Irresponsible company bosses who ‘line their own pockets’ face huge fines, PM warns after Carillion scandal
-The PM will outline plans in the coming weeks to crack down on ‘abuse’
-Proposals include giving the pensions regulator power to issue punitive fines
-Mrs May said: ‘Too often we’ve seen top executives reaping big bonuses’
Huge fines will be imposed on irresponsible company bosses who ‘line their own pockets’, Theresa May has warned.
Irresponsible company bosses who “line their own pockets” while failing to protect workers’ pension schemes are to be hit with huge fines, under plans to be announced by Theresa May’s government within weeks.
Writing in the Observer after a week which saw the collapse of Carillion, the construction and outsourcing giant, with a deficit in its pension scheme of up to £900m, the prime minister says her government will act urgently to stamp out “abuse”.
A total of 28,000 members of Carillion’s 13 pension schemes are facing a cut to their retirement funds.
Other measures being considered for inclusion in a white paper in March would give regulators new powers to block or place conditions on takeovers that are deemed to put pension schemes at risk. The regulator will also be given the power to request information about how companies run schemes.
Resurrecting a commitment with which she launched her premiership – to govern “not for a privileged few, but for every one of us” – May says that while governments should not get involved in day-to-day management of businesses, the state should act now “in favour of ordinary working people”.
While the measures will be welcomed by millions of workers, May’s move to intervene directly in the financial affairs of companies is likely to antagonise Tory backers in the City.
Referring to company bosses who put their own financial interests, and those of shareholders, above their workers, May says “tough new rules” will be introduced to tackle the behaviour of “executives who try to line their own pockets by putting their workers’ pensions at risk – an unacceptable abuse that we will end”.
It is understood that the pensions regulator will be given specific powers to issue punitive fines on company directors in cases of clear wrongdoing. Criticising a business culture which too often prioritises immediate financial rewards over long-term stability, she adds: “Too often we’ve seen top executives reaping big bonuses for recklessly putting short-term profit ahead of long-term success. Our best businesses know that is not a responsible way to run a business and those who do so will be forced to explain themselves.”
Among radical potential measures that have been discussed in Whitehall are plans that would leave individual executives personally liable for hefty financial punishments if their companies’ pension schemes collapse. One proposal is for regulators to be empowered to claw back executives’ bonuses after a company and its pension system go to the wall.
The all-party work and pensions committee has recommended a system of “mega fines” on executives who crash their companies and their pension schemes. The committee chair, the Labour MP Frank Field, says such fines would act as a “nuclear deterrent” against abuse and negligent approaches to pensions.
Steve Webb, a former pensions minister and now director of policy at the pensions company Royal London, said: “The last Conservative manifesto floated ideas of tackling firms who put executive pay and dividends ahead of the pension fund, and the Carillion scandal has given that new urgency.
“The prime minister will want to see bonuses clawed back from executives who steer a company onto the rocks, and will want new powers to block takeovers that could threaten the pension scheme. The government could also make sure that ‘recovery plans’ to tackle pension scheme deficits are tougher, putting the pension fund further up the queue relative to dividends and bonuses.
“The Treasury and the business department will be hostile to these sorts of ideas and will not want regulators interfering in the business decisions of corporate Britain. Despite the idealistic rhetoric, I would expect any actual action to be some years away and reserved only for the most extreme cases.”
May’s pledge comes as she faces renewed criticism from some Tory MPs for a lack of willingness to back radical policies. Nick Boles, a former minister, warned last week of a timidity at the heart of her administration.
Field said: “The prime minister said when she first entered Downing Street that she would be on the side of hardworking British people and those who were the underdogs.
“The reforms suggested by the committee – including mega-fines on individuals who crash their companies and pension funds – gives her an opportunity to get on the front foot with this agenda.”
Parliamentary inquiries are already being set up into how the funding shortfall in Carillion’s pension scheme widened before the business’s spectacular collapse. Its deficit rose from £317m in 2015 to £587m by the end of 2016. The final figure is believed to be high as £900m.
With its pension problems mounting, Carillion controversially changed the rules in 2016 to prevent any clawing back of executives’ bonuses should the business eventually collapse.
The government has come under pressure to limit the damage to pension funds from reckless employers since the collapse in 2016 of BHS, the retailer that went into administration with a large black hole in its final salary retirement scheme – and despite paying hundreds of millions of pounds in dividends to its owner Sir Philip Green’s wife, Tina.A consultation green paper last year signalled that ministers planned to get tough with employers who failed to tackle large deficits in their pension funds.
Employers’ lobby groups have argued that increased powers for the pensions regulator would give it undue influence in the running of companies already struggling to juggle the competing demands of shareholders, employees and the need to invest in new equipment. They have pushed back against proposals to allow the regulator to block executive bonuses and dividend payments, arguing that they are intrusive and draconian limits on private enterprises.
A pensions expert, John Ralfe, said the regulator was unlikely to want extra powers that could lead it into protracted disputes with companies about the level of payouts to shareholders and directors.
He said the government should move from a “DIY regulation that judges each scheme on an individual basis” to a blanket rule that forces all final salary pension schemes to measure their liabilities in the same way and reduce deficits over the same time.
Currently, the regulator agrees a separate plan with each employer to determine how long it needs to close its pension deficit. This can range from five to 20 years.
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Source : http://www.dailymail.co.uk/news/article-5293081/PM-threatens-fine-bosses-line-pockets.html?ITO=1490&ns_mchannel=rss&ns_campaign=1490
Source : https://www.theguardian.com/politics/2018/jan/20/theresa-may-i-will-fine-greedy-bosses