Retailing’s Unacceptable Faces

Of course, the week I was away on annual leave (and if you love rain, then my home country Wales, had it in buckets) the two House of Commons Select Committee investigations into those captains of industry, Sir Philip Green and Mike Ashley, or more accurately practices at ‘their’ companies (well, sort of) decided to publish their reports.  Acres of newsprint, hours of air and TV time have been devoted to them, not least as the spat between Frank Field and Philip Green exploded once more, when the former compared the latter to Robert Maxwell, ensuring yet more coverage.

The two Select Committee reports can be downloaded here (Sports Direct) and here (BHS) as well as via the Committees’ websites (Sports Direct; BHS)where much more evidence is provided, and many of the exchanges are documented.

Given this blog’s interest in retail and past views of the BHS collapse it seems appropriate to return to the reports, not in forensic detail, but rather as a snapshot of British retail capitalism.  Let’s start with parts of what I thought were good, concise summaries:

Sports Direct: “A spotlight has been shone on the working practices and business model of Sports Direct. What the spotlight revealed was extremely disturbing. Workers at Sports Direct were not being paid the national minimum wage, and were being penalised for matters such as taking a short break to drink water and for taking time off work when ill. Some say they were promised permanent contracts in exchange for sexual favours. Serious health and safety breaches also seem to have occurred. For this to occur in the UK in 2016 is a serious indictment of the management at Sports Direct” (p3).

 BHS: “The evidence we have received over the course of this inquiry has at times resembled a circular firing squad. Witnesses appeared to harbour the misconception that they could be absolved from responsibility by blaming others. The worst example was Sir Philip Green, despite his protestations to the contrary. Sir Philip adopted a scattergun approach, liberally firing blame to all angles except his own, though he began his evidence by saying he would do the opposite. The truth is that a large proportion of those who have got rich or richer off the back of BHS are to blame. Sir Philip Green, Dominic Chappell and their respective directors, advisers and hangers-on are all culpable. The tragedy is that those who have lost out are the ordinary employees and pensioners. This is the unacceptable face of capitalism” (p55).

The Sports Direct report focuses on a range of practices which can be summarised as seeing ‘workers as commodities (p12) and, the distribution centre as ‘a workhouse not a warehouse’ (p8).  It zeroes in on the use of agencies and their use of contract workers often on very ‘unbalanced’ contracts.  That many of these workers are foreign and as they don’t have bank accounts have to use company pre-paid cards (p14) says a lot.  This is reminiscent of the worst ‘truck’ systems of the 19th century.

The report finds serious failings of corporate governance, management awareness and leadership.  It concludes (p26):

Sports Direct is the country’s largest sports retail outlet, but that size and success is founded on a business model that enables the majority of workers in both the warehouse at Shirebrook and at the shops around the UK to be treated without dignity or respect….Mr Ashley must be held accountable for some appalling working practices at both the Sports Direct shops and warehouses, either for not knowing about them, or for turning a blind eye to such practices in the interests of maximising the revenue of Sports Direct”.

The BHS report has had more coverage than the Sports Direct one and is more personal and extensive.  Philip Green gets the most criticism for looking after himself/family and not the business, extracting huge value but halving the assets and destroying corporate value.  He is accused of obfuscation, concealment, lack of transparency, starving the pension fund, and playing ‘both sides of the deal’ (p34).  Corporate advisors are castigated for their lend their name, take the money, pass the buck approach.  Lord Grabiner lent a ‘veneer of establishment credibility’ (p46) whilst Chappell and RAL showed an ‘outrageous lack of good corporate citizenship’ (p52), an ‘egregious example of individual greed’ (p53) and ‘had their hands in the till’ (p55).  The details in the report are devastating and jaw-dropping – the unacceptable faces of capitalism.

Yet, despite everything, it is perhaps worth pausing.  The final chapter in the BHS report states that the law and regulation, especially on private companies is inadequate and that there needs to be stronger and more proactive regulation on pensions.

We can decry (and I have previously) the behaviour in these cases.  We can rail against the ‘circular firing squad’ and the denial of responsibility.  We can bemoan what we have come to. But, and it is a big but, at this point neither Green nor Ashley has been charged with doing anything illegal (possibly leaving aside the minimum wage breach in the latter); this may come but it has not yet, and it may of course not.  The framework that allows them to operate in this morally dubious but potentially legal way has been (de)constructed by our lawmakers and Parliamentarians.

Pension problems have been with us for decades.  Working practices have been steadily deteriorating for at least the same length of time.  Yet in these areas we have continued to deregulate and turn blind eyes; governments of both colours are guilty.  When will there be action so that these gaps are filled?

Real people are damaged by this mentality of workers as commodities and companies as private piggy banks.  Deferred pay (pensions) are eroded or lost and the public purse has to pick up the pieces and pay the price.  Practices and behaviour such as those exposed in these two reports should never be allowed to happen again.  They are that devastating and important. Lawmakers and regulators also bear responsibility for what happened and the lack of action to remedy the frameworks.

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 Education and Students and a Fellow of the Royal Society of Edinburgh
This entry was posted in Agencies, BHS, Employment, Employment practices, Governance, Pensions, Retail Failure, Retail leadership, Select Committees, Sports Direct, Store Closures and tagged , , , , , , , . Bookmark the permalink.

7 Responses to Retailing’s Unacceptable Faces

  1. I suggest that the BHS episode is one in a long line of cases that illustrate the failings of our political and law making systems in the UK. To largely rely on profit-maximising commercial businesses and markets adhering to societal morals is to be culpably naive. (See UK Prime Minister Gordon Brown and Chancellor Alistair Darling handing over untold amounts of taxpayers’ funds to bankrupt and dissolute banks with the expectation that those banks would immediately re-invest this in businesses and enterprises.). Adam Smith long ago cautioned us on these matters. Where there is an absence of a competent and diligent political class (as in the contemporary UK) then an old business adage will rule: ‘Bad money drives out good’.

    • Leigh Sparks says:

      It is more than the absence of a “competent and diligent political class” surely, it is their complicity in the whole scheme of things.

      • Good point. When I last year commented online on some adverse publicity about one of the UK major supermarket chains, I was challenged by my own local then-MP. He was chucked out by the electorate at the last General Election. Part of his shadow ministerial brief was on the energy industry. After defeat he moved on directly to a job lobbying for the nuclear industry. A tale not entirely from retail but that illustrates the point in another area of consumerism

  2. Richard Fyfe says:

    All very good and valid points in this article. Unfortunately, as long as we have the corrupt and elitists in government, business empires and especially banking, getting off the hook and never facing justice, the ones below them will try and emulate the bad behaviour.

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