The government has been attacked for “failing” Thomas Cook staff and customers after MPs accused ministers of dragging their feet on corporate reforms.
The reaction came from the Transport Salaried Staffs’ Association (TSSA) as the government responded to the Business, Energy and Industrial Strategy (BEIS) committee’s inquiry into the collapse of the iconic travel brand.
Thomas Cook went under last September with the loss of more than 20,000 jobs, including 9,000 in the UK. The failure left 150,000 British holidaymakers overseas triggering the largest peacetime repatriation process after the government refused to sanction a £200 million bailout.
The BEIS committee held a series of evidence sessions on the collapse in October which concluded with correspondence to then business secretary Andrea Leadsom with a series of recommendations on corporate governance, executive pay and bonuses, and audit reform.
The original findings from its inquiry, the committee expressed “disappointment” the government had not pressed ahead with audit reforms and brought forward legislation to replace the Financial Reporting Council with the Audit, Reporting and Governance Authority (ARGA).
But the government’s response published today (Tuesday) only says that plans “to create the new Audit, Reporting and Governance Authority will follow as soon as Parliamentary time allows”.
Committee chair Darren Jones MP said: “Recent audit scandals highlight the need for the government to tackle this issue as a matter of urgency.
“At a time when businesses are facing tough trading conditions and when their balance sheets are under significant pressure, it’s important investors and other stakeholders can have confidence in audits.
“While the government has a series of priorities at the moment, given the importance of audit and the fact the department already has a raft of practical audit measures sitting on its desk gathering dust, we should expect the business department to show far more urgency to help drive through the reforms needed on audit and on corporate governance.”
TSSA general secretary Manuel Cortes said: “The BEIS select committee is right to say that the government is dragging its feet on corporate reforms.
“Action has been urgently needed in this area for years. Warm words from government on clawback of directors’ remuneration and bonuses, the need for better diversity of board members, and support for a new regulator, is welcome but they are not prioritising it.
“This is foolish given how many other companies could be facing administration in the coming months.
“At the end of the day, the government failed Thomas Cook, its staff and customers. By acting too slowly, the government allowed a great British company to go to the wall, when it would have been cheaper to take ownership of it.
“Thousands of Thomas Cook workers lost their jobs and tens of thousands of holidaymakers were left stranded or without holidays to go on.
“The lacklustre response of the then business secretary was woeful, the compensation bill huge and overall lack of care for the company and its staff was scandalous. It must never be allowed to happen again.”
Corporate responsibility and climate change minister Lord Callanan, responding to the committee’s criticisms, acknowledged that the collapse of Thomas Cook was a “distressing experience” for people who lost their jobs and holidaymakers alike.
He added: “BEIS will consider the risks of a similar situation occurring again and will take steps to prevent any recurrence should it be necessary.”
Lord Callanan said: “We will respond with comprehensive proposals, and legislation to create a new Audit, Reporting and Governance Authority will follow as soon as Parliamentary time allows.
“In many cases we do not need legislation and where that is the case we are making progress with implementation.
“Our goal is to ensure the UK has a world leading corporate governance framework which commands the confidence of investors and the wider public and reduces the risk of avoidable and disorderly corporate failure.”
The government also pointed out that average pay for chief executives of FTSE 100 companies has fallen by 23% between 2012 and 2019 from £4.5 million to £3.46 million.
It also agreed that there should be “no reward for failure”.
The government said: “In the specific case of Thomas Cook, the committee will be aware that the Official Receiver has made it clear that he will review payments made to executives, and that where payments are unlawful or unjustified, he will take action to recover them.”