MPs berate Tories over failure to rein in corporate excess
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Version 0 of 1. Andrea Leadsom also criticised for ‘extraordinary’ lack of engagement with Thomas Cook MPs have criticised the government for failing to follow through on plans to rein in corporate excess, in a report examining the failure of 178-year-old tour operator Thomas Cook. Following an inquiry cut short by plans for a general election, the business, energy and industrial strategy select committee called on ministers to move faster to reform the audit profession, strengthen corporate governance and curb executive pay. They said measures that could have achieved these aims had been suggested in the wake of other high-profile collapses such as that of outsourcing firm Carillion, but that the government had failed to take them forward. Business minister Andrea Leadsom also came in for criticism for her “lack of interest” in the weeks leading up to Thomas Cook’s collapse, after the Guardian revealed she did not meet executives from the company as it teetered on the brink. Rachel Reeves, the committee chair, said: “The piling up of debt, confused business plans, lack of challenge in the boardroom and by auditors, and aggressive accounting practices all contributed to the failure of the business. “The failure at Thomas Cook has also been notable for the extraordinary lack of interest shown by the business department and its secretary of state in the days and weeks leading up to the collapse. “It is also a matter of fact that many of the necessary measures on audit, on executive pay, and on corporate governance have been sitting in the government’s in-tray for months.” In a letter to Leadsom, the committee made a series of recommendations to toughen up corporate governance, including stronger provisions to claw back bonuses from directors when companies fail. The MPs said they were disappointed that the government had not pressed ahead with plans to replace accounting regulator the Financial Reporting Council with a new body called the Audit, Reporting and Governance Authority. Sir John Kingman, who led a review of the FRC, proposed the establishment of a new regulator nearly a year ago. He has since warned of the danger of “drift”, after the government failed to draft legislation to implement his suggestions. “Reform of the [accounting] sector is urgently required, and we share Sir John Kingman’s disappointment that proposals were not included in the Queen’s speech,” the committee wrote. They noted Leadsom’s explanation that she was waiting for the conclusion of a separate review of the scope and quality of the audit profession by Sir Donald Brydon. But they were less forgiving with regard to Leadsom’s “extraordinary” lack of engagement with Thomas Cook prior to its failure. The Guardian revealed last month that she did not once speak to Thomas Cook executives during increasingly frantic talks between the company and its investors and regulators leading up to its collapse. |