What frightens the bosses of GKN and Carillion? Committees

This week will provide further evidence of MPs’ willingness to involve themselves in how big companies are run. On Tuesday the business committee will scrutinise Melrose’s proposed hostile takeover of GKN by questioning both companies’ bosses. Melrose specialises in buying and overhauling industrial companies but Jeremy Corbyn, the Labour leader, has labelled it an “asset stripper” – something Melrose denies.

On Wednesday, members of the business and work and pensions committees will interview former investors in Carillion, in the latest instalment of their joint inquiry into the outsourcing company’s collapse.

Last Friday, Rachel Reeves, who chairs the business committee, and Frank Field, her counterpart at work and pensions, accused Carillion’s management of “pervasive institutional failings” that led to the company’s bankruptcy. The accusation was the latest in a string of criticisms resulting from information extracted from the company and its advisers.

Reeves said it was right for MPs to get involved because the fates of both companies had implications for public policy. “GKN is a strategically important company in the economy and is involved in aerospace and the automotive industry, and it has contracts with the Ministry of Defence. They can be taken over and the government can have no influence over that – and that is different from the position in other countries,” Reeves said.

Carillion, whose biggest customer was the government, raised questions about corporate governance, the role of auditors and the protection of pensioners, suppliers, employees and taxpayers, Reeves said. MPs would ask the former Carillion investors why they short-sold or disposed of shares before the company revealed it was in trouble, she added.

Reeves, who took over chairing the committee in September, has built on the committee’s work in the last parliament when it forced Mike Ashley, the Sports Direct founder, to account for working practices at his company and Sir Philip Green to take responsibility for the plight of pensioners at his former business, BHS.

Before combining forces to investigate Carillion, Reeves and Field worked together to shine a light on working practices at Uber and other gig-economy companies. Other committees are also holding companies to account – the Treasury committee has been a thorn in the side of Royal Bank of Scotland over its treatment of small business customers.

Parliamentary committees used to be relatively weak, with narrow remits to hold government departments to account. But the introduction in 2010 of secret ballots for elected chairs, instead of whips doling out appointments, made committees more independent, with extra gravitas and a more detailed approach.

High-profile recent chairs such as Andrew Tyrie at the Treasury committee and Margaret Hodge at the public accounts committee became grand inquisitors of bankers and tax-avoiding companies. Iain Wright, Reeves’s predecessor at the business committee, put greater emphasis on working with other committees for maximum effect. As well as Reeves’s and Field’s committees, the Carillion investigation has involved the public accounts and public administration committees, with coordination by a more active liaison committee.

Hannah White, director of research at the Institute for Government thinktank, said: “Committees are increasingly moving beyond their core remit of scrutinising government to look at how private companies behave in the policy context set by government. They have attracted significant media attention by doing this in a forensic way rather than grandstanding.”

Reeves said that MPs of all parties were becoming increasingly keen to scrutinise large companies, amid public concern about lack of accountability and a greater understanding of the role of big business after the financial crisis.

“Select committees can give businesses the opportunity to get their voices heard – but the committee won’t hesitate to call people in if we think they have got questions to answer. Businesses should take that opportunity to say what they are doing but they should expect difficult questions on behalf of our constituents and the people we represent,” Reeves said.