Should HM Gov' Bail Out Carillion?

Jez mon

I mean, if you had twenty bikes half way through being built, and had the opportunity to start the process of building another one, which would help protect the investment you've already put into the twenty half built bikes...

No one comes out of this looking great. The issues with PFI are clearly more complex than just private companies getting rich off the back of the tax payer. The issues at Carillion sound like horrendous mismanagement, it would be interesting to see whether there is any link between board pay and performance!?

If I was being cynical I might say that the people that this is a good example of wealth redistribution from tax payers to shareholders and directors, through pfi (they were still paying dividends to the end) with a large amount of wealth being distributed to hedge funds at the very end, who presumably stick it to pension funds when they short shares? Admittedly, that's woefully simplified

mamba80

The Carillion thing is just yet another example of corporate greed allowed to go unchecked, under the smoke screen of private business is more efficient than state.
Why havent we got workers on boards? a tory manifesto promise.... then broken, this would at the very least have stopped some of the excesses of Carillion.... who will be paying their former CEO until next October, would they have run down the pension scheme with an actual "to be" pensioner on the board?
Emergency inquiry into the directors? BS, the insolvency service cannot recover or claw back bonuses or wages paid, just another PR exercise, just as the one of Fred Goodwin was, under Labour.

The tories have supported Carillion despite knowing they were pouring good money after bad because on-going privatisation cannot been seen to fail... well it has now.

slowmart

mamba80 wrote:

The Carillion thing is just yet another example of corporate greed allowed to go unchecked, under the smoke screen of private business is more efficient than state.
Why havent we got workers on boards? a tory manifesto promise.... then broken, this would at the very least have stopped some of the excesses of Carillion.... who will be paying their former CEO until next October, would they have run down the pension scheme with an actual "to be" pensioner on the board?
Emergency inquiry into the directors? BS, the insolvency service cannot recover or claw back bonuses or wages paid, just another PR exercise, just as the one of Fred Goodwin was, under Labour.

The tories have supported Carillion despite knowing they were pouring good money after bad because on-going privatisation cannot been seen to fail... well it has now.

What constitutes a worker? Why would a worker have a grounded insight which would be relevant to the strategic direction of a business? Would that alone remedy the issues that are pertinent here?

Until you re balance the boards legal obligations and thereby the senior leaderships KPI’s beyond sharepirce value into a broader spectrum of pensions then the news about pension deficits will be a reoccurring theme in the news.

And if you think nationalisation is the answer comrade, re evaluate your thinking until you see that the socialist utopia is nothing more than mental masturbation for socialist worker members

Stevo_666

Jez mon wrote:

I mean, if you had twenty bikes half way through being built, and had the opportunity to start the process of building another one, which would help protect the investment you've already put into the twenty half built bikes...

No one comes out of this looking great. The issues with PFI are clearly more complex than just private companies getting rich off the back of the tax payer. The issues at Carillion sound like horrendous mismanagement, it would be interesting to see whether there is any link between board pay and performance!?

If I was being cynical I might say that the people that this is a good example of wealth redistribution from tax payers to shareholders and directors, through pfi (they were still paying dividends to the end) with a large amount of wealth being distributed to hedge funds at the very end, who presumably stick it to pension funds when they short shares? Admittedly, that's woefully simplified

I would say its probably wrong if the company was losing so much on some of these contracts that it went bust. The claims that PFI companies are milking it seem to be a bit thin on the ground in the last week.

The profits or losses made by shareholders and hedge funds on the stock movements are not connected with the taxpayer or the company itself - they only concern the buyers and sellers of the shares.

Stevo_666

mamba80 wrote:

The Carillion thing is just yet another example of corporate greed allowed to go unchecked, under the smoke screen of private business is more efficient than state.
Why havent we got workers on boards? a tory manifesto promise.... then broken, this would at the very least have stopped some of the excesses of Carillion.... who will be paying their former CEO until next October, would they have run down the pension scheme with an actual "to be" pensioner on the board?
Emergency inquiry into the directors? BS, the insolvency service cannot recover or claw back bonuses or wages paid, just another PR exercise, just as the one of Fred Goodwin was, under Labour.

The tories have supported Carillion despite knowing they were pouring good money after bad because on-going privatisation cannot been seen to fail... well it has now.

Here we go again...one corporate failure and we need to nationalise :roll:

What exactly would you nationalise and how much would it cost....

slowmart

https://www.theguardian.com/money/2018/ ... oat-rescue

Sober reading, not only about the number of FTSE 100 companies with pension deficits larger than the net value of the business but the amount paid out in dividends whilst pension deficits remain.

To a degree it’s a circular argument as many private pensions will be invested, in part, in stocks and shares which will qualify for dividend payments.

pblakeney

Slowmart wrote:

https://www.theguardian.com/money/2018/jan/16/after-carillion-how-many-firms-can-the-pensions-lifeboat-rescue

Sober reading, not only about the number of FTSE 100 companies with pension deficits larger than the net value of the business but the amount paid out in dividends whilst pension deficits remain.

To a degree it’s a circular argument as many private pensions will be invested, in part, in stocks and shares which will qualify for dividend payments.

A neat way of describing the Ponzi scheme that it is...

FishFish

Slowmart wrote:

https://www.theguardian.com/money/2018/jan/16/after-carillion-how-many-firms-can-the-pensions-lifeboat-rescue

Sober reading, not only about the number of FTSE 100 companies with pension deficits larger than the net value of the business but the amount paid out in dividends whilst pension deficits remain.

To a degree it’s a circular argument as many private pensions will be invested, in part, in stocks and shares which will qualify for dividend payments.

There is an economic argument that the value of a company and its shares is the same if it retains and re-invests its free cash into projects - assuming the same discount rate as the cost of capital. You may be right but the defined benefit schemes are not making risk investments because of the very issues that are now becoming evident. I don't think they are allowed to. The pensions defecits arise because of low bond yields and the fact that companies and employers took advantage of soaring stock prices in the 80's and 90s by taking a pension fund contribution holiday and because the companies recouped the fund valuation excess into their balance sheet reserves.

If interest rates rise then there will be a corresponding reduction in defined benefit PF defecit.

It works this way: If you have to pay a person £1 a year for a long time and the interest rate in 1% then you need £100 - the liability. If the rate (eg bond yield) increases to 2% then the liability drops to £50. If the rate drops to half % then the liability increases to £200.

surrey_commuter

PBlakeney wrote:

Slowmart wrote:

https://www.theguardian.com/money/2018/jan/16/after-carillion-how-many-firms-can-the-pensions-lifeboat-rescue

Sober reading, not only about the number of FTSE 100 companies with pension deficits larger than the net value of the business but the amount paid out in dividends whilst pension deficits remain.

To a degree it’s a circular argument as many private pensions will be invested, in part, in stocks and shares which will qualify for dividend payments.

A neat way of describing the Ponzi scheme that it is...

It is the exact opposite - it is a defined scheme with defined liabilities and assets.

For a Ponzi scheme you need to look at public sector pensions the deficit for which is vast and they are not even valued in the same way as private sector. To get an idea of the real size of the problem check out the deficits at privatised industries such as BA and BT.

FishFish

I don't think the liabilities are defined. The assets, cash, bonds, investments have an economic measurement but the liabilites are not measurable in the same way. The cash flow - the outflows to pensioners is measurable and the predicted flows for future pensioners is but the funding liability are those divided by an interest rate which is only measurable today.

mamba80

Stevo 666 wrote:

mamba80 wrote:

The Carillion thing is just yet another example of corporate greed allowed to go unchecked, under the smoke screen of private business is more efficient than state.
Why havent we got workers on boards? a tory manifesto promise.... then broken, this would at the very least have stopped some of the excesses of Carillion.... who will be paying their former CEO until next October, would they have run down the pension scheme with an actual "to be" pensioner on the board?
Emergency inquiry into the directors? BS, the insolvency service cannot recover or claw back bonuses or wages paid, just another PR exercise, just as the one of Fred Goodwin was, under Labour.

The tories have supported Carillion despite knowing they were pouring good money after bad because on-going privatisation cannot been seen to fail... well it has now.

Here we go again...one corporate failure and we need to nationalise :roll:

What exactly would you nationalise and how much would it cost....

Clearly private business is not always as efficient as state and no-where did i call for any privatisation ???? learn to read the post before typing an answer

its not just one corporate failure though is it? lets see what private banks did in 2008 shall we? and how no-one was called to account in any meaningful way.

google directors pay and pension deficient s

Are you arguing that the gov was correct to continue giving contracts to carillion? there by giving a strong impression to all their contractors etc that this was a solvent company, they should be doing business with.

Workers on boards was a TORY promise and if its good enough for many multinational companies, then why not the UK? or are our directors worried it might clip their greed?

slowmart

mamba80 wrote:

Stevo 666 wrote:

mamba80 wrote:

The Carillion thing is just yet another example of corporate greed allowed to go unchecked, under the smoke screen of private business is more efficient than state.
Why havent we got workers on boards? a tory manifesto promise.... then broken, this would at the very least have stopped some of the excesses of Carillion.... who will be paying their former CEO until next October, would they have run down the pension scheme with an actual "to be" pensioner on the board?
Emergency inquiry into the directors? BS, the insolvency service cannot recover or claw back bonuses or wages paid, just another PR exercise, just as the one of Fred Goodwin was, under Labour.

The tories have supported Carillion despite knowing they were pouring good money after bad because on-going privatisation cannot been seen to fail... well it has now.

Here we go again...one corporate failure and we need to nationalise :roll:

What exactly would you nationalise and how much would it cost....

Clearly private business is not always as efficient as state and no-where did i call for any privatisation ???? learn to read the post before typing an answer

its not just one corporate failure though is it? lets see what private banks did in 2008 shall we? and how no-one was called to account in any meaningful way.

google directors pay and pension deficient s

Are you arguing that the gov was correct to continue giving contracts to carillion? there by giving a strong impression to all their contractors etc that this was a solvent company, they should be doing business with.

Workers on boards was a TORY promise and if its good enough for many multinational companies, then why not the UK? or are our directors worried it might clip their greed?

Please define what a “worker” is? Toilet cleaner, call centre operator, senior management, salesperson? How many “workers” on a board. Only one and they”ll be out voted. A majorit6 would mean bigger issues for the business past the point of executive renumeration. How would that have negated Carillions demise?

It’s too simplistic to suggest HMG were wrong to award contracts post profit warnings. Balfour Beatty were in a similar position recently and have continued to trade and have now significantly improved their position. The alternative not to award the contracts would have, without doubt, triggered the demise sooner. I’m hoping the relent HMG departments did their due diligence before awarding specific contracts but we will have to wait and see.

Let’s not forget the auditors gave the business a clean bill of health in March 2017 who now find themselves (again) under investigation about their role.

I doubt whatever lessons there are to learn will trigger any meaningful legislation. BHS anyone? The only difference I can between Green and Maxwell is Maxwell took the cash out of the employee pension market while Green took company cash as a dividend. Whilst he has been bought to book it’s dissapointing his actions aren’t just morally wrong but hey still aren’t illegal.

surrey_commuter

FishFish wrote:

I don't think the liabilities are defined. The assets, cash, bonds, investments have an economic measurement but the liabilites are not measurable in the same way. The cash flow - the outflows to pensioners is measurable and the predicted flows for future pensioners is but the funding liability are those divided by an interest rate which is only measurable today.

Or it can be valued by selling to a 3rd party. You may not like the way liabilities are defined but they are defined.

Anyway the good news is people aren't living as long so those mortality tables will be much cheerier.

bompington

Surrey Commuter wrote:

Anyway the good news is people aren't living as long so those mortality tables will be much cheerier.

I've just had a sudden flash of inspiration that might explain an awful lot of government policy :shock:

TheBigBean

lostboysaint wrote:

Once again you've completely missed the point and are confusing the construction contract with what most PFI contacts offered - which was a 25 year turnkey package, full FF&E (not included in almost all construction contracts), funded, maintained. And I'm afraid you are, as a result, miles out with your opinion of what the breakdown of costs is/was.

More than happy to discuss via PM rather than bore the others into submission.

If you have inferred from what I have written that I do not understand the term or structure of the a PFI contract, then my posts must be sufficiently lacking in clarity that further discussion would be futile.

TheBigBean

mamba80 wrote:

its not just one corporate failure though is it? lets see what private banks did in 2008 shall we? and how no-one was called to account in any meaningful way.

This is a fair point. Too many fines and not enough prosecutions.

rick_chasey

It'd be nice if someone explained to Corbyn that monopsonies are also costly, not just monopolies.

FishFish

Surrey Commuter wrote:

FishFish wrote:

I don't think the liabilities are defined. The assets, cash, bonds, investments have an economic measurement but the liabilites are not measurable in the same way. The cash flow - the outflows to pensioners is measurable and the predicted flows for future pensioners is but the funding liability are those divided by an interest rate which is only measurable today.

Or it can be valued by selling to a 3rd party. You may not like the way liabilities are defined but they are defined.

Anyway the good news is people aren't living as long so those mortality tables will be much cheerier.

You can't sell the fund liability. Not only would it be a breach of the pension fund terms but even if you paid one penny you still have to fund the defecit. You can buy off the liability from individuals by offering them a defined contribution scheme but in truth that does not seem to work - and it is only the company that can do it rather than a third party.

FishFish

mamba80 wrote:

Workers on boards was a TORY promise and if its good enough for many multinational companies, then why not the UK? or are our directors worried it might clip their greed?

The FRC are now proposing a revision to the Code of Corporate Governance - and because they are proposing it then it will be required for listed companies at least.

The revision includes Board shopfloor representation and the curious addition to the diversity requirement which is for'...cognitive diversity'. My initial thought was that was for the addition of thick people (or of course intelligent people in the not impossible scenario that the Board is thick). On questioning the FRC I get that it means people who think differently.

Seems to me that in this forum alone there is plenty of scope...

surrey_commuter

bompington wrote:

Surrey Commuter wrote:

Anyway the good news is people aren't living as long so those mortality tables will be much cheerier.

I've just had a sudden flash of inspiration that might explain an awful lot of government policy :shock:

from a Govt point of view it really is get the bunting out time

surrey_commuter

FishFish wrote:

Surrey Commuter wrote:

FishFish wrote:

I don't think the liabilities are defined. The assets, cash, bonds, investments have an economic measurement but the liabilites are not measurable in the same way. The cash flow - the outflows to pensioners is measurable and the predicted flows for future pensioners is but the funding liability are those divided by an interest rate which is only measurable today.

Or it can be valued by selling to a 3rd party. You may not like the way liabilities are defined but they are defined.

Anyway the good news is people aren't living as long so those mortality tables will be much cheerier.

You can't sell the fund liability. Not only would it be a breach of the pension fund terms but even if you paid one penny you still have to fund the defecit. You can buy off the liability from individuals by offering them a defined contribution scheme but in truth that does not seem to work - and it is only the company that can do it rather than a third party.

maybe I have used the wrong term but there is definitely an option to sell (?) to a 3rd party. The price you pay would be far higher than current liabilities but my point is that it puts a price on liabilities.

FishFish

You could sell the net assets but not the liabilities. No one would buy a net liability - well perhaps a husband would!

surrey_commuter

FishFish wrote:

You could sell the net assets but not the liabilities. No one would buy a net liability - well perhaps a husband would!

if we are being pedantic you could not sell the assets either. I am guessing you know what I mean that a deal could be done with a 3rd party.

mamba80

Slowmart wrote:

Please define what a “worker” is? Toilet cleaner, call centre operator, senior management, salesperson? How many “workers” on a board. Only one and they”ll be out voted. A majorit6 would mean bigger issues for the business past the point of executive renumeration. How would that have negated Carillions demise?

It’s too simplistic to suggest HMG were wrong to award contracts post profit warnings. Balfour Beatty were in a similar position recently and have continued to trade and have now significantly improved their position. The alternative not to award the contracts would have, without doubt, triggered the demise sooner. I’m hoping the relent HMG departments did their due diligence before awarding specific contracts but we will have to wait and see.

Let’s not forget the auditors gave the business a clean bill of health in March 2017 who now find themselves (again) under investigation about their role.

I doubt whatever lessons there are to learn will trigger any meaningful legislation. BHS anyone? The only difference I can between Green and Maxwell is Maxwell took the cash out of the employee pension market while Green took company cash as a dividend. Whilst he has been bought to book it’s dissapointing his actions aren’t just morally wrong but hey still aren’t illegal.

All you are doing is arguing for the status quo, which is to be fair, is what will undoubtedly happen.

slowmart

mamba80 wrote:

Slowmart wrote:

Please define what a “worker” is? Toilet cleaner, call centre operator, senior management, salesperson? How many “workers” on a board. Only one and they”ll be out voted. A majorit6 would mean bigger issues for the business past the point of executive renumeration. How would that have negated Carillions demise?

It’s too simplistic to suggest HMG were wrong to award contracts post profit warnings. Balfour Beatty were in a similar position recently and have continued to trade and have now significantly improved their position. The alternative not to award the contracts would have, without doubt, triggered the demise sooner. I’m hoping the relent HMG departments did their due diligence before awarding specific contracts but we will have to wait and see.

Let’s not forget the auditors gave the business a clean bill of health in March 2017 who now find themselves (again) under investigation about their role.

I doubt whatever lessons there are to learn will trigger any meaningful legislation. BHS anyone? The only difference I can between Green and Maxwell is Maxwell took the cash out of the employee pension market while Green took company cash as a dividend. Whilst he has been bought to book it’s dissapointing his actions aren’t just morally wrong but hey still aren’t illegal.

All you are doing is arguing for the status quo, which is to be fair, is what will undoubtedly happen.

FishFish

Surrey Commuter wrote:

FishFish wrote:

You could sell the net assets but not the liabilities. No one would buy a net liability - well perhaps a husband would!

if we are being pedantic you could not sell the assets either. I am guessing you know what I mean that a deal could be done with a 3rd party.

Net assets are total assets less total liabilities. They cannot be split. Both Costain and Balfour Beatty arranged for a third party to offer individuals an alternative to the DB schems they were in. Failed. Neither the PF or the company can sell a DB pension scheme - but you can - such as Maxwell steal one.

I'm guessing that you are a Great Professor.

surrey_commuter

FishFish wrote:

Surrey Commuter wrote:

FishFish wrote:

You could sell the net assets but not the liabilities. No one would buy a net liability - well perhaps a husband would!

if we are being pedantic you could not sell the assets either. I am guessing you know what I mean that a deal could be done with a 3rd party.

Net assets are total assets less total liabilities. They cannot be split. Both Costain and Balfour Beatty arranged for a third party to offer individuals an alternative to the DB schems they were in. Failed. Neither the PF or the company can sell a DB pension scheme - but you can - such as Maxwell steal one.

I'm guessing that you are a Great Professor.

Maybe we are in different countries, but in the UK you are wrong

FishFish

OK so you are not a Great Professor.

I'm struggling to find an example where any organisation was stupid enough to buy pension fund there is an anecdotal example of Kaiser Willhelm's grandson buying an insurance company because he could not insure his car whilst he was a student (at Cambridge - one of my almas mater). But I defer to your Great Knowledge of the pensions industry.

FishFish

FishFish wrote:

OK so you are not a Great Professor.

I'm struggling to find an example where any organisation was stupid enough to buy pension fund there is an anecdotal example of Kaiser Willhelm's grandson buying an insurance company because he could not insure his car whilst he was a student (at Cambridge - one of my almas mater). But I defer to your Great Knowledge of the pensions industry.

robert88

FishFish wrote:

OK so you are not a Great Professor.

I'm struggling to find an example where any organisation was stupid enough to buy pension fund there is an anecdotal example of Kaiser Willhelm's grandson buying an insurance company because he could not insure his car whilst he was a student (at Cambridge - one of my almas mater). But I defer to your Great Knowledge of the pensions industry.

A pension fund is a valuable asset. If you don't understand that then what do you understand?