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Carillion tightens rules to protect executive bonuses

Carillion has made amendments to rules that previously allowed investors to claw back bonuses awarded to the contractor’s top executives, it has emerged.  

The wording of the renumeration part of Carillion’s 2016 annual report includes minor changes to its ’malus and clawback’ section, which makes it harder for investors to claim back bonuses paid to directors. 

The report states that the “minor” changes are designed to give “sufficient flexibility to support succession planning and potential changes to business needs over the next three years”.

The 2016 report states that bonuses can be clawed back only in two specific circumstances. These are: if either the results for the year in respect of which the bonus award was made have been misstated, resulting in a restatement of the company’s accounts; or if the participant is found to be guilty of gross misconduct.

However in the 2015 report, the clawback provision allowed the remuneration committee the right to recover all elements of bonuses in relation to “corporate failure”. 

Carillion has seen around £600m wiped off its market value since it announced a profit warning in July in relation to a £845m writedown on problem contracts

Carillion announced this week that five of its senior management team, including group finance director Zafar Khan, were leaving the firm.

The departures include former chief executive Richard Howson, who took up his old role of COO after stepping down from the top job at the time of the profit warning. He will leave at the end of this month after Carillion previously said Mr Howson would stay on for up to a year.

Carillion declined to comment.

Carillion’s rollercoaster – a timeline

10 July– The firm announces a major profit warning after an £845 writedown on problem contracts in the UK, Middle East and Canada. Chief executive Richard Howson steps down as chief executive and the group suspends its dividend. The news sees the firm’s share price dive more than 70% in the following days and around £600m is wiped off its market value.

17 July– Carillion’s share price temporarily bounces back after it picks up two HS2 contracts, worth £1.34bn as part of a consortium with Kier and Eiffage. However Transport Secretary Chris Grayling is forced to defend the decision after concerns are raised.

18 AugustConstruction News reveals that Richard Howson has taken up his old job of chief operating officer at Carillion.

24 August– The firm’s share price gets another bump after Construction News reports it has won a £300m contract to build a mixed-use scheme in Manchester.

31 August– Carillion drops out the of the FTSE 250 as its share price remains in the doldrums and near an all-time low.

11 September– The firm reveals details of a major executive cull as five senior management figures – including group finance director Zafar Khan and Richard Howson – leave the company.

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