Sunday, 6 October 2019

Unpublished letter on Thomas Cook Affair

Your Business leader said that the chair of the business select committee, Rachel Reeves, "should not be too obsessed with her idea that the downfall of Thomas Cook appears to be a sorry tale of corporate greed" (Thomas Cook was brought down by incompetence, not boardroom greed, 29.09.19) The only reason given is that, although figures like the £35m paid over the last 12 years to the "past three chief executives look appalling", they need to be "treated with care", because out of Frankhauser`s "notional £8.4m haul", about £4m of that was in shares which are now worthless! Of course "incompetence and hubris" played their part, but obscene levels of pay without any requirement for the company to make long-term improvement explain this, and almost all of the recent corporate collapses.  It`s all been heard before, how a company goes bust after not only ridiculously high payments to the chief executive and other directors, bonus payments based on so-called "performance", but also after the accounts have been signed off by the auditors. The Commons` business, energy and industrial strategy committee repeats its disappointment and outrage with regularity, and as the Leader says, usually provokes "grovelling apologies", but nothing changes, and workers lose their jobs and security on a monotonous basis.
  Corporate greed was at the heart of the 2008 crisis, but the bonuses, tax avoidance, short-termism and lack of proper regulation in banking, accounting and business have continued unabated. Thomas Cook issued two profits warnings last year, revealing its debts then were £1.2bn, having also to write off £1.1bn spent on  its 2007 acquisition My Travel. Allied to this was the fairly obvious threat to its future profitability provided by online bookings and more competition from companies not so reliant on 20th century practices. None of this prevented Thomas Cook from continuing to pay out millions in "performance related" bonuses, and in 2017 and 2018 resuming the payments of dividends to shareholders!
     As long as none of the directors and auditors "do a Cummings" and fail to turn up for the hearings, the committee`s inquiry should be reasonably enlightening, but little else. Some of the protagonists might appear in the headlines for a few days, but as already has been proved, "naming and shaming" doesn`t work. Former employees might well "deserve to hear" explanations, but guarantees against future companies being mismanaged by greedy executives would be more welcome. Only legislation can create the transformation in the UK`s business practices which is so obviously needed! 

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