Carillion bosses refusing to repay bonuses – because they ‘earned’ them
CARILLION bosses are refusing to repay bonuses of hundreds of thousands of pounds they received just before the construction giant went bust.
Chief executive Richard Howson was paid £ 293,000 in 2015 and £245,000 in 2016. Former finance boss Richard Adam received £215,000 and £140,000 over the same period.
They were among several executives and former bosses who gave evidence to MPs yesterday. Mr Howson, 49, who was sacked in July when Carillion gave a major profit warning, defended his pay.
Asked by Commons business committee chairman Rachel Reeves whether he felt comfortable with his bonus, Mr Howson said: ‘Yes, I do, for the attributes I earned it for. Half of my bonus is deferred and half of it was paid in cash – so half of it I have lost.’
‘If it’s proven that perhaps they should not have been paid then I will abide by that decision.’
Mr Adam, 60, left in December 2016 after ten years with the firm.
Replying to the suggestion that he should give his bonus back, he said: ‘I need to understand the position. I have been out of this business for over a year, I have had no access to documentation and I don’t actually know what the position is today.’
Miss Reeves and Frank Field, cochairmen of the Commons committee, branded the firm’s bosses ‘delusional’, and criticised them for building ‘a giant company on sand in a desperate dash for cash’.
Carillion went bust last month with debts of £3.3billion after a series of key contracts failed.
It had a black hole in its pension fund of around £990million, but only £29million cash in the bank.
Its collapse has put 48,500 jobs at risk around the world, while 30,000 suppliers are thought to be owed up to £1billion.
A report compiled by Carillion days before it went bust showed it knew of its growing problems, stating: ‘The group had become too complex with an overly shortterm focus, weak operational risk management and too many distractions outside of our “core”.’
It also highlighted ‘poor planning of effective contract controls and monitoring’, ‘ insufficient understanding of and adherence to contract requirements’, and a ‘lack of ownership of issues’.
The Government has been finding providers to cover Carillion’s 450 public contracts to build and maintain schools, hospitals, rail lines and army barracks.
The firm’s bosses were called to give evidence yesterday about its collapse before a joint hearing of the Commons business and pensions select committees. It heard from Mr Howson, his replacement Keith Cochrane, Mr Adam and his replacement Zafar Khan, company chairman Philip Green and other executives.
MPs were angered as the bosses offered to apologise for the collapse, but failed to take responsibility for it. Mr Adam told MPs: ‘I am genuinely shocked and saddened by the events since I left.’
Mr Howson said the firm’s position worsened after uncertainty caused by the Brexit vote and the General Election. It was also owed £200million for 18 months’ work redeveloping central Doha in Qatar for the World Cup in 2022.
Mr Cochrane, 52, who reportedly earned £750,000 a year, revealed that the firm asked the Government for £160million on the weekend before its collapse to help it restructure. But banks and the Government turned it down, and Carillion went into compulsory liquidation on January 12.
He denied the cash amounted to a bailout, saying the Government was a key customer and it was reasonable to ask it for help.
He added: ‘Clearly the business did have issues. Do I wish we had done something about it sooner? Absolutely. I recognise that.’
Mr Khan, 49, who took over from Adam last January and was sacked in september, defended himself over accusations that the firm took on too much risk.
The former finance chief, who earned £415,000 a year, said: ‘I don’t believe we were asleep at the wheel. I believe I did everything that I could have done.’
But his successor, Emma Mercer, 42, claimed the company’s accounting practices were aggressive and had made optimistic assumptions about how much money contracts would generate.
Mr Green, 64, said he accepted full responsibility for what went wrong, adding: ‘Not necessarily culpability, but no question about full responsibility.’
‘A desperate dash for cash’