BHS

Debate between Joanna Cherry and Michelle Thomson

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.