In January 2018, Carillion, a major UK multinational construction and facilities management company, suddenly collapsed, leaving in its wake almost £7 billion of liabilities and only £29 million in cash. Astonishingly, in 2016, Carillion’s senior executives received large performance bonuses and oversaw a record level dividend payment to its shareholders of

£79 million. In May 2018, the UK government inquiry into Carillion’s collapse concluded that ‘the problems that caused the collapse of Carillion were long in the making, as too was the rotten corporate culture that allowed them to occur’ (BEIS, 2018, p. 4). The government report elaborated that: ‘Corporate culture does not emerge overnight. The chronic lack of accountability and professionalism now evident in Carillion’s governance were failures years in the making. The board was either negligently ignorant of the rotten culture at Carillion or complicit in it’. (BEIS, 2018, p. 27)

Required:

(a) Consider the impact that this corporate collapse has had on diverse stakeholder groups and society.

(b) Why do you think the UK government considered Carillion was not too big to fail and did not bail it out?

(c) The UK government refers to ‘the rotten corporate culture’. Discuss the meaning of corporate culture and outline why corporate culture has such a profound impact on corporate governance.