The unacceptable face of capitalism
11,000 COMPLETELY INNOCENT workers are in danger of losing their livelihoods. Retailer BHS has gone under. How did this come to pass? Even Tory MP Richard Fuller called management conduct, ‘the unacceptable face of capitalism’.
The chain was bought by Philip Green in 2000 for £200m. Throughout the period that he ran the business, Green was highly praised in the financial press as a canny operator. After the purchase the shareholders, mainly Green and his wife Tina, relieved BHS of £586m in dividends and rent they paid themselves. Technically the firm was owned in the name of Tina, who conveniently lives in the tax haven Monaco. W Somerset Maugham described Monaco as ‘a sunny place for shady people’.
These two tax-dodging slimeballs were systematically stripping BHS. It has been clear for years that the shops were being completely run down by management. The Greens are the UK’s 29th richest household, said to be ‘worth’ £3.22bn, according to the 2016 Sunday Times Rich List. They have just taken delivery of a 90 metre super-yacht called Lionheart, costing £100m, to add to his existing two yachts.
When he had done the damage and extracted all he could from the chain, Green sold BHS on for £1 in 2015. It was bought by a group led by Dominic Chappell, a man who has been declared bankrupt three times. He continued in the fine tradition of BHS management of sucking the firm dry. BHS, though clearly struggling by this time, paid lavish fees to Chappell’s firm, Retail Acquisitions, and enough in salary so that Chappell could run out and buy a yacht (of course!). BHS was also borrowing money to pay to the directors of Retail Acquisitions. When they had squeezed every penny they could out of the firm, Chappell and co put it into administration.
In addition to 11,000 employees BHS has 20,000 people dependent on their company pension. The pension fund was in surplus when Green took over in 2000. It now has a deficit of £571m. Where did that go?
Green was knighted for his ‘services to the retail industry’ by New Labour. Blair also knighted Fred ‘the shred’ Goodwin, the man who wrecked RBS. Tony Blair described Green as a ‘real visionary’. Daily Mail columnist Sarah Vine, on the other hand, comments that Green’s behaviour is enough ‘to make a hoary old Tory like me contemplate turning to socialism.’
Green and Chappell are blaming each other for the debacle. Many will feel that both ought to be in prison. But the whole point of the story is that it seems nothing they have done is illegal. This is all in the normal workings of capitalism. Green was the principal shareholder in BHS. He was its owner. Under capitalism he could do what he liked with it.
What did Green get up to, that he was so lionised by the financial press? The Guardian commented that ‘Green’s name is often used in the same breath as the phrase ‘Midas touch’, but some argue that his strength lies in financial engineering rather than brand-building.’
What is this financial engineering? One typical fiddle is called ‘accounting arbitrage’ by Financial Times correspondent John Kay. This complicated expression was previously known as cooking the books.
According to Kay, ‘accounting arbitrage’ yields profits at the expense of those who rely on the integrity of accounts.’ There you have it. Financial engineering is a pickpocketing trick that creates no new value but just transfers it to the bloodsuckers. When they’ve done it, they can sweat the resources of the firm till the old horse drops down dead. That is what Green and Chappell did.
Will Hutton, Observer columnist, has written many books on the need to involve other ‘stakeholders’ such as the workforce in the fate of the places they work in. He makes the point that it will make the firm more successful in the long run. He is right of course. But it’s not going to happen. Company law defends the rights of the owners, as Green and Chappell were, to devour the assets of the firm to their hearts’ content at the expense of the workers and others.
The Financial Times wearily explains, ‘The BHS story is a case study in many unpopular aspects of modern capitalism; exploitation of limited liability, loopholeridden tax law and intricate accountancy.’ That is the nature of capitalism. That is why we have to get rid of it.