Monday, July 25, 2016

same old same capitalism

A report, published today by the Commons Work and Pensions and Business committees, once more highlights what the committees describe as “the unacceptable face of capitalism”.

Theresa May will face calls today to act on her promise to get tough on irresponsible business practices by stripping the former BHS boss, Sir Philip Green, of his knighthood. A new report from a group of MPs goes into scandalous detail of how Sir Philip pocketed hundreds of millions of pounds for himself and his wife, leaving the famous chain store on “life support” before selling it off to a “wholly unsuitable chancer”. After examining his record, a group of MPs from all parties have reached the devastating conclusion that they could find “little to support the reputation for retail business acumen for which he received his knighthood”.

The points out that thousands will suffer from what it describes as a “litany of failure”. They include BHS’s 11,000 employers, many on low pay, whose jobs are at risk. Twenty BHS stores closed over the weekend and there is too little money left in the company to cover the pensions of its 20,000 current and former employees. Yet those at the centre of the scandal “have walked away greatly enriched”, the report states. The biggest gainers are Sir Philip and his wife, Lady Tina Green, who are hundreds of millions of pounds richer. The report describes the buyer of BHS, Dominic Chappell, and his associates as “incompetent and self-serving” adding that Sir Philip, Mr Chappell “and the respective directors, advisers and hangers-on who all got rich or richer are all culpable”. Anthony Grabiner, who gave what he called “after event ratification” to the sale of BHS – meaning that as chairman of the board he approved a decision taken at a board meeting to which he had not been invited. The report says: “The complacent performance of Lord Grabiner as the non-executive chairman of the Taveta group boards represented the apogee of weak corporate governance.” Two directors jumped ship with personal financial rewards that it would take many BHS employees decades to earn. The others continued to profit handsomely from their positions without fulfilling their requisite responsibilities.

Sir Philip Green bought BHS in May 2000 for £200m and sold it for the same amount to Taveta 2, a Green family firm in July 2009. Taveta sold it for £1 in March 2015 to Retail Acquisitions Ltd (RAL), owned by Dominic Chappell. BHS showed an increase in profit for a brief period after Sir Philip took over, but the man known as the “king of the high street” achieved this through cost cutting and squeezing suppliers, not by investing or improving turnover. In those years, dividends worth £414 – twice BHS’s after tax profit of £208m – were paid, of which, according to the report, £307m went to the Green family. In 2001, ten BHS stores were sold for £106m to Carmen Properties, a firm registered in Jersey and ultimately owned by Sir Philip’s wife, Lady Tina Green, who lives in Monaco. Both Jersey and Monaco function as tax shelters. BHS paid Carmen £153m in rent before buying back the properties for £70m. The arrangement “reduced profits earned in the UK on which tax was payable.” In 2005, Tavena paid its shareholders what was described as “the biggest pay cheque in British corporate history” of £1.3bn. As a result of such pay outs, the report says “by 2014, BHS was left on life-support”. The chain of stores was then sold to a buyer, Chappell,  who “brought no new money to the deal, took no personal risk, could offer no equity and had no means of raising funds on a sustainable basic”. Chappell ‘had his hands in the till’. His description of £2.6m that he personally took, in addition to an outstanding £1.5m family loan, as a “drip” in the ocean is an insult to the employees and pensioners of BHS.

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