In September 2019, Thomas Cook entered into liquidation, impacting hundreds of customers leaving them without flights and holidays as well as lenders, suppliers, partners, landlords of the high-street shops, employees (21,000 of them) and pensioners.

Like other corporate failures and collapses, questions have emerged around:

• The role of the board, senior executive team and NEDs in the collapse as Thomas Cook expanded rapidly and the expansion was largely financed by debt.
• The role of the auditors. EY signed off on the 2018 accounts as a going concern. The FRC opened an investigation, which may expand to PwC, prior auditors of Thomas Cook.
• The role of the FRC.

A parliamentary inquiry has been launched.

Does this sound familiar? There are similarities with the collapse of Carillion. NEDonBoard, the UK professional body for non-executive directors and board members reminds boards of a few facts:

• Good governance has substance. It is not about ticking boxes, it is about promoting the long-term success and sustainability of the company for the benefit of its stakeholders and the wider society. Prior to its collapse, the Thomas Cook website said that: “The Board of Directors of Thomas Cook Group plc recognises the importance of applying the highest standards of corporate governance to enable effective and efficient decision making and to give a structural aid for Directors to discharge their duty to promote the success of the Company for the benefit of its shareholders”.
• Boards, auditors, advisors and regulatory bodies have a role to play in restoring public trust in businesses. There is no acceptability for excessive remuneration and complacency at the top. Prompt actions are also expected from regulators, ahead of collapses.
• Responsibilities of boards have increased. NEDs are visible, regulated and scrutinised. Expectations from regulators, investors and the general public are high. “Over-boarding” is an issue. NEDs should take on a few roles, to which they are fully committed and for which they are well remunerated. The board has stewardship responsibilities. It signs off executive remuneration and accounting practices. It identifies risks and manages them. Which risks were included in the company’s risk register signed off by the board? What discussions did the board have to manage and mitigate those risks? The Remuneration Committee is responsible for establishing competitive and transparent remuneration practices, aligned to the strategy and linked to the company’s performance. What discussions did the Remuneration Committee have on executive remuneration and the potential “gaming” of it using aggressive accounting practices?
• NEDs need to seek support from peers ahead of turbulent times. NEDonBoard offers experienced NEDs a safe environment to exchange ideas and a platform to advance their knowledge. The ongoing professional development of NEDs is not optional.

NEDonBoard supports non-executive directors and board members throughout their career at board level. NEDonBoard connects, informs and trains non-executive directors and board members and we extend the Thomas Cook board a free annual membership to NEDonBoard.

Decision-makers interested in knowing more about NEDonBoard, our Group Membership, our training offering or any of our services, please contact us at [email protected].

We have a collective responsibility to restore public trust in businesses.

Additional resources:

Key governance learnings from the failure of Patisserie Valerie

Carillion’s collapse: lessons learned

Key governance learnings from the Renault-Nissan scandal

Written by Elise Perraud, NEDonBoard COO

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