Carillion exposes full majesty of the current ‘open the stable door further after the horse has bolted’ FRC corporate governance consultation
AMONGST other things, the sudden but predictable (by the media, small suppliers and private equity funds if not by the government) collapse yesterday of Carillion leaves claims of stronger board level corporate governance from the Theresa May government in further tatters.
With the consultation of corporate governance regulator, the FRC (Financial Reporting Council) still open to submissions until February – effectively a show trial required in order to kill off Theresa May’s rush of blood attention seeking proposal to force boards to appoint workers to their boards – the Carillion receivership further highlights the basic toothlessness of any future anodyne changes it enacts.
Corporate governance expert Gerry Brown notes, “The FRC has carefully selected its consultation options - assign non-executive director to represent employees; nominate a director from the workforce; create an employee advisory council – to, rather uniquely, further open the stable door after the horse has bolted. If we are generous, at best, the FRC consultation proposal matrix is rigorously unchallenging. Advance news that whatever the outcome that the resulting code will be enforced on a “comply or explain” basis (aka companies that ignore it must only provide an explanation for doing so) appears to encourage further board level Carillion-style scandals to go ahead with impunity rather than actively seeking to hinder them happening in future.”
Brown continues, “Whatever the FRC consultation finally ‘reveals’, the new voluntary code will be ineffective when it comes to effecting much needed cultural change at board level. It is the dereliction of their responsibilities by the board of Carillion that now sees workers, suppliers and the taxpayer severely financially punished. After corporate governance scandals too numerous to list, and even if we ignore how the government enabled Carillion by granting further contracts after doubts surfaced, the time for either the government or boards to voluntarily mark their own homework without adequate enforcement legislation is long overdue to be immediately over.”