CARILLION : AMBITION + HUBRIS = COLLAPSE

The collapse of facilities management and construction company Carillion is a sad example of the hubris shown by some who manage large companies, governments or other organisations. They come to believe that they are all-powerful, unstoppable and unbreakable, when they are anything but.

Carillion's demise, under a mountain of debt, has echoes of the collapse of the once all-conquering giant of the electrical engineering world, GEC. Under the management control of the late Sir Arnold Weinstock, the company was oft criticised for its niggardly ways and its mountains of cash, but it thrived. Once Weinstock departed, the new management dispensed with thrift and, through overconfidence, unfulfillable ambition and foolhardiness spent the cash and built up piles of debt. The inevitable result was collapse and a once-mighty giant of the stock market vanished forever.

Carillion was formed out of parts of the former Tarmac company and seems to have gone the same way as GEC, gobbling up smaller names such as Mowlem, McAlpine and John Laing (later demerged), accumulating huge debts and ultimately collapsing. Thousands of employees are left in limbo, not knowing whether or for how long they will be paid, and many contracts are now at risk. Shockingly, it's reported that some analysts began to have misgivings about the company as long ago as 2013, and yet nothing was done to rectify matters.

As with GEC, the company's auditors must bear a great responsibility, having failed to ring alarm bells. The management of the company did nothing until it began to issue profit warnings quite recently, while saying nothing about the true and parlous state of the company's finances. The governments' 'Financial Reporting Council' has failed miserably in its role of overseeing the application of good standards of Corporate Governance.

Carillion's creditors, mostly large banks but also including many sub-contractors, employees and pensioners are left wondering what, if anything, of what they are owed will ever be paid. No doubt, the government will set up an inquiry; there will be much hot air, political claptrap and grinding and gnashing of teeth, but the result will be the same - little, if anything, will change and many people will lose money.

If it was up to me, the entire board of the company would go to prison and be barred from ever holding any similar role, while the auditors would be heavily fined. What hope is there of any of that happening ?