Carillion’s upbeat strategy? Shoot the messenger

You can’t argue with boardroom minutes. They’re the definitive summary of who said what. They are compiled by the company secretary, or stand-in, with all directors given the opportunity to check for accuracy afterwards. And what do minutes of Carillion’s board meeting on 5 July last year show? Self-delusion on a scale that, outside the banking sector circa 2008, would be hard to believe at a public company employing tens of thousands of workers.

Of all the pieces of evidence unearthed by the two select committees of MPs, these minutes may be the most damning. The scene was the board’s receipt of the devastating news that Morgan Stanley, the company’s joint corporate broker, was no longer prepared to underwrite a cash-raising rights issue that had been under preparation since May.

Peter Moorhouse from Morgan Stanley delivered the bleak message in person. The size of the bad contracts – to be revealed the following week as a £845m provision – was too great. The investment case was “insufficient to support an underwriting”. New investors “would not be convinced”. Morgan Stanley’s investment committee would not sign off.

This should have been a neon-lit warning to the directors that Carillion was in deep financial trouble. Hedge funds, remember, had been shorting the shares for months. Now quick access to new equity was being turned off.

The board’s reaction was extraordinary. First, the minutes show, the directors asked no questions of Moorhouse. None. Instead, when Morgan Stanley’s man had left the room, Carillion’s bosses agreed that their advisers were being terribly unreasonable. Moorhouse’s rationale was “not credible given that there had been no obvious change to the market position, the position of the business or its prospects” since May.

Carillion chairman Philip Green, displaying monumental levels of optimism, went on to say that work continued towards a “positive and upbeat announcement” the following Monday. The directors then resolved to dump Morgan Stanley – as plain a case of shooting the messenger as you’ll see.

As it happens, when the huge write-offs were unveiled on the Monday, chief executive Richard Howson was stood down, suggesting Green was becoming dimly aware that Carillion faced a crisis of credibility, to put it mildly. In truth, though, these minutes point to a deep cause of Carillion’s collapse: the directors were incapable of recognising bad news even when it was served up to them.

ITV needs something, but is it a ‘refresh’?

The bidding battle for Sky “shows how much money there is around and how valuable content businesses and broadcast businesses are”, argued Carolyn McCall, eight weeks into her new job as chief executive of ITV. Well, up to a point. None of the excitement around Sky has rubbed off the Coronation Street broadcaster’s share price. ITV sits at 160p, down 8% on Wednesday, versus a peak of 260p in 2015.

McCall’s “refresh” of ITV’s strategy is a work in progress, but the five-year run of special dividends for shareholders is over. Does that imply an investment splurge, as some investors clearly fear, or just a tightening of predecessor Adam Crozier’s approach?

It’s hard to tell, but some form of wet towel is clearly required. ITV’s advertising revenues fell in 2017 for the second year in a row – by a thumping 5%. Top-line profits also dropped 5%, to £842m, the first decline on that measure since the bad old days of 2009.

Neither fall implies a crisis, since ITV’s near-monopoly on free-to-air commercial TV advertising slots remains a valuable asset. But Netflix et al are changing viewing habits and also the definition of a large programming budget.

Sky, supposedly, is too small to stand alone in the today’s international world of TV giants, but will still be sold for £22bn-plus. So where does that leave ITV, worth £6.5bn? Outgunned, or more nimble? McCall’s refresh needs to answer the question. But, if investment needs to be ramped up, go for it. This is supposed to be a golden age for television.

Shine on, you Jamie Dimon

Jamie Dimon, chairman and chief executive of JP Morgan, thinks shareholder meetings are “a complete waste of time” and have been “hijacked by people who have only political interests and don’t have any interest in the future health of the company”.

He should pipe down. One reason why special-interest groups have alighted on annual meetings is that they offer a rare chance to penetrate the corporate bubble. If that’s shocking to Dimon, he should get out more. If a boss can’t meet the owners, even those who have bought one share in order to ask a question, he is dangerously unaccountable.