Frank Field is right to castigate the directors of Carillion for being “contemptuous” of their obligations to the company’s pensioners. The picture of what happened in the pre-crash years is now reasonably clear: the directors, even as they were raising the dividend to shareholders year after year, made a corporate plea of poverty when talking to the pension trustees. The decision-making and the skewing of priorities were appalling.
The deeper scandal, however, may be the fact that the Pensions Regulator had a front-row seat at the developing debacle and didn’t once deploy its formal powers of intervention. The regulator’s officials attended meetings between the company and the pension trustees but were not shocked into formal action until Carillion went bust, by which time there was no money left.
Lesley Titcomb, the chief executive of the regulator, pleads in her letter to Field’s committee that her organisation “made clear” to both company and trustees that it was “prepared to use” its formal powers. And the regulator separately argues that those threats resulted in a “significant” – but unquantified – increase in contributions.
Sorry, but semi-threats and attempts to cajole just look too timid. The gap between what the trustees wanted in 2013 (£65m a year of contributions over 14 years) and what the company was offering (£33.4m a year) was enormous. It should have been a cue for the regulator to turn up the interventionist dial to the maximum, and roll out its section 231 powers to impose a schedule of pension contributions.
The softly-softly approach may be explained by the passage in Titcomb’s letter in which she points to the need – enshrined in statutory objective in 2014 – to take account of a sponsoring company’s ability to invest in its business and grow. Well, yes, it’s easy to agree that the politicians’ commands made the regulator’s job more difficult. But, come on, the legislation was not intended to be a blanket excuse to tread lightly in all circumstances.
The regulator, as Field points out, has used its section 231 powers only once – an extraordinary statistic. Lack of regulatory resources may be one factor. Lack of ambition is surely another.
Reckitt must prove worth of Mead deal before contemplating another
For about 10 years until the end of 2016, Reckitt Benckiser’s marketing machine ran with barely a splutter. In 2017, however, two things happened. First, as Monday’s full-year results showed, like-for-like growth ground to a halt – revenues were flat. Second, the Dettol-to-Durex group paid the mighty sum of $18bn (£13bn) to buy Mead Johnson’s baby milk formula business.
The purchase was clearly designed to address the growth problem and, up to a point, the chief executive, Rakesh Kapoor, can claim it is delivering. The infant milk business is producing higher sales figures after nine quarters of contraction under the previous owner. Reckitt was full of explanations of how minor adjustments to packaging and presentation have worked a little magic.
Fine, but the idea that all the hard work has been done, and that Reckitt can now contemplate another big deal, such as a bid for Pfizer’s consumer products division, stretches credibility. Reckitt has owned the business for only six months, which is not long enough to make meaningful judgments about an adventure that was a major departure from the bolt-ons that were Reckitt’s style during its golden run.
The Pfizer unit – which was also caught GlaxoSmithKline’s eye – could cost $15bn-plus. At that kind of money, shareholders would surely want solid proof that Reckitt’s appetite for big deals isn’t a distraction from the day-job of re-igniting the old business. A prediction that operating margins will rise at only a “moderate” rate in the medium-term was vague and underwhelming.
The shares, down 7% on Monday, have now fallen by a fifth from their peak last summer. The message should be simple to decipher: prove the worth of the Mead deal, and pay down more of the borrowings, before you contemplate another big acquisition.
Time to tell us just what you think about bid for GKN, prime minister
Let’s hope somebody has remembered to tell Theresa May that hostile bids – like Melrose’s £7bn offer for GKN – run to a timetable. Asked again about the government’s view of affairs at GKN, the prime minister trotted out the same “watching carefully” line. Get on with it. Or, rather, stop watching and give an opinion.
The deal could have implications for the UK manufacturing base, which is why the business secretary, Greg Clark, has met both sides. But most of the relevant facts are now on the table – the formal offer document has been published, and GKN has tabled its defence. Ministers must have observed everything they can hope to observe. Just tell us what you think.