Should HM Gov' Bail Out Carillion?

TheBigBean

Rick Chasey wrote:

Finally, it also seems that, with new evidence, PFI is not as successful as it was once thought to have been, according to the NAO.

The report is an infuriating read. It continually argues that risk transfer should not be included in value for money assessments, and yet states.

The IPA told us that one of the benefits of PFI was that if problems with a building emerge, for example due to poor initial construction work, this will be the responsibility of the private sector, not the public sector. It notes that problems in Edinburgh PFI schools and fire safety defects discovered in PFI hospitals were being resolved by the SPVs responsible for the building.

It also repeatedly states that the public sector is worse off in cases where costs have reduced over recent years e.g. insurance, interest rates etc.. This is what happens when you have a fixed price - sometimes you win sometimes you lose. Yet, no mention of the fact that the government is still paying 4%+ on plenty of gilts.

coopster_the_1st

rjsterry wrote:

Coopster the 1st wrote:

rjsterry wrote:

Coopster the 1st wrote:

Ignoring the tory manifesto pledge,

Well if the government is ignoring it, why should anyone else give it the time of day?

I was ignoring it from the argument as mambo likes divert from the main issue raised, just like you are looking to do

You're reading way too much into one sarky comment. FWIW, I don't think shop floor representation on boards is a solution to poor management. It's a sticking plaster, and about as useful as sending the directors down to the shop floor for a day or two.

We agree that shop floor representation would be useless. My point was that any board would make sure someone compliant would be chosen and mechanisms put in place so they would comply eg a financial incentive to be in that position.

The naivety of mambo is strong in thinking it would make any difference

Stevo_666

mamba80 wrote:

rjsterry wrote:

Coopster the 1st wrote:

rjsterry wrote:

Coopster the 1st wrote:

Ignoring the tory manifesto pledge,

Well if the government is ignoring it, why should anyone else give it the time of day?

I was ignoring it from the argument as mambo likes divert from the main issue raised, just like you are looking to do

You're reading way too much into one sarky comment. FWIW, I don't think shop floor representation on boards is a solution to poor management. It's a sticking plaster, and about as useful as sending the directors down to the shop floor for a day or two.

Aside from Italy, the UK is the only major euro eco that has no legislation in this respect.

i dont think i ve read anywhere its a solution to poor management.

but so far, apart from this idea, no one has come forward with alternatives, just negativity.

There are only really 4 major European economies - UK, France, Germany and Italy. So that's 50% that don't have them.

Like others on here, I don't really see what they achieve. Also it could well be a positive hindrance if the board needs to discuss certain matters impacting employees, even if they are only points for consideration.

There are other ways to deal with this such as the employee forums and some good old fashioned decent internal communication. Seems to work fine where I am.

Lookyhere

Coopster the 1st wrote:

rjsterry wrote:

Coopster the 1st wrote:

rjsterry wrote:

Coopster the 1st wrote:

Ignoring the tory manifesto pledge,

Well if the government is ignoring it, why should anyone else give it the time of day?

I was ignoring it from the argument as mambo likes divert from the main issue raised, just like you are looking to do

You're reading way too much into one sarky comment. FWIW, I don't think shop floor representation on boards is a solution to poor management. It's a sticking plaster, and about as useful as sending the directors down to the shop floor for a day or two.

We agree that shop floor representation would be useless. My point was that any board would make sure someone compliant would be chosen and mechanisms put in place so they would comply eg a financial incentive to be in that position.

The naivety of mambo is strong in thinking it would make any difference

So you agree boards are corrupt... nice.

coopster_the_1st

Lookyhere wrote:

Coopster the 1st wrote:

rjsterry wrote:

Coopster the 1st wrote:

rjsterry wrote:

Coopster the 1st wrote:

Ignoring the tory manifesto pledge,

Well if the government is ignoring it, why should anyone else give it the time of day?

I was ignoring it from the argument as mambo likes divert from the main issue raised, just like you are looking to do

You're reading way too much into one sarky comment. FWIW, I don't think shop floor representation on boards is a solution to poor management. It's a sticking plaster, and about as useful as sending the directors down to the shop floor for a day or two.

We agree that shop floor representation would be useless. My point was that any board would make sure someone compliant would be chosen and mechanisms put in place so they would comply eg a financial incentive to be in that position.

The naivety of mambo is strong in thinking it would make any difference

So you agree boards are corrupt... nice.

Your choice of word, not mine.

You could be the most talented employee in the company but if you are obstructive to the views of your bosses, you are not going to climb very far up the corporate ladder. No amount of 'worker on the board' legislation is going to change that.

Jez mon

Stevo 666 wrote:

There are only really 4 major European economies - UK, France, Germany and Italy. So that's 50% that don't have them.

Like others on here, I don't really see what they achieve. Also it could well be a positive hindrance if the board needs to discuss certain matters impacting employees, even if they are only points for consideration.

There are other ways to deal with this such as the employee forums and some good old fashioned decent internal communication. Seems to work fine where I am.

I think it's one of those small steps that can go to changing a culture. It is naive to think of it as some magic pill that will ensure better governance. On the other hand, I don't think it would hurt, yes, it might make some conversations difficult. But they probably should be difficult conversations...

rjsterry

Coopster the 1st wrote:

rjsterry wrote:

Coopster the 1st wrote:

rjsterry wrote:

Coopster the 1st wrote:

Ignoring the tory manifesto pledge,

Well if the government is ignoring it, why should anyone else give it the time of day?

I was ignoring it from the argument as mambo likes divert from the main issue raised, just like you are looking to do

You're reading way too much into one sarky comment. FWIW, I don't think shop floor representation on boards is a solution to poor management. It's a sticking plaster, and about as useful as sending the directors down to the shop floor for a day or two.

We agree that shop floor representation would be useless. My point was that any board would make sure someone compliant would be chosen and mechanisms put in place so they would comply eg a financial incentive to be in that position.

The naivety of mambo is strong in thinking it would make any difference

I didn't say they were necessarily useless. I think senior management can become remote from day-to-day operation in any business, and that usually has negative consequences. I'm not sure that's the problem here, though.

mamba80

Coopster the 1st wrote:

Lookyhere wrote:

Coopster the 1st wrote:

rjsterry wrote:

Coopster the 1st wrote:

rjsterry wrote:

Coopster the 1st wrote:

Ignoring the tory manifesto pledge,

Well if the government is ignoring it, why should anyone else give it the time of day?

I was ignoring it from the argument as mambo likes divert from the main issue raised, just like you are looking to do

You're reading way too much into one sarky comment. FWIW, I don't think shop floor representation on boards is a solution to poor management. It's a sticking plaster, and about as useful as sending the directors down to the shop floor for a day or two.

We agree that shop floor representation would be useless. My point was that any board would make sure someone compliant would be chosen and mechanisms put in place so they would comply eg a financial incentive to be in that position.

The naivety of mambo is strong in thinking it would make any difference

So you agree boards are corrupt... nice.

Your choice of word, not mine.

You could be the most talented employee in the company but if you are obstructive to the views of your bosses, you are not going to climb very far up the corporate ladder. No amount of 'worker on the board' legislation is going to change that.

thats an about turn, first its they d bribe them, now its career limiting, either way it shows you ve a very poor opinion of the standard of UK directors.
Same argument could be made for union reps, on a workers committee or indeed anyone with the temerity to disagree with ones superiors :roll:

havin said that i do agree on legislation, people can have a way of getting round laws... culture change is better way to address it,
if you disagree soooo strongly, whats your answer then?

surrey_commuter

mamba80 wrote:

Coopster the 1st wrote:

Lookyhere wrote:

Coopster the 1st wrote:

rjsterry wrote:

Coopster the 1st wrote:

rjsterry wrote:

Coopster the 1st wrote:

Ignoring the tory manifesto pledge,

Well if the government is ignoring it, why should anyone else give it the time of day?

I was ignoring it from the argument as mambo likes divert from the main issue raised, just like you are looking to do

You're reading way too much into one sarky comment. FWIW, I don't think shop floor representation on boards is a solution to poor management. It's a sticking plaster, and about as useful as sending the directors down to the shop floor for a day or two.

We agree that shop floor representation would be useless. My point was that any board would make sure someone compliant would be chosen and mechanisms put in place so they would comply eg a financial incentive to be in that position.

The naivety of mambo is strong in thinking it would make any difference

So you agree boards are corrupt... nice.

Your choice of word, not mine.

You could be the most talented employee in the company but if you are obstructive to the views of your bosses, you are not going to climb very far up the corporate ladder. No amount of 'worker on the board' legislation is going to change that.

thats an about turn, first its they d bribe them, now its career limiting, either way it shows you ve a very poor opinion of the standard of UK directors.
Same argument could be made for union reps, on a workers committee or indeed anyone with the temerity to disagree with ones superiors :roll:

havin said that i do agree on legislation, people can have a way of getting round laws... culture change is better way to address it,
if you disagree soooo strongly, whats your answer then?

Maybe make it compulsory to have your accounts OK'ed by financial professionals so that they are an honest representation of the company's financial position. If these financial professionals signed off accounts that were not accurate then they should face potentially crippling fines.
Pension wise they could set up an overseeing body that has the powers to make a company make payments to reduce their pension deficit. This could reflect the company's ability to pay, with dividends being seen as an ability to pay rather than an alternative.

coopster_the_1st

mamba80 wrote:

Coopster the 1st wrote:

Lookyhere wrote:

Coopster the 1st wrote:

rjsterry wrote:

Coopster the 1st wrote:

rjsterry wrote:

Coopster the 1st wrote:

Ignoring the tory manifesto pledge,

Well if the government is ignoring it, why should anyone else give it the time of day?

I was ignoring it from the argument as mambo likes divert from the main issue raised, just like you are looking to do

You're reading way too much into one sarky comment. FWIW, I don't think shop floor representation on boards is a solution to poor management. It's a sticking plaster, and about as useful as sending the directors down to the shop floor for a day or two.

We agree that shop floor representation would be useless. My point was that any board would make sure someone compliant would be chosen and mechanisms put in place so they would comply eg a financial incentive to be in that position.

The naivety of mambo is strong in thinking it would make any difference

So you agree boards are corrupt... nice.

Your choice of word, not mine.

You could be the most talented employee in the company but if you are obstructive to the views of your bosses, you are not going to climb very far up the corporate ladder. No amount of 'worker on the board' legislation is going to change that.

thats an about turn, first its they d bribe them, now its career limiting, either way it shows you ve a very poor opinion of the standard of UK directors.
Same argument could be made for union reps, on a workers committee or indeed anyone with the temerity to disagree with ones superiors :roll:

havin said that i do agree on legislation, people can have a way of getting round laws... culture change is better way to address it,
if you disagree soooo strongly, whats your answer then?

Let's put yourself in this new board position. Now the board offer you an end of year bonus equal to your salary for the extra responsibility you have taken on based on your 'performance' in the role. To think many people are going to rock the boat risking this bonus in very naive. Just look around you at people who have moved up the ladder and become more 'corporate'. They start thinking more and more about budgets and business profitability and less about the pay that Joe Bloggs the cleaner gets.

Do you know many union reps who attain a promotion? No, there's a reason for that! Why would a business risk this when there are plenty of 'better' candidates?

You are edging towards the politics of envy with your views.

Businesses are constantly evolving, some will benefit from this, the bad ones will fail. Failing businesses should be allowed to fail so that better businesses can replace them. Carillion with their pricing practices was damaging a whole industry in a pricing race to the bottom. Those remaining and the new businesses that replace Carillion should be much better for their employees.

I'm loathe to bring in more business regulation as there are always unknown consequences. However I do think pensions should be better protected and some formula meaning that director pay rises, bonuses and shareholder dividends are limited until pension deficits are resolved. However this could just mean more businesses will offer less or only the minimum required pension provision

mamba80

Coopster the 1st wrote:

mamba80 wrote:

thats an about turn, first its they d bribe them, now its career limiting, either way it shows you ve a very poor opinion of the standard of UK directors.
Same argument could be made for union reps, on a workers committee or indeed anyone with the temerity to disagree with ones superiors :roll:

havin said that i do agree on legislation, people can have a way of getting round laws... culture change is better way to address it,
if you disagree soooo strongly, whats your answer then?

Let's put yourself in this new board position. Now the board offer you an end of year bonus equal to your salary for the extra responsibility you have taken on based on your 'performance' in the role. To think many people are going to rock the boat risking this bonus in very naive. Just look around you at people who have moved up the ladder and become more 'corporate'. They start thinking more and more about budgets and business profitability and less about the pay that Joe Bloggs the cleaner gets.

Do you know many union reps who attain a promotion? No, there's a reason for that! Why would a business risk this when there are plenty of 'better' candidates?

You are edging towards the politics of envy with your views.

Businesses are constantly evolving, some will benefit from this, the bad ones will fail. Failing businesses should be allowed to fail so that better businesses can replace them. Carillion with their pricing practices was damaging a whole industry in a pricing race to the bottom. Those remaining and the new businesses that replace Carillion should be much better for their employees.

I'm loathe to bring in more business regulation as there are always unknown consequences. However I do think pensions should be better protected and some formula meaning that director pay rises, bonuses and shareholder dividends are limited until pension deficits are resolved. However this could just mean more businesses will offer less or only the minimum required pension provision

How many workers who keep their heads down, compliant, do their job & then get promoted to sen management? few people start on the shop floor and end up in the board, having said that, a good friend of mine did exactly that, became CEO and trust me, he is quite the socialist lol! started with the same company at 16, CEO in his 40's his rewards are very high and rightly so, he treats his staff really well.

I dont see why revolving elected reps (6 or 12months) cant be on the board, sure they arent going to have the casting vote on that latest acquisition but maybe they can be allowed to feed back certain other decisions? as i say, its fairly common across Europe, do you think german industry is on the whole, badly run? can we learn from them? (VW aside!!)

My interest in this is that corps should nt be allowed to run down pension funds, whilst paying themselves ever larger salaries, dividends and share schemes and in the case of Carillion, future proofing themselves knowing the company is failing, i mean who agrees to pay the ex CEO a years salary on top of his golden handshake.... its fraud.

i really dont see wanting to a little more transparency as "the politics of envy"

slowmart

mamba80 wrote:

Coopster the 1st wrote:

mamba80 wrote:

How many workers who keep their heads down, compliant, do their job & then get promoted to sen management? few people start on the shop floor and end up in the board, having said that, a good friend of mine did exactly that, became CEO and trust me, he is quite the socialist lol! started with the same company at 16, CEO in his 40's his rewards are very high and rightly so, he treats his staff really well.

I dont see why revolving elected reps (6 or 12months) cant be on the board, sure they arent going to have the casting vote on that latest acquisition but maybe they can be allowed to feed back certain other decisions? as i say, its fairly common across Europe, do you think german industry is on the whole, badly run? can we learn from them? (VW aside!!)

My interest in this is that corps should nt be allowed to run down pension funds, whilst paying themselves ever larger salaries, dividends and share schemes and in the case of Carillion, future proofing themselves knowing the company is failing, i mean who agrees to pay the ex CEO a years salary on top of his golden handshake.... its fraud.

i really dont see wanting to a little more transparency as "the politics of envy"

If your interest is as your state, around company pension deficits you're not addressing the issues around corporate governance and why no material remedies can be evidenced past the inappropriate formula currently being used, however you do seem intent on pushing a narrow argument solely based on 'worker' representation on a board which would have no material impact on either pension deficits, transparency, executive renumeration & employment contracts which provide the legal mechanism for payments to be made to departing executives.

If listed companies saw value in this approach I'm sure there would be more boards with a shop floor presence.

slowmart

FishFish wrote:

Slowmart wrote:

A single worker on a board won’t change the weighting of shareholder dividends to company pension fund contributions.

Dividends would not flow to a Pension Fund unless the PF held shares. The PF is funded by agreement to an actuarial cost projection relating to future liabilities and taking into account defecit or surplus. I think it is mandated to have a valuation and liquidity analysis for a PF done every 5 years.

Sorry if I've not been clear as the greater emphasis from the board should be on remedying the pension deficit rather than paying out shareholder dividends.

Of course we are reliant on the board doing the right thing whilst the evidence of company pension deficits against continued dividend payments seems to dispute this.

If you had a change in the requirement to include a pension deficit into the profit and loss accounts of the company this alone would make it difficult for dividends to be paid to shareholders.

surrey_commuter

Slowmart wrote:

FishFish wrote:

Slowmart wrote:

A single worker on a board won’t change the weighting of shareholder dividends to company pension fund contributions.

Dividends would not flow to a Pension Fund unless the PF held shares. The PF is funded by agreement to an actuarial cost projection relating to future liabilities and taking into account defecit or surplus. I think it is mandated to have a valuation and liquidity analysis for a PF done every 5 years.

Sorry if I've not been clear as the greater emphasis from the board should be on remedying the pension deficit rather than paying out shareholder dividends.

Of course we are reliant on the board doing the right thing whilst the evidence of company pension deficits against continued dividend payments seems to dispute this.

If you had a change in the requirement to include a pension deficit into the profit and loss accounts of the company this alone would make it difficult for dividends to be paid to shareholders.

Pension deficits are phenomenally complicated.

But importantly it seems that the trustees were incapable of standing up to the Board despite having the ultimate sanction of going to the pensions regulator to settle a dispute

Stevo_666

Surrey Commuter wrote:

Slowmart wrote:

FishFish wrote:

Slowmart wrote:

A single worker on a board won’t change the weighting of shareholder dividends to company pension fund contributions.

Dividends would not flow to a Pension Fund unless the PF held shares. The PF is funded by agreement to an actuarial cost projection relating to future liabilities and taking into account defecit or surplus. I think it is mandated to have a valuation and liquidity analysis for a PF done every 5 years.

Sorry if I've not been clear as the greater emphasis from the board should be on remedying the pension deficit rather than paying out shareholder dividends.

Of course we are reliant on the board doing the right thing whilst the evidence of company pension deficits against continued dividend payments seems to dispute this.

If you had a change in the requirement to include a pension deficit into the profit and loss accounts of the company this alone would make it difficult for dividends to be paid to shareholders.

Pension deficits are phenomenally complicated.

But importantly it seems that the trustees were incapable of standing up to the Board despite having the ultimate sanction of going to the pensions regulator to settle a dispute

Agree on the complexity. They are also solved over the long term.

However you and Slowmart should look at the last set of Carillion accounts. They had been making deficit recovery payments to pension schemes of £46m - £47m per year (can be seen in 2016 and 2015 comparatives in the cash flow statement). These payments will also go throughout the P&L.

The accounting point on whether the deficits themselves go through the P&L is more to do with the fact that the movements can be very large and would hit one year when in reality it is multi-year impact.

surrey_commuter

Stevo 666 wrote:

Surrey Commuter wrote:

Slowmart wrote:

FishFish wrote:

Slowmart wrote:

A single worker on a board won’t change the weighting of shareholder dividends to company pension fund contributions.

Dividends would not flow to a Pension Fund unless the PF held shares. The PF is funded by agreement to an actuarial cost projection relating to future liabilities and taking into account defecit or surplus. I think it is mandated to have a valuation and liquidity analysis for a PF done every 5 years.

Sorry if I've not been clear as the greater emphasis from the board should be on remedying the pension deficit rather than paying out shareholder dividends.

Of course we are reliant on the board doing the right thing whilst the evidence of company pension deficits against continued dividend payments seems to dispute this.

If you had a change in the requirement to include a pension deficit into the profit and loss accounts of the company this alone would make it difficult for dividends to be paid to shareholders.

Pension deficits are phenomenally complicated.

But importantly it seems that the trustees were incapable of standing up to the Board despite having the ultimate sanction of going to the pensions regulator to settle a dispute

Agree on the complexity. They are also solved over the long term.

However you and Slowmart should look at the last set of Carillion accounts. They had been making deficit recovery payments to pension schemes of £46m - £47m per year (can be seen in 2016 and 2015 comparatives in the cash flow statement). These payments will also go throughout the P&L.

The accounting point on whether the deficits themselves go through the P&L is more to do with the fact that the movements can be very large and would hit one year when in reality it is multi-year impact.

That looks like a ten year recovery plan which is on the limits of what is deemed acceptable.

To give an idea of complexity. Many experts see these deficits as technical so gilts returning to "normality" would hurl them into a surplus. Companies can not take surpluses out so they are loath to risk over-funding. To get around this companies can pledge assets (check Cathedral City) to the pension fund. By all accounts Carillion had next to no assets.

slowmart

Stevo 666 wrote:

Surrey Commuter wrote:

Slowmart wrote:

FishFish wrote:

Slowmart wrote:

A single worker on a board won’t change the weighting of shareholder dividends to company pension fund contributions.

Dividends would not flow to a Pension Fund unless the PF held shares. The PF is funded by agreement to an actuarial cost projection relating to future liabilities and taking into account defecit or surplus. I think it is mandated to have a valuation and liquidity analysis for a PF done every 5 years.

Sorry if I've not been clear as the greater emphasis from the board should be on remedying the pension deficit rather than paying out shareholder dividends.

Of course we are reliant on the board doing the right thing whilst the evidence of company pension deficits against continued dividend payments seems to dispute this.

If you had a change in the requirement to include a pension deficit into the profit and loss accounts of the company this alone would make it difficult for dividends to be paid to shareholders.

Pension deficits are phenomenally complicated.

But importantly it seems that the trustees were incapable of standing up to the Board despite having the ultimate sanction of going to the pensions regulator to settle a dispute

Agree on the complexity. They are also solved over the long term.

However you and Slowmart should look at the last set of Carillion accounts. They had been making deficit recovery payments to pension schemes of £46m - £47m per year (can be seen in 2016 and 2015 comparatives in the cash flow statement). These payments will also go throughout the P&L.

The accounting point on whether the deficits themselves go through the P&L is more to do with the fact that the movements can be very large and would hit one year when in reality it is multi-year impact.

And dividend payments of £88 million were made to share holders during the same period which was the 7th consecutive year where increased payments were made to shareholders.

As regards it’s a hit on an annual basis rather than a multi year impact on the P&L is whole the point as it would ensure a greater emphasis in resolving pension deficits as no dividends could be paid.

Arguably without the inclusion of any deficit on the P&L gives the view of false financial stability.

Stevo_666

Surrey Commuter wrote:

That looks like a ten year recovery plan which is on the limits of what is deemed acceptable.

To give an idea of complexity. Many experts see these deficits as technical so gilts returning to "normality" would hurl them into a surplus. Companies can not take surpluses out so they are loath to risk over-funding. To get around this companies can pledge assets (check Cathedral City) to the pension fund. By all accounts Carillion had next to no assets.

I have reasonable feel for this because we have to factor in the impact on our group pension fund contributions of various factors impacting P&L and/or balance sheet such as one off investment write downs or dividend payments.

The last Carillion accounts published for the year ended Dec 2016 showed net assets of just over £700m: these would have been wiped out in the 2017 write down which was around £850m IIRC.

Stevo_666

Slowmart wrote:

Stevo 666 wrote:

Surrey Commuter wrote:

Slowmart wrote:

FishFish wrote:

Slowmart wrote:

A single worker on a board won’t change the weighting of shareholder dividends to company pension fund contributions.

Dividends would not flow to a Pension Fund unless the PF held shares. The PF is funded by agreement to an actuarial cost projection relating to future liabilities and taking into account defecit or surplus. I think it is mandated to have a valuation and liquidity analysis for a PF done every 5 years.

Sorry if I've not been clear as the greater emphasis from the board should be on remedying the pension deficit rather than paying out shareholder dividends.

Of course we are reliant on the board doing the right thing whilst the evidence of company pension deficits against continued dividend payments seems to dispute this.

If you had a change in the requirement to include a pension deficit into the profit and loss accounts of the company this alone would make it difficult for dividends to be paid to shareholders.

Pension deficits are phenomenally complicated.

But importantly it seems that the trustees were incapable of standing up to the Board despite having the ultimate sanction of going to the pensions regulator to settle a dispute

Agree on the complexity. They are also solved over the long term.

However you and Slowmart should look at the last set of Carillion accounts. They had been making deficit recovery payments to pension schemes of £46m - £47m per year (can be seen in 2016 and 2015 comparatives in the cash flow statement). These payments will also go throughout the P&L.

The accounting point on whether the deficits themselves go through the P&L is more to do with the fact that the movements can be very large and would hit one year when in reality it is multi-year impact.

And dividend payments of £88 million were made to share holders during the same period which was the 7th consecutive year where increased payments were made to shareholders.

As regards it’s a hit on an annual basis rather than a multi year impact on the P&L is whole the point as it would ensure a greater emphasis in resolving pension deficits as no dividends could be paid.

Arguably without the inclusion of any deficit on the P&L gives the view of false financial stability.

As SC says, it is more complex than that.

The concept of matching your expenses to the right period is a core accounting concept. That's why fixed assets are depreciated over time and not written off in the P&L in year 1. As mentioned above, the deficit reduction payments go to P&L - these paymentsare also a cash hit and it is not usually possible for companies to pay cash up front for a scheme deficit (which usually arises from actuarial adjustments). In Carillions case it would have been around 500m.

Problem with your idea is that it would prevent many perfectly viable healthy companies from paying dividends form long periods because you would be putting potentially masive costs into the P&L when the right treatment is to spread the cost - as with many other items.

mamba80

Stevo 666 wrote:

As SC says, it is more complex than that.

The concept of matching your expenses to the right period is a core accounting concept. That's why fixed assets are depreciated over to e and not written off in the P&L in year 1. As mentioned above, the deficit reduction payments go to P&L - these paymentsare also a cash hit and it is not usually possible for companies to pay cash up front for a scheme deficit (which usually arises from actuarial adjustments). In Carillions case it would have been around 500m.

Problem with your idea is that it would prevent many perfectly viable healthy companies from paying dividends form long periods because you would be putting potentially masive costs into the P&L when the right treatment is to spread the cost - as with many other items.

Surely though, its about balance? perhaps some companies need to redress this.

Paying 50m a year, it would take 10years to fund the scheme, yet for 16 years Carillion increased its dividend to shareholders.
Long term payments are only any good if the company stays in business.

there are reports circulating that the deficit is far larger?

fwiw i ve a few shares with a former company i worked for, i receive twice yearly dividend payments, yet the closed FS scheme is on its knees

slowmart

Stevo 666 wrote:

Slowmart wrote:

Stevo 666 wrote:

Surrey Commuter wrote:

Slowmart wrote:

FishFish wrote:

Slowmart wrote:

A single worker on a board won’t change the weighting of shareholder dividends to company pension fund contributions.

Dividends would not flow to a Pension Fund unless the PF held shares. The PF is funded by agreement to an actuarial cost projection relating to future liabilities and taking into account defecit or surplus. I think it is mandated to have a valuation and liquidity analysis for a PF done every 5 years.

Sorry if I've not been clear as the greater emphasis from the board should be on remedying the pension deficit rather than paying out shareholder dividends.

Of course we are reliant on the board doing the right thing whilst the evidence of company pension deficits against continued dividend payments seems to dispute this.

If you had a change in the requirement to include a pension deficit into the profit and loss accounts of the company this alone would make it difficult for dividends to be paid to shareholders.

Pension deficits are phenomenally complicated.

But importantly it seems that the trustees were incapable of standing up to the Board despite having the ultimate sanction of going to the pensions regulator to settle a dispute

Agree on the complexity. They are also solved over the long term.

However you and Slowmart should look at the last set of Carillion accounts. They had been making deficit recovery payments to pension schemes of £46m - £47m per year (can be seen in 2016 and 2015 comparatives in the cash flow statement). These payments will also go throughout the P&L.

The accounting point on whether the deficits themselves go through the P&L is more to do with the fact that the movements can be very large and would hit one year when in reality it is multi-year impact.

And dividend payments of £88 million were made to share holders during the same period which was the 7th consecutive year where increased payments were made to shareholders.

As regards it’s a hit on an annual basis rather than a multi year impact on the P&L is whole the point as it would ensure a greater emphasis in resolving pension deficits as no dividends could be paid.

Arguably without the inclusion of any deficit on the P&L gives the view of false financial stability.

As SC says, it is more complex than that.

The concept of matching your expenses to the right period is a core accounting concept. That's why fixed assets are depreciated over to e and not written off in the P&L in year 1. As mentioned above, the deficit reduction payments go to P&L - these paymentsare also a cash hit and it is not usually possible for companies to pay cash up front for a scheme deficit (which usually arises from actuarial adjustments). In Carillions case it would have been around 500m.

Problem with your idea is that it would prevent many perfectly viable healthy companies from paying dividends form long periods because you would be putting potentially masive costs into the P&L when the right treatment is to spread the cost - as with many other items.

It’s debatable if a company is viable when pension deficits are more than the value of the entire company with numerous businesses who currently trade on the FTSE100. It’s more kicking a can down the road....

It seems to reduce down to the time frame companies are allowed to balance deficits? Let’s hope this timeframe is revised by HMG but I doubt any appetite exists within the Tory party or any competence within Labour to deliver a coherant and effective remedy.

mamba80

Slowmart wrote:

It’s debatable if a company is viable when pension deficits are more than the value of the entire company with numerous businesses who currently trade on the FTSE100. It’s more kicking a can down the road....

It seems to reduce down to the time frame companies are allowed to balance deficits? Let’s hope this timeframe is revised by HMG but I doubt any appetite exists within the Tory party or any competence within Labour to deliver a coherant and effective remedy.

Odd statement, the Tory party have no appetite but the Labour are incompetent...... ....

the next GE is in 4 years time, i d have thought any competent government would sort this out, its been going on long enough.... its in the electorates interest or are you saying the Tories "interest" is that of business only?
if you mean its due to pressures of brexit, well that will afflict any administration.

slowmart

The Tory’s have no appetitive for adding to the regulatory burden on businesses. Look a the banking crisis- the net effects from that lesson were?

Labour, under Corbyn, given their statements to date, haven’t a clue how to remedy the issues here. So far Corbyns inability to hold the governments feet to the fire has been woeful. The Tories are the worst government in living memory and Corbyns inability to offer a viable alternative is beyond comprehension. It really is.

You’ve answered your own question “any competent government would sort this out, it’s been going on long enough”

Using your own point answers your question.

BHS was a massive warning shot, dividends being paid out at the expense of the pension fund in deficit. No action not even a statement of intent.

Stevo_666

Slowmart wrote:

It’s debatable if a company is viable when pension deficits are more than the value of the entire company with numerous businesses who currently trade on the FTSE100. It’s more kicking a can down the road....

It seems to reduce down to the time frame companies are allowed to balance deficits? Let’s hope this timeframe is revised by HMG but I doubt any appetite exists within the Tory party or any competence within Labour to deliver a coherant and effective remedy.

These pension liabilities are due over the next 20 or 30 years so, not now. Following your logic would be like declaring any one with a decent sized mortgage bankrupt.

The other point is how the deficits arise. When an actuarial valuation is done it can materially affect the fund value - companies have no control over that and can only react to the outcome of the valuation.

As for the timing, it needs to be balanced against the ability to fund these deficits. Also it would not have prevented the Carillion issue. The underlying cause here is not the pension deficit itself but poor management decisions/poor trading etc. Had Carillion been a decently run company making the sort of profit that it made until recently, its pension issue would likely not be an issue.

Stevo_666

mamba80 wrote:

Stevo 666 wrote:

As SC says, it is more complex than that.

The concept of matching your expenses to the right period is a core accounting concept. That's why fixed assets are depreciated over to e and not written off in the P&L in year 1. As mentioned above, the deficit reduction payments go to P&L - these paymentsare also a cash hit and it is not usually possible for companies to pay cash up front for a scheme deficit (which usually arises from actuarial adjustments). In Carillions case it would have been around 500m.

Problem with your idea is that it would prevent many perfectly viable healthy companies from paying dividends form long periods because you would be putting potentially masive costs into the P&L when the right treatment is to spread the cost - as with many other items.

Surely though, its about balance? perhaps some companies need to redress this.

Paying 50m a year, it would take 10years to fund the scheme, yet for 16 years Carillion increased its dividend to shareholders.
Long term payments are only any good if the company stays in business.

there are reports circulating that the deficit is far larger?

fwiw i ve a few shares with a former company i worked for, i receive twice yearly dividend payments, yet the closed FS scheme is on its knees

Not sure what you are proposing.

Dividends may well have been going up, but when did the pension deficit arise? I suspect it was more recent, probably due to to the revised actuarial estimates for life spans etc. And if you stop companies paying dividends, that will have a major negative impact in share prices, which hits the value of pension funds...the very thing you want to protect.

As mentioned above these are major funding requirements and would not have prevented the current issue. Also as you note above, it is more important that the company stays in business and we can't legislate against bad business decisions, substandard management etc.

rick_chasey

Stevo 666 wrote:

mamba80 wrote:

Stevo 666 wrote:

As SC says, it is more complex than that.

The concept of matching your expenses to the right period is a core accounting concept. That's why fixed assets are depreciated over to e and not written off in the P&L in year 1. As mentioned above, the deficit reduction payments go to P&L - these paymentsare also a cash hit and it is not usually possible for companies to pay cash up front for a scheme deficit (which usually arises from actuarial adjustments). In Carillions case it would have been around 500m.

Problem with your idea is that it would prevent many perfectly viable healthy companies from paying dividends form long periods because you would be putting potentially masive costs into the P&L when the right treatment is to spread the cost - as with many other items.

Surely though, its about balance? perhaps some companies need to redress this.

Paying 50m a year, it would take 10years to fund the scheme, yet for 16 years Carillion increased its dividend to shareholders.
Long term payments are only any good if the company stays in business.

there are reports circulating that the deficit is far larger?

fwiw i ve a few shares with a former company i worked for, i receive twice yearly dividend payments, yet the closed FS scheme is on its knees

Not sure what you are proposing.

Dividends may well have been going up, but when did the pension deficit arise? I suspect it was more recent, probably due to to the revised actuarial estimates for life spans etc. And if you stop companies paying dividends, that will have a major negative impact in share prices, which hits the value of pension funds...the very thing you want to protect.

As mentioned above these are major funding requirements and would not have prevented the current issue. Also as you note above, it is more important that the company stays in business and we can't legislate against bad business decisions, substandard management etc.

Why would a hit on the share price hit the pensions substantially?

mamba80

Stevo 666 wrote:

mamba80 wrote:

Surely though, its about balance? perhaps some companies need to redress this.

Paying 50m a year, it would take 10years to fund the scheme, yet for 16 years Carillion increased its dividend to shareholders.
Long term payments are only any good if the company stays in business.

there are reports circulating that the deficit is far larger?

fwiw i ve a few shares with a former company i worked for, i receive twice yearly dividend payments, yet the closed FS scheme is on its knees

Not sure what you are proposing.

Dividends may well have been going up, but when did the pension deficit arise? I suspect it was more recent, probably due to to the revised actuarial estimates for life spans etc. And if you stop companies paying dividends, that will have a major negative impact in share prices, which hits the value of pension funds...the very thing you want to protect.

As mentioned above these are major funding requirements and would not have prevented the current issue. Also as you note above, it is more important that the company stays in business and we can't legislate against bad business decisions, substandard management etc.

...i said balance, so no, we dont stop all dividends but perhaps reduce them? in certain circumstances. didnt Carillion pay out almost a billion in dividends? so if they d paid out 500m instead....

its about priorities and spending choices as always.

Incidentally, the Tory party have pocketed 50k because of the Carillion collapse, you really couldnt make this stuff up.

Slowmart is correct, the Tories really do have no appetite to tackle this problem, why would they? they are hand in glove with business, to the detriment of everyone else.

surrey_commuter

Slightly weird standing shoulder to shoulder with Steve but as a pension fund trustee I know more than most (but less than many) so happy to help shed some light on a very complex subject.
Valuations are done every 3 years so it is a snapshot. We did ours Jan 2016 and had a deficit of £25m which was manageable. By Sept 2016 the deficit was up to £85m.

Not everybody (professionals) agree with how future liabilities are valued. These valuation assumptions are set by the Govt in the form of the pensions regulator. The Govt does not value public sector pension liabilities in the same way. If they did we would probably be bankrupt.

If Gilt rates ( think base rate) return to normal then a lot of thesecdeficits would disappear. Many people see these deficits as technical. If the scheme swings into a massive surplus the company can not get it's money back out, unsurprisingly they are loath to "overpay"

surrey_commuter

Rick Chasey wrote:

Stevo 666 wrote:

mamba80 wrote:

Stevo 666 wrote:

As SC says, it is more complex than that.

The concept of matching your expenses to the right period is a core accounting concept. That's why fixed assets are depreciated over to e and not written off in the P&L in year 1. As mentioned above, the deficit reduction payments go to P&L - these paymentsare also a cash hit and it is not usually possible for companies to pay cash up front for a scheme deficit (which usually arises from actuarial adjustments). In Carillions case it would have been around 500m.

Problem with your idea is that it would prevent many perfectly viable healthy companies from paying dividends form long periods because you would be putting potentially masive costs into the P&L when the right treatment is to spread the cost - as with many other items.

Surely though, its about balance? perhaps some companies need to redress this.

Paying 50m a year, it would take 10years to fund the scheme, yet for 16 years Carillion increased its dividend to shareholders.
Long term payments are only any good if the company stays in business.

there are reports circulating that the deficit is far larger?

fwiw i ve a few shares with a former company i worked for, i receive twice yearly dividend payments, yet the closed FS scheme is on its knees

Not sure what you are proposing.

Dividends may well have been going up, but when did the pension deficit arise? I suspect it was more recent, probably due to to the revised actuarial estimates for life spans etc. And if you stop companies paying dividends, that will have a major negative impact in share prices, which hits the value of pension funds...the very thing you want to protect.

As mentioned above these are major funding requirements and would not have prevented the current issue. Also as you note above, it is more important that the company stays in business and we can't legislate against bad business decisions, substandard management etc.

Why would a hit on the share price hit the pensions substantially?

I think the assumption is that some major parts of the FTSE would all cut dividends so lowering their share prices. The majority of these share are held by pension funds so you are locked in a vicious circle.

surrey_commuter

mamba80 wrote:

Stevo 666 wrote:

mamba80 wrote:

Surely though, its about balance? perhaps some companies need to redress this.

Paying 50m a year, it would take 10years to fund the scheme, yet for 16 years Carillion increased its dividend to shareholders.
Long term payments are only any good if the company stays in business.

there are reports circulating that the deficit is far larger?

fwiw i ve a few shares with a former company i worked for, i receive twice yearly dividend payments, yet the closed FS scheme is on its knees

Not sure what you are proposing.

Dividends may well have been going up, but when did the pension deficit arise? I suspect it was more recent, probably due to to the revised actuarial estimates for life spans etc. And if you stop companies paying dividends, that will have a major negative impact in share prices, which hits the value of pension funds...the very thing you want to protect.

As mentioned above these are major funding requirements and would not have prevented the current issue. Also as you note above, it is more important that the company stays in business and we can't legislate against bad business decisions, substandard management etc.

...i said balance, so no, we dont stop all dividends but perhaps reduce them? in certain circumstances. didnt Carillion pay out almost a billion in dividends? so if they d paid out 500m instead....

its about priorities and spending choices as always.

Incidentally, the Tory party have pocketed 50k because of the Carillion collapse, you really couldnt make this stuff up.

Slowmart is correct, the Tories really do have no appetite to tackle this problem, why would they? they are hand in glove with business, to the detriment of everyone else.

I would keep Party politics out of it. It was el Gordo who effectively ended DB schemes in the private sector.

Personally I think it is a farking disgrace that MPs did not shut their own DB scheme so that they understood the issues facing the average man in the street.

Oh apart from those t0ssers in the public sector who want us to back their industrial action to keep their gold plated pension schemes.

Anybody who thinks public sector pension scheme deficits are not an issue should read up on US cities. Wait until your council tax is going through the roof because half of it is going on pension schemes that you can only dream of.