A joint inquiry by the Work and Pensions and BEIS Committees into the company's collapse has published papers from Carillion's remuneration committee (RemCo) which appear to support the analysis by Amra Balic, Head of Stewardship at BlackRock, that the company's board was more concerned with "how to remunerate executives rather than what was going on with the business".
After the company issued its first profit warning in September 2017, RemCo were forced to act to stop employees from fleeing the business. A range of measures were introduced including retention bonuses for senior managers below director level, salary increases for others, and a fee of £750 000 per annum for interim Chief Executive Officer, Keith Cochrane.
Carillion also continued to pay Richard Howson - who had been fired as CEO but kept on in a lesser role "to prop up morale at the unravelling company" - his contractual pay until the company became insolvent, despite suggestions from RemCo evidence that other options may have been available.
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In addition, MPs hit out at bosses contracts which made clawing back bonuses difficult. RemCo did at one point consider asking directors to return their bonuses from 2016, but the weak and restricted terms they had already agreed "made this impossible".
The Committees aded they have seen no evidence to suggest that any further attempts were made to return cash from bonuses to the business.
Shareholders (including BlackRock) also sought to limit the level of bonuses paid to directors in 2016. An attempt by Carillion to raise the maximum bonus level to 150% was met with resistance, forcing the company to back down to 100% of salary maximum bonus pay-out.
Hon Frank Field MP, Chair of the Work & Pensions select committee, said the situation was "greed on stilts, pure and simple".
Rachel Reeves, Chair of the Business, Energy and Industrial Strategy Select Committee, said: "These RemCo papers are further evidence that when the walls were falling down around them, Carillion bosses were focussed on their own pay packets rather than their obligation to address the company's deteriorating balance sheets. While these directors could still walk off with bonuses intact, workers were left fearing for their jobs and suppliers faced ruin.
"Carillion had a notorious reputation for late payments to suppliers. But while suppliers were waiting up to 120 days to be paid, Carillion directors were doing their upmost to ensure there was no impediment to their receipt of fat pay and bonuses.
"Finally, when even the Carillion RemCo considered asking for directors to return their bonuses, the system and culture was so dysfunctional, and the terms and clawback provisions so weak, that even this meek step was ruled out."
(LM/MH)
