Carillion’s management knew, or should have known, about the need for a £845M provision due to receivables on its construction business earlier than July 2017” and that if Carillion had not gone into liquidation, would have “considered participation in civil legal action against Carillion with a view to recovering a proportion of its clients’ crystallised losses.”

The inquiry, chaired by Frank Field MP and Rachel Reeves MP, will hear evidence from Carillion’s special managers PwC and business ministers Esther McVey and Greg Clark on Wednesday, 21 March.

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