The strange case of Carillion

1. The strange case of Carillion Paul Moxey paul@moxey.co.uk • Quakers and Business Conference 2018

2. http://www.transparency.org.uk/publications/incentivising-ethics-managing-incentives-to-encourage-good-and-deter-bad-behaviour/http://www.transparency.org.uk/publications/incentivising-ethics-managing-incentives-to-encourage-good-and-deter-bad-behaviour/

4. https://www.icsa.org.uk/shop/books/l4-study-texts/certificate-in-corporate-governancehttps://www.icsa.org.uk/shop/books/l4-study-texts/certificate-in-corporate-governance • https://www.amazon.co.uk/Certificate-Corporate-Governance-Paul-Moxey/dp/1860727255/ref=olp_product_details?_encoding=UTF8&me=&qid=1543686839&sr=8-2

5. Corporate reports including the financial statements... • Can almost always be relied upon by investors • Can mostly be relied upon by investors • Can often not be relied upon by investors • Generally not reliable enough for investors to use for investment decisions

6.  Aug 25, 2017 Carillion has been presented with the Queen’s Award for Enterprise in recognition of its contribution to sustainable development. https://www.expressandstar.com/news/business/2017/08/25/carillion-receives-queens-award/ “Through detailed analysis of its relationships with employees, customers, suppliers and other external partners, Carillion was able to demonstrate a strong commercial case for sustainability, integrated with its core strategy, and a contribution to profitability through sustainable behaviours and actions.”

7. “Cash flow from operations represented 117 per cent of profit from operations.” “The Group continues to have substantial liquidity with some £1.5 billion of available funding…The vast majority of the Group’s £1.5 billion of funding matures in November 2020 and beyond.”

8. Strong order book and substantial frameworks and pipeline of contract opportunities • Leadership positions in good markets • Broad capability and trusted partner • A track record of performance • Integrated and sustainable business

10. Our business model

11. The Directors confirm that they have carried out a robust assessment of the principal risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity. On the basis of both reasonably probable and more extreme downside scenarios, the Directors believe that they have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the three-year period of their assessment.

12. Board and Committee performance evaluation At the December 2016 Board meeting, the Directors reviewed the results of the evaluation, which confirmed that the Board, each of its Committees and the Directors continue to be highly effective. Fair, balanced and understandable At its February 2017 meeting the Committee reviewed the Group’s Annual Report and Accounts and recommended them to the Board as representing a fair, balanced and understandable assessment of the Group’s position.

13. Performance and financial review continued The Group is well positioned to continue funding the dividend, which continues to be well covered by cash generated by the business. Furthermore, with around £1.5 billion of funding available to the Group, following the addition of £112 million of funding secured from the Schuldschein market in January 2017, we continue to be well positioned to support our strategy.

15. 29 September 2017 Financial results for the six months ended 30 June 2017 Strategic and operational review update “The Group is compliant with its covenants at 30 June 2017 and is forecast to be in compliance with covenants as at 31 December 2017 and 30 June 2018” “Taking account of the projected trading for the Group over the remainder of the year and the additional bank facility, the Board has a reasonable expectation that the Company and the Group will be able to operate within the level of its available facilities and cash for the foreseeable future”

16. Banks owed £900mPension fund owed £2.6bn43,000 employees, 19,000 in UK. Many more employed in supply chains £2 billion owed to 30,000 suppliers, sub-contractors and other short-term creditors

17. Going Green? • In 1993 Michael Platt, the Pensions Ombudsman, found that Philip Green Coloroll's managing director was guilty of a breach of trust and of maladministration of the pensions scheme. • Philip Green joined Carillion board in 2011 and became Chairman in 2014.

18. What about incentives? Revenue Avoid censure and claims Dividend Long term share price Keep job & bonus ? A quiet life Keep client Profit Do good job Keep senior happy Keep manager happy

19. Individual v Corporate Values and Behaviours Exterior Interior Personal Values and Beliefs Personal Behaviours Individual Corporate Behaviours (Processes, Systems and Results) Corporate Values and Beliefs Corporate based on a model by Ken Wilber and Richard Barrett

21. Seven Levels of Organisational Consciousness Positive Focus / Excessive Focus Service To Humanity and the Planet Social responsibility, future generations, long-term perspective, ethics, compassion, humility Service Strategic Alliances and Partnerships Environmental awareness, community involvement, employee fulfilment, coaching/mentoring Making a Difference Building Internal Community Shared values, vision, commitment, integrity, trust, passion, creativity, openness, transparency Internal Cohesion Continuous Renewal and Learning Accountability, adaptability, empowerment, teamwork, goals orientation, personal growth Transformation High Performance Systems, processes, quality, best practices, pride in performance. Bureaucracy, complacency Self-esteem Employee Recognition Loyalty, open communication, customer satisfaction, friendship. Manipulation, blame Relationship Financial Stability Shareholder value, organisational growth, employee health, safety. Control, corruption, greed Survival Barratt Values Centre

22. A moral hierarchy From Principles to profit Paul Palmarozza and Chris Rees