Can regulation stop financial scandals?
Business failure is often attributed to sharp accounting practices. James Ryans and İrem Tuna say we shouldn’t rush to blame the auditors
Scandals make for good headlines. Be it politics, show business or the Royal Family, newspapers will seize on any suggestion of impropriety and make the most of it.
Business is no different. Scandal sells. Scandal makes exciting reading. Scandal is good box-office – and the past few years have offered plenty of material for scandal-watchers to feed on. Take two notable examples.
Carillion, a construction and outsourcing firm that provided a host of services to the public sector, issued a profit warning in July 2017. Within six months it had collapsed. This was no small matter. Carillion had 43,000 employees, 19,000 of whom were in the UK; the government had to deal with the sudden loss of a major supplier; some companies that had provided goods and services to Carillion were themselves forced into bankruptcy as their bills went unpaid; and there was a hole in the Carillion pension fund that had to be plugged by other, quite blameless, businesses that contributed to the pool underpinning pensions.
Dividends before pensions
There was a further dimension to this particular scandal: despite the pressing need to plug the pensions gap, the company continued to pay out generous dividends – dividends far exceeding the sums it set aside to replenish the pension fund.
