The Committee expresses disappointment that the Government did not press ahead with necessary audit reforms and bring forward legislation to replace the Financial Reporting Council with the Audit, Reporting and Governance Authority (ARGA). The Committee recommends a new Government push ahead with the required legislation in the first Queen’s Speech of the new Parliament.
The correspondence outlines a number of areas for action, following previous Committee inquiries on Carillion, on the future of audit, and on executive pay. The letter makes a series of recommendations on the role of the board, clawback on bonuses, tackling late payments to small business, and audit issues including conflicts of interest and the use of ‘goodwill’.
The Committee has also published today a number of documents relating to Thomas Cook, including correspondence from Hays Travel, the Secretary of State for DBEIS, and letters relating to advisers to Thomas Cook’s Remuneration Committee.
Rachel Reeves, Chair of the Business, Energy and Industrial Strategy (BEIS) Committee said: “Our inquiry has been cut short by the election but it’s clear that a series of misjudgements at Thomas Cook led to its collapse. The piling up of debt, confused business plans, lack of challenge in the board room and by auditors, and aggressive accounting practices all contributed to the failure of the business.
“During our inquiry, we’ve witnessed buck-passing and blame-shifting but precious little humility or reflection from those at the top of the business. Directors and senior management pocketed hefty sums in annual salaries and bonuses that Thomas Cook staff will only have dreamed of earning throughout their entire careers. Mr Fankhauser told us he would reflect on the huge salaries he has earned. Given the riches which Thomas Cook poured into his pockets I hope that Mr Fankhauser will realise that now is the time to put right the wrong he has done.
“Manny Fontenla-Novoa offered apologies but appeared unable to identify any single thing he would have done differently during his time stacking up debt at Thomas Cook. The circumstances of Harriet Green’s departure remain unclear but her vision of the business would likely have seen fewer stores and fewer staff. We will never know whether it might have rescued the business.
“There was a lack of challenge in the boardroom as the company piled up debt and Thomas Cook management missed opportunities to reduce debt levels and give the business a viable future. Huge financing costs hamstrung attempts to invest in the business. The final collapse of the business resulted in misery and uncertainty for staff and customers, and brought a significant hit to the taxpayer.
“The failure at Thomas Cook has been 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. The CMA and BEIS Committee published proposals in April on reforming the audit market, on tackling conflicts of interest, and on improving audit quality but the Government failed to bring forward the legislation necessary to drive this forward. A new Government needs to put this right and ensure the Queen’s Speech in a new Parliament includes the laws needed to make this a reality”.