The collapse of construction and support-services group Carillion has left a lot of people with a lot of explaining to do. First up, the UK's equity analysts. Even in 2015, says the Financial Times, two-thirds rated Carillion's shares a buy despite warning signs in its accounts. The managers are also in the firing line. Why on earth were they taking huge bonuses in the face of a failure they surely saw coming? Why did they take on so much debt (if there is one lesson for investors here, it is to avoid companies with high levels of debt)? And why did they keep paying dividends, even as their cash-flow woes mounted?
The UK's institutional shareholders are hardly blameless either. They bore on endlessly about how they take a long-term view so why were they demanding those dividends from a firm that was clearly stressed? Short-termism at its worst(see this week's cover story for more on firms who pay dividends that they probably shouldn't). Next there is the civil service (and hence the government) awarding major contracts to firms you know might not be able to deliver is embarrassingly irresponsible. So to whom should all of these people be explaining themselves?
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