Monday, 19 February 2018

“Round Two” – Sir Philip Green and Frank Field set to Renew Hostilities

Here in Financial Regulation Matters we have focused upon Sir Philip Green and his vast business empire on a number of occasions, with most posts assessing the downfall of the British retailer ‘BHS’ and the subsequent fallout that spanned from that. Frank Field MP, who chairs the Parliamentary ‘Work and Pensions Select Committee’ has, by way of the Committee’s mandate, come into direct opposition with Green over the collapse of BHS and the effect on its pension holders, and news today suggests that they are yet again set to resume hostilities over Green’s business plans; so, in this post, we will detail what is at issue this time and look at some of the possible effects that may ensure from this continuation of investigation.

The collapse of BHS, and Green’s involvement in the reduction of its pension schemes beforehand, made for a spectacle that was remarkable, but in reality not surprising. We covered the account of Sir Philip Green taking a daring approach to being questioned by Field’s Committee, with the result being that Green contributed significantly, but not in full, to the pension schemes to bring about some sort of parity after it was systematically reduced by the company’s leaders over a period of years. Whilst questions were raised here regarding the effect of that encounter, particularly in relation to the sentiments that resulted - i.e. Green’s bluster was both demonstrative of a. his belief in his lack of wrongdoing and b. his disregard for the threat posed to him, but also in relation to the sentiments offered for Field, that taking on such a commercial giant can reap the correct rewards – the outcome was to both secure a significant portion of the lost pension funds for the pension holders, but also to bring Green to the stage on account of his business dealings. It has been noted recently that Green’s Arcadia company, that controls many high street chains and has nearly 3,000 stores and 26,000 employees worldwide, is under increasing pressure from online retailers that have forced their way into the marketplace but, of course, with much less operating cost; as a result, news today suggests that Green is considering selling his company to a Chinese firm called Shandong Ruyi. However, for Field, this raises concerns on the back of Green’s performance with BHS, and it is for that reason that he has declared that his Committee will ‘look at the state of Sir Philip Green’s pensions schemes and whether he can sell to whomever he wants…’. Other reports suggest the reason for this concern, with one source stating that it is widely rumoured that Arcadia’s current pension deficit stands at almost £1 billion, which would add weight to Field’s declaration that it is important to ‘find out what the position is’ in relation to the current deficit held by Arcadia before any sale can go through. However, leaving aside the merits of the Chinese company, who have been making a concerted entrance into the European market of late, a question posed by Journalists to Field is of more interest at the moment; Field was asked whether this new investigation might be perceived by Green to be the confirmation of a vendetta against him, with Field responding ‘I hope it doesn’t’. That question from the journalist raises some very questions indeed.

On the one hand, it could look like a politician focusing upon a business leader too much, particularly as the BHS scandal and its fallout was so recent, but this is a particularly poor vision to follow. Another way to examine developments would be a politician, tasked with safeguarding vulnerable pension holders, fulfilling his mandate that he was elected to carry out, and consistently protecting pension holders against what has been demonstrated to be particularly venal behaviour. It is quite illustrative of the problems within modern society that investigating a business leader who has just had to settle to the tune of £350 million to replenish funds that he and his company drained, and who sit on an apparently gigantic pension deficit at the moment, is even potentially considered to be a ‘vendetta’; it is not, and this shaping of the debate lends poorly to the integrity of those who advance such degenerative arguments. In reality, Green should have to declare, at a very early stage, his intentions with regards to the sale and then a formal and thorough investigation should be commenced; it is very unlikely that someone who operates in such a manner will leave the company in great shape for its purchaser, and more importantly its employees. It will be an interesting scene if Green is put in front of the Committee again, because his appalling performance last time will surely not be repeated; this is, however, a logical conclusion to make. The case is that, in reality, if Green is put in front of the Committee again, he will likely be even worse, and this come from his understanding that there is no real deterrent for someone in his position; would Green ever face imprisonment for his actions? We know the answer to that, and at best he faces a slight reduction in his substantial wealth which, for a man in his mid-60s, is no real threat at all. Yet, whilst that is a negative, the positive can be found in Field’s determination to protect those who cannot protect themselves, and his actions in this continuing case need to be the model moving forward. Perhaps the word ‘vendetta’ is correct, but rather it needs to be a vendetta against those who continue to plunder the system in the belief that they will not be pursued.

Keywords: Sir Philip Green; Arcadia, Topshop, Retail, Business, Pensions, Politics, @finregmatters.

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