Playthings of the Monetary Rich and (In) Famous

The last couple of times this blog has fallen silent for a month, it has been because of a death in my family. Thankfully, this time that is not the case, though an alleged death threat does feature.

Can you believe the BHS saga as it unravels? My silence is basically because I have been trying to lift my jaw up from the ground. I have been rendered speechless – or wordless to be more accurate – over the whole affair and especially the Select Committee investigations. In what may yet be not the most jaw-dropping element we now have the ex-Chief Executive alleging that the owner threatened to ‘kill him’ if he raised alarm over specific money going out of the company.

The ways in which BHS was the plaything of the rich, as laid out by the fall out from administration and liquidation is genuinely astonishing. Treated as a private cash cow by the owners and in my view, some of the advisors, auditors, consultants and other hangers on, the grubby story shows the employees, pensioners, some managers and now the public purse being taken as mugs. Staff have been shafted by the greedy, rapacious behaviours of a number of people and firms.

Should this surprise me?

In the early 1980s, soon after I moved to Stirling and became seriously interested in retailing, we had the Tiny Rowland and Mohammad Fayed ‘spat’ over Harrods. This was unpleasant with plenty of mud to go round. The unacceptable face of capitalism was also laid out in companies such as Polly Peck, Guinness and United Distillers (I see Ernest Saunders’ miraculous recovery allowed him to be a company advisor and director) and Amber Day (in which a certain Philip Green starred). Throw in Amazon tax issues, the current Boots problems and Mike Ashley and Sports Direct (what an excellent choice to choose this week to appear before a Select Committee given the BHS ‘evidence’) and we have a long and not so distinguished history in this broad area. But if you can get away with it …..?

We could also look to the more recent Comet closure and pension issues. This is not at all the same cause or ilk as the current BHS situation, nor is it of the same magnitude. But it does have similarities in terms of the role and reward of advisors and administrators, preferred creditors and the public having to pick up the tab. This was in its own smaller way a scandal, but the Government, despite pledges to the contrary, have refused to make public the investigation findings. Why not? What is there to hide? After all the taxpayer paid for this report in so many ways and we should see it. Perhaps it might even contain lessons for BHS – and those to follow.

Advisors passing the buck, shady introductions and inter-linkages, a lack of morals and ethics and a wanton disregard for staff, suppliers and even landlords; this is not exactly a wonderful legacy for deregulation and the market economy. Add in a death threat, claims of insanity, questions of intelligence and who knows what else in the coming weeks and it really is a grand soap opera, whatever we think of the ‘probing’ of the Select Committee members. But in this soap opera people are being really hurt and livelihoods damaged.

‘(He) is a mythomaniac…a Premier League liar and a Sunday pub league retailer. At best’ (Michael Hitchcock, former BHS financial consultant on owner Dominic Chappell).

That’s some epitaph on an owner and a business model. Whilst I understand the current focus on BHS and its problems, there may be a systemic issue here that needs to be resolved (lanced?) We have to make sure it can never happen again.

This is probably a good place to reiterate that this blog expresses my personal view and is not a stated position of my employer.

About Leigh Sparks

I am Professor of Retail Studies at the Institute for Retail Studies, University of Stirling, where I research and teach aspects of retailing and retail supply chains, alongside various colleagues. I am Chair of Scotland's Towns Partnership. I am also a Deputy Principal of the University, with responsibility for Internationalisation and Graduate Studies.
This entry was posted in administration, BHS, Closure, Comet, Governance, Liquidation, Pensions, Retail Failure, Select Committees, Store Closures and tagged , , , , . Bookmark the permalink.

9 Responses to Playthings of the Monetary Rich and (In) Famous

  1. johnwelbeck says:

    Leigh
    My interest in retailing goes back a bit further than yours, since I was first appointed a retail manager in the early 1970s having already spent over a decade living with my parent’s business. I also have had first hand experience of many of the matters that you raise today having worked with some of the businesses that have been involved during the end-game periods in some of the most high-profile failures.

    I notice that you did not remark upon Woolworths, which was also presented a major burden on the public purse when it its staff were laid off. More importantly you have not indicated in your thoughtful piece about the near-misses. There has always been a culture of smoke and mirrors within the corporate retailing industry. The key indicators reported on their performances are often chosen to avoid the awful truths of their, sometimes, spectacular mismanagement.

    How often does the media use the term ‘bell-weather’ in relation to retail corporations. A term misused and abused with regular frequency even by the specialist trade press. Ignoring the firm most often referred to in this way, JLP, whose business model I admit is admirable and praiseworthy, there have been countless occasions over the past few decades when firms such as M&S have enjoyed the same epithet. Yet the truth appears to me to be quite different.

    M&S as an example have very often performed astonishingly badly in their core business, to such an extent that had it been their only business they would have crashed and burned long ago. For a period of nine whole years of monitoring their performance in the 1990s, the only truly profitable aspect of their corporate business was not their retailing but their banking arm – which then successfully underwrote the many and varied crass decisions made throughout that business. Now there is nothing actually wrong in legal or even moral terms for this, but for them to have been consistently held up by the media (and themselves!) as a prime example of retailing is both naive and misleading.

    That so many of the most high profile executives of these businesses are held up as celebrities has been another astonishing feature of the past forty years. A significant number have received high honours, even membership of the House of Lords, yet despite the figures produced by their corporations, the label by which they are most commonly attached is that of ‘expert retailer’. How many of them have actually been entrepreneurial? How many have actually created anything? Would they have been head of a multi-billion turnover business had they been the founders?

    There are real entrepreneurs in the UK, names like Branson and Dyson who started from scratch without the benefit of inherited wealth, and they are justly celebrated, but the likes of the most commonly quoted ‘high-flyers’ are generally beneficiaries of a remarkable coincidence of current economic trends, unexpected opportunities, other people’s hard work and outright bullying. Hardly the citation one would expect on a knighthood or a peerage.

    My jaw has also dropped at times during the many hours of the select committees’ sessions, but less through incredulity than through the fact that it has taken this long for Parliament to actually ask questions about the state of businesses within the UK ‘High Street’. It has been talked about since Woolworth’s physical demise in 2008, yet how often has it been even remotely referred to as a potential threat to our actual town centres throughout the ongoing decade long discourse on the state of our town centres?

    • Leigh Sparks says:

      John
      Thanks for taking the time to reply to the blog. Sorry for not acknowledging this sooner. I take many of the points you make. My reason for not using Woolworths in the piece is that I have sort of done that to death already and I do believe that what has gone on in the case of BHS is of a different dimension and order. It can be argued that the way Woolworths was split off meant that it started with a debt burden that tied one hand behind its back, but I do feel that is different to the case BHS finds itself in. I also think it is more than the retailers that are complicit, hence my comment about advisors etc and the government in terms of Comet.Your comment about M&S also brings back memories of papers I wrote about them in the 1990s as they declined. Some of the decisions taken at that point over international stores were simply taken to be seen to be doing something to appease the City – something I hope they regret now.

      I do wonder what would have happened if Philip Green has got his hand son M&S.
      Leigh

  2. Very timely piece. I and and group of fellow members are just this week hosting an RSA Scotland event at which we are proposing the setting up of a new RSA Scotland network. This is to be on the over-arching theme of ‘inclusive growth’, For me, a critical strand within that over-arching theme is governance. That is governance that includes corporate governance in the private sector where, despite the Cadbury Report onwards, we still see recurrent corporate ‘sagas’.

    Maybe it’s because you’re a nicer human being than me, but I’m not really sharing your Incredulity. My philosophical cum pragmatic perspective stems from my MBA studies many years ago, My previous ‘unknowingness’ about the corporate business world was ended by two case studies that my syndicate group undertook.. One was the Robert Maxwell and Mirror Group affair. The other was the alleged culpability of the-then head of the company Richard Greenbury in the travails of Marks and Spencer (and the later episode that led one major institutional shareholder to accuse the company of a “decision to flout normal corporate governance standards and combine the roles of chairman and chief executive”.) As you point out, the good ship M&S still lumbers on.

    It seems that, as with the BHS affair allegations, a core factor is the presence of an allegedly asocial, macho, super-ego. Applying that wider we see accumulating post recession evidence that companies with a higher proportion of women in top management and on the board, suffer less from the consequences of high risk-taking and self-serving short-term exploitation of the companies’ assets.

  3. PS.A small typo by me… it was off course John Welbeck above who made the reference to M&S.

  4. Leigh Sparks says:

    Edward

    Thanks for the comments – including acknowledging the point that was raised by John not me on M&S. There are always going to be cases where the super-ego comes into play, or, as I would argue in the M&S case, there was a closed group which looked internally rather than externally and cut themselves off from those that could see what was happening on the ground. In such cases the market in the form of customers tends to extract the penalty. And we have seen this in Woolworths and BHS both of whom have lost customers hand over fist over many years as they either neglected the market change or were unable to respond to it.

    Much of the current malaise is in my view to do with expectations of reward and return being unrealistic – something that began with the Big Bang in the City and has driven through banking and the financial sector and is apparent in aspects of retailing. Performance bonuses that are unrelated to realities – the current M&S issue of what figures to reward on is another example – is another pernicious problem.

    Your points about governance and gender are well made.

    Not sure that you are not a nicer person than me, by the way! I would stand by my incredulity – I know there are cases such as Maxwell, but I think BHS is a far greater collective scandal across many players, companies and government, and I am incredulous that so many felt they could do what they did over such a time period. This is not a rogue person in my view, but a wider systemic failure and I hope our remedies do not lose sight of that 9which is your governance point I think).

    Leigh

    • Totally agree Leigh that, notwithstanding any ‘rogue egos’, the UK faces an acute issue of wider systemic failure. Indeed, we ought have in place a set of governance arrangements, supported by a real-economy consensus, that will identify such egos and provide for the ‘management’ of them.

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