Calls to seize cash paid to directors of Carillion
THE government has been urged to seize money paid out to Carillion’s directors as the business ran up pension fund deficits.
Thousands of workers could be forced to accept lower pensions after the Wolverhampton-based construction giant collapsed last week with a £587 million pensions deficit.
But there is anger over deals that allowed senior managers to continue receiving huge salaries and bonuses after the business issued a profit warning last July. The payments were even due to continue after the firm went into liquidation, until the Insolvency Service stepped in to put a stop to them.
West Midlands Conservative MP Rachel Maclean (Con, Redditch) said the Government should act.
Speaking in the House of Commons, she asked Work and Pensions Secretary Esther McVey: “What action is she taking in working with the Secretary of State for Business, Energy and Industrial Strategy to look at the conduct of the directors of Carillion in this regard?”
She added: “What can be done now to recover any of this money for the people affected?”
Mrs Maclean was not the only Tory to express concern. Conservative MP Bernard Jenkin said people were “seriously repelled by the notion that executive directors and even exdirectors should carry on drawing large payments at the same time as there is a mounting pension deficit.”
He added: “If this is what capitalism was really like, people would not want it.”
Construction giant Carillion has a £587 million pensions deficit but boasted in its 2016 annual report that the dividend paid to sharehold- ers “has increased in each of 16 years since formation of company”. It paid £162 million in dividends to shareholders over 2015 and 2016, but put in just £94 million to address the pensions shortfall. The firm has 13 final salary pension schemes in the UK with around 28,500 members, including 12,000 who are already claiming a pension.
The future of the schemes is uncertain. Employees are protected by the Government’s Pension Protection Fund, but this means their pension could be about 85 per cent of what they might have expected to receive.
There is still anger this week over a deal that allowed Richard Howson, Carillion’s former chief executive, to step down last July after the firm issued a profit warning – but continue to receive his £660,000 salary and £28,000 benefits until October 2018.
The Insolvency Service stepped in and ended the payments days after the firm collapsed. Carillion’s interim chief executive Keith Cochrane was also set to keep on receiving his £750,000 base salary until July, before the intervention of the Insolvency Service. And former finance director Zafar Khan, who stepped down last September from his £425,000 a year job, was due be paid until July.
Ms McVey told the Commons: “If there is any evidence that untoward things have been done, a prosecution will follow. That is what we are about : we want businesses to act responsibly. They employ the majority of people in this country, so it is only right that we support them when they need our support and bring them to account when they are doing things wrong.”