There is something of the late medieval about the Palace of Westminster of late. Notwithstanding Theresa May’s use of parliamentary powers last invoked by the despot Henry VIII, in the Commons’ committee corridors there is an air of the nasty and brutish.
Witnesses exposed to select committees (qv Sir Philip Green, Mike Ashley, all those bankers) are put in the metaphorical stocks or are subjected to bear-baiting from the House’s attack dogs.
Next week with the carcass of Carillion still warm, the work and pensions and business select committees gang up to begin inquiries. The witch hunt will be led by Frank Field, co-chair of the joint committee. As witchfinder-general he will be in full Vincent Price mode.
It will all be a bit Spanish Inquisition. Mr Field and his co-chairwoman Rachel Reeves have already made their minds up who is to blame for Carillion’s fall: the auditors (KPMG), the pensions regulator, the directors asleep at the wheel.
The committee’s victims this week will include the Financial Reporting Council, a body that won’t say anything if it can get back to you with a proper fudge in six years’ time.
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Next week the directors arrive. Richard Howson, the former chief executive, will be hung, drawn and quartered. His crimes appear to include buying himself an alpine chalet. The committee will also want to know about Keith Cochrane and his £750,000 contract to (not) save the company as interim chief executive. As Carillion’s senior independent director what skeletons should he have known about?
One issue with these grand jury-style hearings is MPs’ tendency to grandstand, aiming for a soundbite on the six o’clock news. Newscasters will have to help explain that the star of the show, Philip Green, has not gone through some extraordinary weight loss but is another of the same name, Carillion’s chairman, proving that the words “Philip Green” are a red flag for impending insolvency.
If select committees are genuine in their inquiry into corporate failure does it help that they are accuser, judge and jury? Are witnesses too exposed without an advocate to help defend them?
Not so long ago we used to have DTI reports, quasi-judicial investigations by a QC and senior accountant which with a case like Carillion would take evidence and tell us who behaved poorly and what lessons should be learnt.
Commons’ public hearings expose clay-footed business people for what they are and quite rightly so. But do they produce what an accountant might call a true and fair account?
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Who knew what?
It is early days in the joint select committee’s inquiry but there are others we should hear from. Not least Carillion’s bankers and how the lenders muffed this up. Did the banks sit on their hands because of ministers’ mixed messaging, which suggested the government might rescue Carillion? Their failure to intervene when a debt-for-equity swap was the obvious solution bears some scrutiny.
But we mustn’t forget to ask: what were Carillion’s owners doing? A year ago several large institutions had serious holdings: Blackrock had 9 per cent and UBS, Brewin Dolphin, Deutsche Bank, Standard Life Aberdeen and Kiltearn Partners held 27 per cent between them. Shouldn’t these investors have expressed misgivings to management about Carillion’s cashflows, questioning the sustainability of the outflow of hundreds of millions of pounds of dividends?
The grand jury of MPs might also wish to hear from the short-sellers. What did they know, these funds that were betting on a fall in Carillion’s share price?
One of the biggest shorters turned out to be its biggest shareholder, Blackrock. MPs could ask Blackrock’s most famous £50,000-a-day consultant and part-time newspaper editor George Osborne what he knew, especially as Blackrock was doubling up on its short-selling of Carillion after Mr Osborne joined its roster. He presumably was as clueless about Carillion as the rest of the Treasury. But given that the big two private finance initiative deals that helped fell Carillion — the Midland and Liverpool hospitals — were signed off during Mr Osborne’s chancellorship, Mr Field and Ms Reeves could have fun asking.
Rescue is grey area
Should we be scandalised to hear that Greybull Capital could emerge as a bidder for part of Carillion? Turnaround specialists — vulture funds, as some prefer — are all over the Carillion carcass. They include Greybull, the fund that rescued Monarch Airlines in 2014 but has since been crucified because it was still holding the parcel when the music stopped in October 2017. If we hate the prospect of Greybull, or its like, being part of the Carillion rescue then we need to ask ourselves what the Carillion solution should be. Do we want civil servants using taxpayers’ money to take control of Carillion? Or do we want a private sector taking risk, savings jobs, which might be matched by subsequent reward?
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Melrose’s place
In business, the prize invariably goes to those who seize the day. When a faltering GKN raged that Melrose’s £7.4 billion hostile takeover offer was “opportunistic” it was meant to hurt. It didn’t because Melrose admitted as much. After 15 years of bobbing and weaving and buying and selling, Melrose didn’t get where it is today without being opportunistic. As any stand-up comedian will tell you, success is all in the, er, timing. Opportunities come and go. They rarely reappear.
