It’s been an ugly few days for Britain’s retail tycoons. On Friday Sports Direct’s Mike Ashley got a hammering in a report by MPs that (slightly hyperbolically) accused him of operating his warehouse like a Victorian workhouse. Today politicians trained their sights on Sir (for now) Philip Green over his sale of BHS.
They didn’t hold back. ‘Sir Philip cut costs, sold assets and paid substantial dividends offshore to the ultimate benefit of his wife,’ their report concludes. ‘He failed, however, to invest sufficiently in stores or reinvent the business to beat the prevailing high street competition. We found little evidence to support the reputation for retail business acumen for which he received his knighthood.’ Ouch.
‘So what?’ one might think. Green still has his prized Arcadia group and a fortune worth an estimated £3.2bn. That will keep him in super yachts and champagne well past the end of his days. And Green has never been loved by the public, he has far too many rough edges to be a celebrated public persona in the same mould as Richard Branson or James Dyson. He has already faced protests over his tax arrangements and use of ‘sweatshops’ in the developing world. Perhaps he didn’t have that much of a reputation to lose.
But while he might live the life of Riley, like most entrepreneurs Green loves doing deals and being successful in business. For that reason he will surely try to salvage his name. It’s not that bad headlines will damage his company’s ability to rack up revenues – the average Topshop punter cares a lot more about what’s fashionable and affordable than they do about the pensions of some former BHS staff (they probably don’t even realise that he owns Topshop). But it could give suppliers, creditors and potential new hires a reason to think twice before they link arms with him.
If Green ever wants to sell Arcadia, for instance, then whoever is looking to buy will be going through its books, and in particular its pension scheme, with the finest of fine tooth combs. Nobody wants to end up like BHS’s buyer Dominic Chappell, who the committee described as ‘out of his depth,’ and ‘over-optimistic to the point of arrogance.’
Why Green’s dressing down matters above all though is the resulting impact on the public’s already shaky trust in business. Just as RBS boss Fred Goodwin became the focal point for a broader malaise towards Britain’s financial services sector in the wake of the financial crisis, there is a danger than Green, Ashley and the like become similar symbols of malpractice within the ‘real economy’. That would be bad for all of us.
As the result of the EU referendum showed so clearly, the voice of UK Plc does not carry the weight it once did. The new government is already revving up to take on Britain’s boardrooms, with plans to crack down on excessive pay and give workers a seat in the boardroom. They don’t need more ammunition. For his own sake, as well as for that of British business, Green needs to publicly atone and help plug at least some of the hole in the BHS pension fund. Who knows, they might even let him keep his knighthood.
Image credit: Mtaylor848/Flickr