Posted By: Admin, 23 Jun, 2011 - 02:05 pm
The failure of care home provider Southern Cross raises questions about the role of the senior advisers who helped negotiate the troubled firm’s flotation on the London Stock Exchange back in 2006.
According to the Daily Mail newspaper, David Cameron's Permanent Secretary at Downing Street and former Tony Blair aide Jeremy Heywood was a leading figure at Morgan Stanley during the period the bank helped to arrange the deal.
Likewise, Ofsted chair Baroness Morgan of Huyton was a non-executive director at Southern Cross and worked closely with Blair, and presumably Heywood, at the time of the float.
Although there was no way to predict the property crash of 2008, which left the company facing bankruptcy, some critics have suggested the City investors and advisors responsible for overseeing the floatation failed to employ due diligence.
How else, they say, could a deal brokered by a senior government aid and an Ofsted adviser ultimately end up with 31,000 frail elderly people living in 750 care homes run by a company facing bankruptcy?
US private equity firm Blackstone bought Southern Cross in 2004, floated the firm on the stock market in 2006 and sold all its shares for a huge profit the following year.
However, over the last three years, the shares' value has fallen by a staggering 98% and reduced the company's value from £1.1bn to around £12m leading some observers to suggest that legislation be introduced, which accommodates the free market, but protects the interests of all stakeholders.
When overseeing deals like this, profitability is important, but it should never be the determining factor.
Obviously, Heywood and Baroness Morgan couldn't have anticipated the housing market crash of 2008, which devastated the company, but that's still no excuse for the lack of security afforded to its service users.
In circumstances such as these, a strong link between the desire to close a deal and the protection of the interests of all long-term beneficiaries must be maintained.
Moreover, the Southern Cross scandal is just one example in a series of recent high-profile healthcare failures.
Three years ago, Prime Minister Gordon Brown was forced to apologise after it was revealed that between 2005 and 2008, up to 1,200 patients at Stafford Hospital had died because of substandard care, and last week, Winterbourne View, a residential hospital for vulnerable adults where abuse was secretly filmed by the BBC programme Panorama, announced it is to close.
Examples such as these highlight the human side of governance; where clinical governance is neglected and compliance-driven measures are ignored the effect is often detrimental to defenceless victims.
Subsequently, vulnerable elderly people are left without the services they require and feeling uncertain about their future accommodation; that couldn't happen if the governance was right.