There have been a number of concerns raised about the benefits obtained by directors and other key stakeholders of companies that have subsequently gone into administration.

Share selling

In large corporations its true financial position is often difficult to understand because of the very complex nature of trading and accounting, accordingly the share value can in some cases bear little resemblance to true financial performance. It has been claimed that key staff in some failed companies were clearly aware that their business was going to collapse and sold their shareholding at its inflated value. This is effectively a form of an illegal practice known as “insider dealing”, however the complexity and cost of investigations into this behaviour are so great that as a practice it is rarely prosecuted.

Bonuses

Bonuses can be a genuine way to reward good staff performance, but there have been limited controls on their assessment and payment, usually coming down to a staff members discretion of another’s performance. Because some are linked to the winning of a commercial deal, the bonus payment can be automatic. Unfortunately, it has been claimed there are cases where little assessment of the true value of a commercial deal has been made and the bonus was still paid even where the actual deal is likely to be averse to benefit of the company.