When BHS opened the doors to its first store in Brixton in 1929 they had a unique marketing plan to take on their competitors Woolworths - nothing in the store would cost more than a shilling. Today, BHS is mired in controversy, on the brink of collapse, with over 11,000 people at risk from losing their jobs, while tens of thousands of retired former employees face an uncertain future with a £571million black hole in the pension scheme.
If Philip Green, the man who stands accused of bringing one of the UK's iconic high street brands to its knees, was to have a motto it would be: 'He knows the price of everything. But the value of nothing'.
The recent select committee report reveals how, over 15 years, 'Sir' Phillip Green extracted £586million from BHS, in the form of rent, interest payments, and dividends to shareholders (mostly Green's family). Displaying a reprehensible lack of sensitivity to the workforce who he had employed for so many years - and despite the oversight of several City advisory firms - he then sold the company to a serial bankruptee with no business experience, who went on to receive millions in salaries and management fees from the company. The taxpayer - already owed £6million by BHS in unpaid VAT and taxes - cannot be allowed to foot the bill for the inadequate size of the pension pot which was left behind. But the workforce shouldn't have to suffer with lower pensions either.
Given that Green and his wife are worth an estimated £3.22billion, it is only right that the family replenish the pension scheme from his own resources. He should also politely step out of the creditors' queue, allowing employee redundancy packages, the many BHS suppliers still awaiting payment, and outstanding tax bills to have first claim on BHS's remaining assets. But it is perverse that the revocation of a knighthood is the only sanction we have available to make sure he does.
The report paints Green and Chappell as our very own Gordon Gekkos. And it is true that their conduct is an affront to every hardworking business owner in this country.
But the BHS debacle is surely not an isolated incident. Every major element of this story is symptomatic of a broader problem. Alongside many companies which are well managed and play by the rules, there are too many British firms which are run with a single-minded short-termism that privileges shareholder value over responsibilities to other stakeholders.
Where this mindset exists, we see the pursuit of high dividends at the expense of investment, and the prioritising of short-term price movements over a company's long-run growth, or even survival. This is to run such companies in the narrow interests of a small group of shareholders rather than those of the thousands of employees, suppliers, and customers who depend on it.
The public perception that careless greed pervades a part of the corporate sector is compounded by the recurrent failure of the City's own regulatory bodies.
There was widespread outrage at the 2008 revelation that ratings agencies were serving rather than stewarding the companies they were meant to be monitoring. The investigation of BHS's auditor, PricewaterhouseCoopers, for deeming BHS a "going concern" less than a year before it was sold by Green for just £1 shows that these problems haven't gone away. The role of Goldman Sachs and an assortment of other City advisory firms in waving through BHS's sale to Chappell also sounds alarm bells.
Even the Prime Minister, who has been part of a government which allowed a culture of greed to pervade too much of the British economy - the same Government, let's not forget, who appointed Green to review public spending in 2010 - has now concluded Britain has a corporate governance problem. She is yet to see that it is a problem that goes to the heart of one of the central weaknesses of Britain's economy. No wonder we have pitifully low investment and productivity rates when companies are used to extract value rather than create it.
I welcome the Prime Minister's proposal to introduce worker representation on Boards - give workers a say and they won't allow their pension funds to be mined, or the company, and the jobs it creates, to be run into the ground. But we need more than Tory tokenism. We need a radical overhaul of our corporate governance to ensure that companies are run in the interests of all stakeholders, and that long-term economic health is prioritized over lining private pockets.
We also need a better answer to the question: "who watches the watchmen?". External auditing is currently carried out by four big firms who too often have close personal and financial relationships with those they are monitoring. We need to bring the corporate sector in line with the vast majority of other sectors by making auditors financially independent. In the case of BHS, the auditors appear also to have been acting as consultants on the company's tax affairs, and, crucially, on its pensions structures. This cannot be right, and gives a clear perception of a conflict of interests. The practice of auditors selling additional services to the audited company should be stopped immediately, and auditors required to act exclusively as auditors.
The Prime Minister laments public cynicism about the corporate sector. But for as long as scandals like Sports Direct and BHS continue to occur, the public are justified in their impression that in Tory Britain 2016 there is one rule for the 1% and another rule for the 99%. Only a fundamental overhaul of corporate governance will restore their faith.
Jon Trickett is the shadow business secretary and Labour MP for Hemsworth
Suggested For You
SUBSCRIBE AND FOLLOW
Get top stories and blog posts emailed to me each day. Newsletters may offer personalized content or advertisements.Learn more