Failure of Corporate Governance in Carillion Plc Construction Company

corporate governance

Contents
Introduction...........................................................................................................................................2
Answer-1...............................................................................................................................................2
Answer-2...............................................................................................................................................4
Answer-3...............................................................................................................................................7
Conclusion.............................................................................................................................................9
References...........................................................................................................................................11

Introduction
This report focuses on three major questions on failure of corporate governance in a Carillion
Plc Construction Company. Carillion Construction Company offers construction services to
both public and private associations. Recently, due to failure of Nolan principle that involve
integrity, accountability, honesty, transparency, openness, and leadership. It is notable that
not only the principle discussed above is important but also, the employees and
subcontractors are some important stakeholders, which affect the company more than
taxpaying (GOV. UK, 2019). This report has answered three important questions such as
factors affecting the failure of corporate governance in Carillion and this led to demise of
Carillion (Rogers, 2018). What had led to failure of corporate governance and which
stakeholders were responsible in the construction company. Stakeholders such as directors
(both executive and non-executive) were responsible for the corporate failure. Nature of
failure, and the problems, other factors are the main reasons, which has led to failure of
corporate governance. Al last, the report identifies the changes that can prevent the problems
may be through applying ethical theories and comply with the laws (GOV. UK, 2019).
Answer-1
Renowned multinational Carillion plc and other companies, which provide construction
services are more inclined to corporate failure. Carillion plc is headquartered in UK. Recently
on 15 January 2018, high court hired an official receiver as a liquidator of the company and
its subsidiaries. The aim of liquidator was to oversee the insolvency process and finally invest
the reason of Carillion’s failure and settle the related payment to creditors and employees.
The situation of compulsory liquidation occurred due to exposure of collapse of Carillion
(Evangelinos et al., 2016). Some of the public project contracting proved to be less lucrative
than expected. The company suffered huge and stagnant losses on public contracts especially
after employing the debt of £ 1.5 billion. This collapse of Carillion that lead to failure of

certain ethical standards (Ethics Unwrapped, 2019). This failure lead to lack of poor strategic
leadership and competitive financial management. It should focus on detraction from
examination of occurring ethical leadership, accountability, honesty, transparency, and
accountability, which have costed government, taxpayer, and the company. All these above
stakeholders, employees, and subcontractors who rely on public services (Hussey, 2016).
Post- modern investigations have revealed the causes of different corporate scandals that
identifies certain deficiencies and weaknesses in defence programs. Examples of corporate
failure relates to poor governance, poor risk management, unreliable intelligence, compliance
failures, inadequate security, ineffective controls, and failure of assurance providers.
Similarly, while evaluating and identifying the failure of corporate governance, Carillion
faced a series of defence failures. The line of defence failures includes guilty on the part of
Carillion’s board. Non-executive directors ultimately failed to find and observe the reckless
executives (Wang, Sexton, and Lu, 2016). Narrow-minded executives had built the culture of
maximum rewards and it focused on enhancing personal success and profit. The judiciary
who appointed liquidators doubted whether non-executive directors had the power to keep an
effective check on executive directors (Rogers, 2018). In 2016, it was reviewed that Carillion
hospital`s contract claimed that it was a loss. The management dominated and drived the
business activities to earn a healthy profit as per the assumption in 2016 assumptions. Before
going through Nolan principles, the company could not follow any of the ethical theories
such as utilitarianism and Deontological lead to collapse of Carillion. Utilitarianism states,
which determines to perform good or right from wrong by ultimately focusing on results.
This ethical theory is the one, which will produce maximum good for maximum number
(Wang, Sexton, and Lu, 2016). As we cannot predict future, a common approach is utilitarian
but again it does not reflect whether the result of consequences of actions will be good or bad.
Therefore, demise of Carillion rely on some questions whether they were honest enough to