BHS

Joanna Cherry Excerpts

Thursday 20th October 2016 Commons Chamber

[Michelle Thomson]

I thank my hon. Friend for that intervention. The code goes on to say in the sentence I was quoting:

“The directors should lead by example and ensure that good standards of behaviour permeate throughout all levels of the organisation.”

The code applies only to listed companies with a premium listing of equity shares, but that does not absolve a private owner from any responsibility. Time and again opportunities were missed to address the growing pension deficit and it cannot simply be argued that the deficit was a result of the global financial crisis and increased longevity. Sir Philip had accountability for addressing the deficit and could have chosen to do so on a number of occasions, as other schemes managed to do.

The QCs’ report cites many examples of the Green family’s legal rights as the majority shareholder, but says very little about the responsibilities to pensioners and employees that that brings. I am sorry, but Sir Philip cannot have it all his own way. It was a lack of judgment that allowed the pensions situation to continue, and a lack of judgment that progressed a sale to a wholly unsuitable third party.

The non-executive chairman was at pains to point out that the code does not apply to private companies, and the QCs’ report notes that the chair of the board has merely the same duties as the other directors. Legally that is true, but might I inquire as to what exactly the remuneration of £125,000 as chair of the board was for? I support the suggestion of the governing body for governance, the ICSA, which suggests reforming the code to include private companies. We have heard a number of calls for that today.

In terms of the general culture of organisations, there is always a key risk if a level of power is concentrated in just a few key individuals, there is weak leadership which chooses to surround itself with people who are reluctant to disagree for fear of falling out of favour, and there are cultural failings within the organisation that are common knowledge but remain unchallenged. We all have a duty to speak out in these cases, because by remaining silent we become complicit in the contract of the bully and the bullied.

In the case of BHS, the final decision on sale was made without the non-exec chair asking about the credentials of the purchasing company, why it was believed to be the best outcome for the employees and pensioners, or whether the third party had a credible turnaround plan—and, incredibly, they were not invited to the ratification meeting. There was only one non-exec director at the meeting: the son-in-law of Sir Philip Green, whose stated brief was to represent the interests of Lady Green.

I challenged some board members to name a time—any time—when they successfully challenged Sir Philip Green. Their response was muted. I could literally count the seconds ticking by as each respondent looked for an example.

Our report notes that

“absolute power, in business as in politics, is a dangerous thing”.

It was certainly absolute power that enabled Sir Philip and the Green family to run BHS as their personal fiefdom, to exclude independent directors from key decisions and to bully weak senior managers, and this contributed to the ultimate failure of BHS and to its ultimate failure in its duty of care to the pensioners and employees.

I shall finish by making a brief comment about the amendment. This UK legislature is already struggling to demonstrate its relevance to many people. It must be able to give a voice to people on the important issues of the day. The saga of BHS is being played out in the media, and not only recently. We have seen the success story, the “loadsamoney” parties, the knighthood, the record-breaking dividends, the decline and the eventual sale of the business. People watching at home have, with every justification, asked, “How can this be? How can an owner of a company act with such impunity in the matter of 11,000 jobs and 20,000 pensions?” Hindsight is a wonderful thing, and who among us does not recognise circumstances in which we would do things differently? I am sure Sir Philip Green regrets the circumstances now, but we are talking about a knight of the realm, and that position must surely require a higher bar of ethical behaviour.

[Joanna Cherry]

(Eningburgh South West) (SNP): My hon. Friend is making a powerful speech. Has she, like me, received dozens of emails from constituents who are concerned that Sir Philip Green should be held up as an example? I shall read out just one of the emails I have received.

“As someone in business, who takes pride in the efforts we make for our staff and customers, it’s really hard to understand why someone like Sir Philip would be allowed to retain his knighthood. Surely, we should not be placing such traits as aspirational for the public.”

Does she agree with that sentiment?

[Michelle Thomson]

I absolutely agree. Many of us will have received hundreds of letters and emails from our constituents on this subject.

It is on this point that the argument turns for me. The corporate governance code is not there to provide a loose set of rules that companies are invited to think about now and again. It is fundamentally a framework for behaviour in business. Business is not just about the bottom line; it is about providing jobs and sustaining communities, and the best businesses are based on partnership. Sir Philip Green knew for many years that BHS was in trouble and he failed to do the right thing. His actions, and his inaction, led directly to the loss of 11,000 jobs and affected the lives of 20,000 pensioners. He seems to believe that BHS being a private company negated any accountability or responsibility for the lives of people who depended on him and, ironically, who made his success.

--- Later in debate ---

[Hannah Bardell (Livingston) (SNP)]

Having listened to colleagues and read the conclusions of the report by both the Work and Pensions and the Business, Innovation and Skills Committees, two principles come to mind that cut to the core of the debate. What we have seen from Sir Philip Green and the collapse of BHS is a lack of responsibility and, moreover, a lack of respect. I commend both Committees, their members and their staff for a comprehensive, factual and damning report on the fiasco of the BHS collapse. Mr Green lacked respect for BHS employees and their families when he mismanaged the business to the point that it could only be sold for £1. He then abandoned all responsibility for their pensions and the failed company that fell apart under his leadership. The report makes for grim reading, particularly when it states that

“the total dividends paid by BHS Ltd were £414 million in the 2002–04 period, almost double the after-tax profits of £208 million. BHS Group, the parent company, paid dividends of £423 million in this period… We were told that the Green family received £307 million of this. This effectively removed value from the company, precluding its use for purposes such as investment or pension contributions.”

Our constituents are bearing the brunt of that recklessness and greed. A constituent of mine, Tracey Hurst, reached out just yesterday to share the impact that the BHS collapse has had on her life. Having worked for BHS for 17 years, she remained there until it collapsed and closed completely. She refers to herself as a loyal member of staff who stayed until the very end. She was not bitter, but disappointed and concerned for her colleagues, many of whom have been unable to find new jobs. Another constituent, Laurence Robertson, contacted me to say that he feels strongly about such greed at the expense of the average person. Another constituent reached out to express how he and his family had always loved shopping at BHS but had been disgusted to discover what he called Sir Philip’s absolute greed and complete lack of compassion. Many have asked that Mr Green be stripped of his knighthood, which seems only fair given that many have been stripped of their jobs and pensions under his leadership.

[Joanna Cherry]

BHS was a much-loved institution on Edinburgh’s Princes Street for many years. I remember visiting it with my mum as a wee girl in the days when there was even a food hall, which was quite a long time ago. Does my hon. Friend agree that this House owes it to the staff of BHS, who served their communities so loyally for many years, to ensure that sanctions are imposed for what occurred and that this cannot happen again?

[Hannah Bardell]

As ever, my hon. and learned Friend is absolutely spot on. A knighthood for thousands of pensions does not seem unreasonable. The 32 BHS stores that closed across Scotland included branches in Livingston, Hamilton, Kirkcaldy and Leith, and the closure resulted in more than 700 employees losing their jobs and livelihoods, and a place of work to which many, like my constituent Tracey, gave a huge chunk of their working lives.

When employees lose their jobs and pensions, their families are hit by that loss. Sir Philip understood the importance of providing financially for his family—he understood it very well. In fact, the entire Green family hugely benefited from BHS. Reports say that the Green family made around £2.7 billion in total out of BHS and Taveta. Mr Green paid substantial dividends offshore that financially benefited his wife. BHS employees want to be able to provide for their families, but Mr Green is clearly blind to the parallel. Sir Philip has done pretty well out of BHS and other investments. He has a helicopter, a jet and three yachts. I have nothing against someone spending their hard-earned money as they please, but that should not come at the cost of our constituents’ pension pots. If Sir Philip’s responsibilities do not include ensuring that his employees receive what they have earned, they will certainly not be enjoying the same luxuries as he; they will not even have a pension to retire on.

Beyond responsibility and respect, Philip Green’s actions and those of Dominic Chappell and the BHS directors simply fly in the face of good business practice. BHS’s collapse, coming amid trade negotiations for Brexit, reflects the dire need to encourage fair and inclusive business practices across the UK. This debate is about not only placing blame on Sir Philip Green, but doing what is right for BHS employees, who have been cheated out of their jobs and pensions, and other future employees. It is about ensuring that there are fair business models and regulations so that such a collapse can never occur again.

The Work and Pensions Committee’s announcement that it will examine the adequacy of the Pensions Regulator’s power in a further inquiry is a constructive start to the mission. My SNP colleagues and I have called repeatedly for the establishment of an independent pensions commission so that we can create an architecture under which the Philip Greens of this world can no longer run away with people’s hard-earned money. Now that EU workers’ rights will no longer be guaranteed and transferred to UK workers, it is more important than ever that we are proactive and ensure that our constituents are treated fairly by their employers. As the UK Government embark upon Brexit negotiations, there may be no running commentary, but we can be sure that there are running and ongoing concerns. Employees will remain uncertain about their rights, and the Government have a duty of care to all workers, including those put out of a BHS job and pension.

The Prime Minister claims that she will ensure that workers’ rights continue to be guaranteed in law as long as she is Prime Minister. I say to her and her Government that we require rights to be guaranteed far beyond her term or any of this Government.