Thomas Cook collapse dubbed 'sorry tale of corporate greed' as MPs launch probe

Oscar Williams-Grut
·Senior City Correspondent, Yahoo Finance UK
(GERMANY OUT) Fankhauser, Peter - CEO of Thomas Cook AG, Germany (Photo by Kielmann/ullstein bild via Getty Images)
Thomas Cook CEO Peter Fankhauser will be questioned by MPs. Photo: Kielmann/ullstein bild via Getty Images

MPs have launched an inquiry into the collapse of Thomas Cook, saying management, auditors, and accountants have “serious questions” to answer about thee collapse of the 178-year-old travel operator.

The Business, Energy, and Industrial Strategy (BEIS) select committee on Thursday announced an inquiry into Thomas Cook, which collapsed at the start of the week after failing to secure a rescue deal.

The inquiry, set to start next month, will look at: the management of Thomas Cook; executive pay; accounting and audit practices; and the role of regulators. It will also look at how small businesses that worked with Thomas Cook are likely to be affected by the collapse.

Peter Fankhauser, Thomas Cook’s CEO, will be hauled in front of the influential committee to answer questions, as will the company’s former finance director and chairman. Auditors EY and PwC are also set to be investigated.

“Amid the frustration of holidaymakers and the misery of thousands of staff losing their jobs, the collapse of Thomas Cook has uncovered what appears to be a sorry tale of corporate greed,” Labour MP Rachel Reeves, who chairs the BEIS committee, said in a statement.

Reeves said there were “serious questions about the actions of Thomas Cook’s bosses and their stewardship of the business.”

A Thomas Cook Scandinavia Airbus A330 plane takes off from Las Palmas in the Canary Islands, Spain, September 25, 2019.REUTERS/Borja Suarez
A Thomas Cook Scandinavia Airbus A330 plane takes off from Las Palmas in the Canary Islands, Spain, on 25 September. Photo: Borja Suarez/Reuters

Thomas Cook executives received £20m in pay and bonuses over the last five years as the business ran into trouble. The figure has provoked anger and Transport Secretary Grant Shapps suggested on Wednesday that directors could have bonuses clawed back or be disqualified from future roles.

Reeves said Thomas Cook’s collapse also “shone a light once again on the use of aggressive accounting methods to aid bumper payouts to company executives.”

Thomas Cook’s excessive use of “exceptional costs” to massage its profit numbers drew a caution from auditors EY, according to the Daily Mail. The auditing watchdog said earlier this week that it was considering launching a full investigation into how accounts were prepared.

Reeves said the incident highlights the “apparent inability of auditors and regulators to curb these practices in the wider interests of shareholders, investors, and the public.”

The BEIS select committee has heavily criticised the UK auditing profession and earlier this year called for a break up of the “Big Four” auditors — EY, PwC, KPMG, and Deloitte. Reeves this week wrote to business secretary Andrea Leadsom calling for urgent reform.

“The BEIS Committee has a long-standing interest in corporate governance, executive pay, and audit reform which we are keen to follow up in this inquiry,” Reeves said. “The main players in the sad demise of Britain’s oldest travel firm should face public scrutiny and be held to account for their actions before the company collapsed.”

The BEIS select committee inquiry will sit alongside an official government-backed probe into the company’s collapse launched by the Insolvency Service.