Company bosses approaching insolvency could be fined if they fail to protect the firm’s pension fund, new government proposals have revealed.
The proposals, published on Sunday, 26 August, were a reaction to high-profile company failures, such as BHS and Carillion, which fell “short of the high standards we [the government] expect”.
New measures would give powers to the Insolvency Service, allowing it to investigate the directors of dissolved companies, enhancing their recovery powers and the ability to disqualify directors of holding companies.
Despite this, the Trade Union Congress said that the government’s plans were merely “tinkering around the edges” and that they did not go far enough.
TUC general secretary, Frances O’Grady, said: “Carillion showed that we need radical overhaul of corporate governance in Britain today. Tinkering around the edges is not enough.
“Leaving it to shareholders to police directors is too risky and has been shown not to work. If ministers want to curb reckless behaviour they should put workers on boards, as Theresa May promised. Company bosses will not be quaking in their boots at these proposals.”
Minister for Small Business, Consumers and Corporate Responsibility, Kelly Tolhurst, said: “This response will ensure that the responsibilities of directors of firms when they are in or approaching insolvency meet the standards that we require of them, and more generally improve the performance of directors and the effectiveness of the boards of public companies.
“We also want to learn lessons from recent corporate failures which have had serious impacts on customers, suppliers and employees.”
The Department for Business and Industrial Strategy said that a number of consultation responses called for firms to be more transparent about how surplus revenue is allocated for dividends as well as pension deficit reduction.
However, the consultation found that there was “very little support” for restricting dividend payments where the company’s pension fund was in a “significant deficit”, with one respondent arguing it would make the UK a “very unattractive place to raise equity capital”.
The government said: “It agrees with strongly held views that there should be no automatic bar on companies paying dividends in these circumstances.
“The government will, however, give further consideration to ways in which directors could provide stronger reassurances for shareholders and stakeholders that proposed dividends will not undermine the affordability of any deficit reduction payments agreed with pension fund trustees.”