I can find no redeeming behaviour on the part of the venal and hubristic directors of Carillion in the Commons select committees report. Greed, recklessness, irresponsibility, immorality - directors, in the words of Frank Field, more interested in stuffing their mouths with gold than with their fiscal and fiduciary responsibilities.
As I've written previously, I've seen this culpable recklessness time after time in the Construction industry - loss leading bids for contracts with a naive hope that profit can be screwed from contract variations, a prioritising of turnover over profitability, a childish drive for size. It's unforgivable and I don't forgive it.
Those who suffer are the trades, workers and sub-contractors - working people, living from contract to contract, often at the slenderest of margins strained by late payment or settlement of accounts, ordinary grafters with families and mortgages and car leases to pay. Men and women I know and like and will always defend. And those fat carousing bastards at Carillion thieved millions without compunction. Shame on them.
Equally culpable are the crooks at the big 4 audit firms - KPMG, PwC, Deloitte and EY - also excoriated by the Commons report. In return for fat audit fees, these crim bastards send in teams of juniors and trainees to test-check documents, interrogate computer systems and generally to record time spent and accumulate fat box files of dross to demonstrate due diligence, whilst happily ignoring a global picture of impending failure. Shame on these bastards, too.
My only solution is the American one. We don't need any more regulations, any more accounting codes, any more restrictions on doing business, any more restraints on responsible capitalism. What we have are adequate. We must not make business any harder or more onerous or burdensome. No, what we need are post-hoc retributive measures - that if a firm fails, as Carillion did, and if that failure was due to the malfeasance of directors and auditors, as it was at Carillion, it should mean long jail terms. Twenty years and more. And not for the junior trainees at the Big Four but for the directors. These bastards must face real penalties.
32 comments:
Criminal, willful negligence, should be prosecuted under the full force of the law and custodial sentences made to reflect the seriousness of the crime........in any other walk of life, it is. Thus, why are the CEO's and directors able to get away with it - well this is Britain, corporates can do as they please, Britain? should I say, 'the EU' mate.
KPMG, PwC, Deloitte and EY, corporate malpractice = "collusion", lets make another point, who gave the UK banks a 'clean bill of health' in circa 2007?
You can't lock em all up, but examples should be made of certain top execs, pour encourager les autres.
The bosses in the businesses and in the accounting companies should also suffer confusion of wealth, accrued by their criminal behaviour, regardless of whether they have tried to protect it by putting it in their wife's name or in trust or in offshore accounts.
Correction: confiscation, not confusion
What really pisses me off about this is that the directors' pension fund was in surplus while the ordinary workers fund was in huge deficit.
Talk about lining your own pockets!
Carillion didn't exemplify capitalism. It was a corrupt cronyist chop shop.
The capitalist system has tried, sentenced and executed Carrillion.
System working as normal.
I have probably commented before that one of the worst aspects of the capitalist system (generally bad) as opposed to the free market (generally good), is limited liability.
When operated within small companies, it can lead to unwise risk taking, but when operated by public companies the onus moves from doing a good job to satisfying the expectations of the shareholders.
It would be much better if liability was unlimited, it would make these directors more interested in their own personal welfare and by extension the quality of the product. If the law could take irresponsibly behaved directors to prison, they might think before taking that risk.
It is only a small part of the problem with markets, the biggest problem is of course the mafia aka the government and its taxes that punish success, and encourage failure. The habit of large companies of not paying small companies taking no account of cash flow is something that I would want to address too.
So the MP's may be right, but it is their irresponsibility, which is presumably linked to their total ignorance about how business operates, which enables them to pontificate on morals, whilst earning their crust from the hard work of these company's employees and sub-contractors.
@ right-writes
You can't really do as you suggest re unlimited liability. No company would ever come to the UK and those that are here would be making moves out. Limited liability exists is scores of countries around the world under different names such as S.A. (sociadad anonym) in Spain or Italy.
The recourse for malfeasance should be played out in courts where directors cannot hide behind Ltd. Co if it is proved that their actions were/are deliberate. Prison, loss of pension rights, and severe financial penalties (savings, investments etc) should be enough to guide the moral compasses of future directors.
That's what I like about your opinions Radders - you're not some spineless fence-sitting scrote, who tries to be all things to all men. Nah, you tell it how you see it, and as a general rule, most of use who are regular visitors to your blog tend to agree. Even I have mildly disagreed from time to time. There's always the fly in the ointment (jack ketch), but even I will concede that he is entitled to say his piece; however wrong-headed I think he is.
You are absolutely right in this case. Nail 'em up I say. This should serve to pour encourager les autres.
Government Authorities always seem to give contracts to the biggest companies that they can find rather than small ones who are quite capable of doing the job. This was my experience working 25 years of such an authority.
I remember one case where I was stopped from giving a contact to a small company and it was given to a large company who sub-contracted it to the company that I wished to use, but we paid about four times the price.
It's totally unnecessary, I read that Carillion had contracts for things like cleaning hospital windows and providing school meals. I blame the state for not giving these directly to the smaller companies who no doubt became Carillion sub contractors.
"Carillion didn't exemplify capitalism. It was a corrupt cronyist chop shop."
It exemplifies a problem with capitalism: small and medium sized companies can be very efficient and quite honest. The problem comes when a medium company starts buying other companies. This apparently is great fun and gives the CEO and his friends a sense of power.
It soon snowballs into the kind of corrupt greedfest that Carillion exemplifies.
Shareholders and accountants need to look much more critically at acquisitions. This isn't a new problem.
Don Cox
I recall the last primary school I attended. School meals courtesy of a couple of part time cooks - local ladies who walked to work. They were managed by the Headmistress, who indeed managed the entire school. And still taught. No LA or big companies in sight.
Street cleaning used to occur by employing a street cleaner who lived locally and had responsibility at his own level. That's all. Now it needs half a dozen tiers of management, whether government or privately run.
We are smothered by managerialism. And it is a response to massive over-regulation. We do need regulations to "ensure" safety, including food safety. But that regulation needs to be efficient and effective. The usual response when something goes wrong is more, more, more, regulation, rather than finding out what truly went wrong.
The unnecessary complexity of regulation enables the big boys to hide their responsibilities whilst raking off the money. Once out of the EU we have some serious cleaning up to do.
As lifelong capitalists, we at C@W have been saying the same for over a decade.
VW execs are not in jail?
WTF not?
RBS. Co-Op directors. BHS. Oxfam.Nat West and many more.
Jail time.
In the good old days if you could get some to turn King's Evidence to ensure convictions you could hang the rest. The procedures would do well on TV and if on a pay to view channel, there might be no cost to the taxpayer.
Going back to one of my first QS jobs with a builder, it was a matter of pide that with about 50 on the staff, we had our own plumber, joinery shop, carpenters, brickies and painters, and subbing was only for larger jobs.
An autocratic Guvnor was all we needed to do the business, and we did.
He only showed us his 'wealth' with a big Rover car, and was generous to a fault when the opportunity presented itself.
Moving on a few years, that all changed, and subbies began to do the work, but were getting paid later and later, and it wasn't fair at all.
So the old Mowlem crowd come Carrillion have burnt their own boats, and there'll be more.
. Even I have mildly disagreed from time to time. There's always the fly in the ointment (jack ketch)
I find myself in broad agreement with Raed, and sometimes even yourself, on a whole range of topics and more than once his observations upon the vagaries of life and the body politic have been in accord with mine own.
On today's topic I don't really have an opinion beyond a feeling we might already have the laws required and it is a case of those laws not being enforced. I'm also sure it will all be better after Brexit....(did I really need to use '/sarcasm' tags there?).
There is also the problem of government favouring the lowest tender irrespective of other considerations, or at least giving that impression. What is a company to do if it wants the contract?
Jack Ketch said: "I'm also sure it will all be better after Brexit....(did I really need to use '/sarcasm' tags there?)."
No one can be sure it will be better after Brexit; but we can be sure we'll have a better chance to correct faults. Why? Because of better transparency.
At the moment most of our regulations (and laws) are made in an opaque manner by largely unelected eurocrats, rubberstamped by a figleaf parliament that has no power to form a government or form an opposition, and that has no demos anyway. The rules are largely made with the lobby input of big eurobusiness in a way that is reminiscent of Nazi and Fascist corporatism.
We are an animal that mimics. The lack of direct accountability to the people by the EU has rubbed off on our own politicians who have too little to do, and too little responsibility because they illegally farmed it out to a foreign power. They are fat, lazy, arrogant, incompetent, just like their EU masters.
The fish rots from the head: it has infected our politicians, our main business leaders, and the civil service. "Lessons will be learned" but no-one accepts responsibility because they no longer really have any at national level. They are just incumbents there to cream off a stonking wedge for themselves whilst blaming their underlings. And all the while the real power is wielded by the EU.
Anon 15.41 - Innovate. Integrate the supply chain. Diversify horizontally. OK, that's all middle management bullshit. Real example.
Your town centre is alsmost certainly being re-paved in grey Chinese granite. The material cost here in the UK is about £65/m2. It's cheap, it's strong, it lasts a long time. But when Tarmac offered acres of it to the Corporation of London for not much more than concrete paving slabs they weren't loss leading; the quarry-gate price in China is £5 - £10/m2, shipping cost is £20/m2. The rest is taken by Chinese middlemen and UK importers / wholesalers. Tarmac sent a team out to China and bought a granite quarry - and cut £40/m2 off their cost. Plus the quarry makes a profit.
That was before the Lafarge takeover in 2013. It's all been downhill since.
The problem is that stupidity is not a crime.
The directors of Carilon were recruited by the owners to grow the business, and grow it they did. With disastrous, but not criminal, results.
The big 4 carried out their lawful duties, to give an opinion on accounts, true and fair view, they said carilion was racking up losses and burning cash, and so it was.
"Equally culpable are the crooks at the big 4 audit firms - KPMG, PwC, Deloitte and EY..."
This has been going on a long, long time (It was painfully obvious in the late 1980's) and won't stop just because the names change. There needs to be some form of legal redress against sloppy or even dishonest accountancy and legal work.
Why pick on Carillion and why now?
The BANKS have been getting away with Carillion-like operations and far, far worse for decades - all ENCOURAGED by Government.
I don't condone what happened but, c'mon..... this is nothing 'new'.
In fact I'd go so far as to suggest that, behind all the Carillion fraud and incompetence, the BANKS have cleaned up and would be found to be more than mere lenders of convenience......
Carillion's management are just bit-part criminals by comparison.
Dave_G: "The BANKS have been getting away with Carillion-like operations and far, far worse for decades - all ENCOURAGED by Government."
Yep, Shut down RBS, and sell off it's assets - such as they are. We'd save the British tax payer another £10bn next year, it's too late for this year, and stem the haemorrhage since 2008 which now amounts to £120bn.
I agree 100%.
I would also like to add that I find it unbelievable that German car companies can defraud millions with their cheating emissions devices for commercial advantage and yet no action is taken against them by either our government or the EU.
In the US car owners affected have been compensated and a senior German car maker executive was sentenced to seven years in prison by a US court (The Guardian 06/12/2017)
Germany runs the EU. Not surprising that the EU takes no action against German car makers.
The banks encourage the government to borrow. Otherwise what is QE?
Where do the banks get their money to lend? You’d think they produced it out of thin air.
Maybe they have a mint out the back.
This is a 'me too' comment. I've seen similar, rather smaller scale, but the behaviour is the same.
Banks do produce money out of thin air.
If you lend them 10 pounds, dollars or whatever, they will lend out a hundred to various customers. Ninety of this is created from thin air. They can do this because they expect only 10% of the people who have lent them money will ask for it back in any given period.
They like to call lending to them "depositing" and present it as a service to the depositor.
If too many depositors want their money back in a hurry, the bank may be unable to produce it, as they have lent it out to various people who may not be ready to repay.
You can't do these tricks when the currency is all gold coins, but they are easy when the currency is digital.
Don Cox
Banks do produce money out of thin air.-DC
+1
Banks don't lend out depositor cash, as far as I am aware they are not allowed. The money is created into existence when they are asked for a loan. Same with credit cards. As soon as you take one, that credit limit is created and held by them. All these shops offering interest free credit get that sum up front into their account. Same model applied to car leasing.
^ in respect to the comments on banks...... Carillion? Pah..... frikken amateurs....
Do retail banks create money out of thin air? No (with one minor caveat).
Does the government's Bank of England create money out of thin air? Yes.
You've seen it yourselves. The 2007-2008 crash would have produced a depression as bad as, or worse than, the 1930s. Gordon Brown the hubristic Chancellor, was fooled by the Chinese Prices Index into creating a housing bubble that crashed dreadfully.
Did the retail banks save themselves? No. If the retail banks could really print money out of thin air they would have done, and saved themselves. They were "saved" by government (state) money, which was possible because the economy was saved from depression by BoE QE - BoE money printed out of thin air.
Whilst Banks do not create money out of thin air they nearly do - they certainly don't lend money out. They require a counterparty before being able to "create" money - actually they are getting a a promissory note, i.e. a promise to pay in the contract, which then a security. See this for starters from the excellent Prof. Richard Werner of Southampton University whom I put in same bracket as Steve Keen
https://www.youtube.com/watch?v=10AIaRNGIZs Werner Like Steve
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