High Street Giant BHS went into administration on Monday putting 11,000 employees at risk of losing their jobs. Retail Acquisitions lead by Dominic Chappell bought the 88 year old retail giant for £1 last March. The collapse is reportedly down to poor trading, mismanagement and poor return on property sales.
When the company was sold by Sir Green there was a pension deficit of £571m. This black hole remains. This will now largely require to be met by the government backed Pension Protection Fund. There is a nearly £571m black hole yet Sir Philip Green took £400m of dividends from the company prior to the sale. Twenty thousand people will take a 10% reduction in their pension scheme as a result. Those already claiming their pension are protected by the PPF, paid for by tax payers.
Sir Green took his money and ran leaving his employees and the tax payer to pick up the pieces. Retail Acquisitions’ conduct has been equally appalling.
Mr Chappell transferred £1.5m out of the company overseas when he found out his lifeline loan of £60m was rejected. He has since returned this money less £50,000 which Chappell claimed was due to foreign exchange costs.
This is shocking conduct, however even more shocking is that despite a huge pension black hole and the company losing money Retail Acquisitions reportedly paid themselves £30m in remuneration for their ownership during the last year. This is allegedly made up of management charges, legal fees, interest payments, salaries and wages. This is utterly ridiculous especially considering they owe the tax £2.6m in unpaid VAT bills.
The conduct of both Green and Chappell may not breach the law in respect of directors duties, however what about their moral ones? The concept of limited liability is long established. Owners of a limited company are liable only up to the money they have invested into the business. However, in exchange for this protection comes responsibilities ie: keep proper accounts, register their business, report those accounts, hold shareholder meetings etc. Most importantly they must not continue to trade if their company is insolvent. However should people like Green and Chappell not have a moral duty to account to their employees and the rest of society? Sir Green is ranked 205th richest man in the world by Forbes and yet he took £400m from the company in dividends which he paid to his wife. He has just received delivery of his third yacht, worth around the same sum as the pension black hole.
Business is not a social enterprise but owners do have a moral, if not legal, obligation to play fair. If they are not going to do so then the law should be reformed to prevent this sort of misconduct. Much like the bankers who took huge bonuses whilst their banks haemorrhaged money, these owners made a fortune and then left the tax payer to pick up the pieces. Has capitalism gone too far? Should we have tighter regulation not just for the banks but for all businesses?
Blog by Alan Calderwood