MPs blast Thomas Cook bosses' failures, and demands bonuses are repaid – business live

Mark Carney added that that some people in the financial markets will make money whichever direction Brexit takes.

The governor told the Treasury committee (on a busy morning for committees) that:

“On no-deal some people will become wealthier as a consequence of that, yes. Others will become poorer – they [winners] will be outnumbered by the number who become poorer.”

And on Facebook’s Libra, Carney said the cryptocurrency is either going to be regulated properly globally “or it’s not going to happen” – and he says he’s confident that will be the view of the G7 and G20 financial stability board.

“This will not be like social media. This will not be a case where something gets up and starts running and then the system tries to figure out after the fact how it’s going to regulate it.

“It’s either going to be regulated properly, overseen properly, or it’s not going to happen.”

Here’s a snap summary of the key points from today’s blistering inquiry:

Finally, Rachel Reeves MP chastises the former Thomas Cook bosses for their failure to run the company properly, or to show dignity at today’s inquiry.

A travel company is a simple business at heart, the BEIS committee chair says.

You send people on holiday, make sure they have a good time, and bring them back. Thomas Cook couldn’t get that right, so it failed – and that failure touched a lot of people a lot harder than it touched the five well-paid executives in front of the committee.

You’ve all given your apologies, Reeves continues. But frankly, as seen time and time again on this committee, apologies are the easy bit. The hard bit is to resign from other other directorships, and recognised you have a lot to learn.

And… to:

Give back some of the huge rewards that you have not earned, Mr Peter Fankhauser, but you have received.

And with a final flourish, she urges Peter Fankhauser, Frank Meysman, Martine Verluyten, Sten Daugaard and Warren Tucker to reflect on the dignity which other Thomas Cook workers have shown, but which the committee has not seen today.

And with that, they’re dismissed…

Rachel Reeves rounds the session up, with a scathing, magisterial dismissal of some of the excuses we’ve heard this morning.

She begins by dismissing former chairman Frank Meysman claim that a “tragedy” occurred one Saturday in September, when Thomas Cook went under.

Reeves says:

A tragedy, though, speaks of something that is out of your hands.

I don’t think this was out of the hands of the company. On the contrary, I would say that that the collapse of Thomas Cook was due to the decisions of the board, including you, Mr Meysman.

Reeves says “a series of misjudgements made by management” led to the inevitable collapse of the world’s oldest travel firm, namely:

• A failure to deal with the debt, not accumulated by Peter Fankhauser, but not dealt with in the five years he was in charge, or under Meysman’s chairmanship
• A failure to write down goodwill. It “can’t be true” that goodwill was worth £2.5bn one minute and £1.5bn the next — and now worth nothing.
• The use of special disclosed items in the financial accounts seem to be “anything but special, as they occurred year after year.”
• All of the special events — good weather, terrorism, volcanic ash — every year there was some special item that helped to hide the underlying problems, rather than reveal the underlying state of the company.
• Failure to sell parts of the business that could have saved other parts; including the failure to sell the airline, failure to sell the travel agencies, the failure to raise the extra £200m needed.

She then dismisses Meysman’s claim that Thomas Cook was “almost there” with its rescue plan.

Then looking to the back of the room, Reeves points out that former Thomas Cook staff have attending the hearing, in their uniforms, showing their commitment to the company.

They do your company proud, and you should reflect, Mr Fankhauser, what you can do to put something back and say sorry to the people whose jobs you have taken and whose holidays you have ruined.

I hope you will go away and reflect on the huge salaries you have earned, and what you can do to put right what you’ve done wrong, she adds.

Anna Turley MP turns to pensions.

Q: How is it fair that Peter Fankhauser got a pension contribution of 30% of his salary?

Fankhauser says that’s a matter for the remuneration committee, but adds he faces a “considerable impairment” of his pension accumulated between 2001 and 2013 in Germany, when he was running Thomas Cook’s European operations.

He reiterates that he won’t defend his pay – that’s was set by the company – and adds that he has lost £4m of shares.

Warren Tucker confirms that Thomas Cook’s executive pay packets were “large by any standard” and when compared to average pay at the company (a fine statement of the bleedin’ obvious).

Turley points out that Thomas Cook’s workers face uncertainty over their own pensions, and the committee needs to keep a close eye on this.

BEIS committee chair Rachel Reeves circles back to the pay question — how much of the £20m of board bonuses paid out in the last five years be clawed back?

Warren Tucker says that Peter Fankhauser received £1.7m in bonuses. One third has been lost, and the clawback procedures means the rest of the 2017 bonus could be clawed back, if the liquidator decides it is appropriate.

It could be £558,000.

Fankhauser’s £4m of shares has already been lost.

Q: What about other bonuses?

Tucker says the finance director received a £400k bonus in 2017 – and it could also be clawed back.

Q: So should they be clawed back?

That’s up to the people running the business now, says Tucker.

There are four criteria that have to be met — Statement of the accounts, reputational damage, gross misconduct and financial failure.

Well, the financial failures and reputational damage boxes have been “absolutely ticked” says Reeves triumphantly.

Q: So shouldn’t the bonuses be clawed back, in your view?

Tucker argues that Fankhauser worked “exhaustively” to save the company…..

Reeves (who doesn’t appear very impressed by the witnesses) lets rip again:

Q: What’s the point of clawback policies if you can’t claw back a bonus when a company collapses, taking jobs, taxpayers money and the hopes and dreams of your customers. You put those facilities in place!

Tucker says the bonuses can be clawed back – it’s up to the liquidator.

Back in the Grimond Room, the BEIS committee want to know whether Thomas Cook accepts it shouldn’t have paid such large bonuses.

Q: With hindsight, have you learned anything or would you have done the same thing?

Warren Tucker, who was responsible as remuneration committee chair, concedes that bonuses were mis-structured – there was too much focus on profits, and not on cash-flow generation.

With hindsight, we wouldn’t have paid the 2% pay rises either.

Q: You’re a non-executive director at the Foreign and Commonwealth Office – has anyone asked you about your suitability for that role?

Tucker says he left the board in May, so “none of these events” coincided with his time at the FCO.

I just checked, and he started at the FCO in 2015…..

Q: What about other former Thomas Cook executives?

Frank Meysman says he has tendered his resignation from two other boards,and been asked to stay on. Martine Verluytem says the same happened to her – the two boards she serves on believes she provides value.

“That is fascinating”, Kyle tells the pair — which may be a polite way of saying “surprising”.

Peter Kyle returns to the Thomas Cook bonuses.

Q: The collapse of your company has created real suffering for your employees. You’ve not suffered the same way. Why have you not put your hand into your own pocket?

Peter Fankhauser says he won’t defend his pay, compared to ordinary workers. But he repeats that he worked “exhaustively and very hard” to try to rescue the company — adding that he wasn’t paid in September.

[Reminder: Fankhauser received £8.4m during his tenure as chief executive at Thomas Cook, including £4.6m in bonuses]

Q: How can chairman Frank Meysman justify receiving over £4m over the years?

Meysman says he was paid £275,000 per year, over his six years, plus £30,000 in expenses as he lives in Belgium.

Q: OK, but can you justify that.

Meysman says that’s for others to judge, but insists he did the job “for pleasure”, and had also bought shares with his own money.

Q: Does Warren Tucker (remuneration committee chair) agree that bonuses were paid as a reward for failure?

Tucker tries to defend the use of underlying profits for bonuses, but “Absolutely, at the end I agree” that the company failed.

Peter Kyle MP asks how the board addressed the rising crisis that subsumed Thomas Cook.

Former chair Frank Meysman says board members discussed how to cut its debt levels, and devised a plan to cut the pile by £100m per year.

Q: But your plans didn’t work, so was the crisis ‘normalised’?

Meysman says Thomas Cook did raise £400m through a rights issue, sold £350m of assets. Steps were taken, he insists.

Q: But that just shows you were reacting to the crisis!

Meysman says the company had a strategic plan – managing more of its own hotels, a new tie-up in China with Fosun, and a focus on Russia. But the overriding priority was to lower debts, thus the restructuring plan.

Q: But you’re travelling around the world, asking people to lend you more money. You look like a gambling addict, trying to open more credit cards to keep your addiction running.

Meysman tried to sweep this aside. He says the £900 rescue plan was a “great plan”, saving employees and hoteliers, and not costing the government anything (he claims) – until it collapsed on 22 September when the government refused to provide help.

Q: But you wanted £200m of support, and that would have been swallowed up by your £150m debt servicing costs, postponing the inevitable.

Meysman says those debt repayments were a “heavy heavy load”.

Fankhauser adds that he was in ‘close contact’ with UK government bodies, with around 100 meetings in the last year.

That included a meeting with Grant Shapps, transport secretary, on 9th September, when Fankhauser told Shapps that TC’s banks were seeking additional financing to underpin the rescue plan.

Q: Did you have any contact with the business department in the run-up to your collapse?

Fankhauser says no, because the transport department told him not to!

We covered this last month:

Rachel Reeves asks whether Thomas Cook spoke to government ministers in other countries.

Apparently they spoke to lots!

Peter Fankhauser says he spoke to the tourism ministers of Spain, Bulgaria, Turkey and Greece, who were concerned about the situation.

He says that he knows that some of them contacted the UK government, and were told they’d “See you on Monday in New York”.

That, I think, must refer to the UN Climate Summit which began on Monday 23rd, attended by Boris Johnson.

Fankhauser adds that Thomas Cook engaged intensively with the government, at the highest level, in the days before its collapse.

We were “pretty confident”, he says, but then on Sunday 22nd September the company realised that it faced a cliff-edge – without government support, the game was up.

Fankhauser says that at 5pm that day he realised he “had to throw in the towel” when he spoke to a “high official” on the phone, and learned that the government wouldn’t support the plan.

Q: Did you speak to any ministers on that Sunday?

No, Fankhauser replies. We were clearly told earlier that week that the point of contact was the officials who were sitting in our meetings.

The committee look astonished.

Q: Didn’t you try to challenge this?

Fankhauser says no, but adds that the company did have contact with officials in Number 10 Downing Street.

The other Thomas Cook executives confirm that they didn’t speak to a minister either!

Q: Do you regret that, Mr Meysman? (former TC chair).

Meysman suggests that with hindsight, things could have been different (not the first time he’s cited hindsight).

Q: Who did you speak to at Fosun?

The chairman.

Q: But when it comes to the government, you only spoke to an official?

Yes.

Q: Would it have been in the taxpayers’ interest to rescue Thomas Cook?

Former chair Frank Meysman says that this is a matter for governments, but points out that other governments have taken a different view. Germany, for example, has bailed out the Condor airline (which is profitable).

He then throws an elbow at the government for simply sending an email on Sunday 22nd September (the day before the collapse) saying it wouldn’t provide support.

I wish someone from the government would have come and sat down with us, and the chairs of its banks – who were in the country – Meysman says.

Former CEO Peter Fankhauser agrees that government support on that Sunday would have been vital. He says Thomas Cook had worked out that the cost of its collapse to the taxpayer was higher than the amount of extra money it needed to keep going.

Q: But wouldn’t a bailout have simply delayed the inevitable?

We would have been one of the best funded travel companies in Europe if the recapitalision plan had gone ahead, Fankhauser insists, waving his hands in the air as he insists the company could have had a bright future.

Q: But what would have changed?

Fankhauser says Thomas Cook would have had a new rolling credit facility, money from the bondholders, maybe new investment from elsewhere (if Fosun allowed it).

Plus, enough money to get through the winter, expand in China, expand its online business, because the debt burden would have been lifted.

Frank Field MP, Chair of the Work and Pensions Committee, has urged Thomas Cook’s former top brass to do the right thing, and hand their bonuses to the firm’s pension fund.

Field says:

“Thomas Cook workers now face a long wait to find out exactly how much they’ve lost from their life savings, and while their former bosses might argue that this isn’t another BHS, Carillion or British Steel, they will have a hard time justifying the millions they pocketed, one eye on the door, while the company collapsed around them.

“If they’ve had a chance to check how their own pensions are affected, perhaps the high-paid executives responsible would like to bolster the retirement of some of the workers they left behind, and give some of it back?”