BHS goes bust - why Sir Philip Green's brand of capitalism is not acceptable, he should be made a pariah

Comments

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   Striebs

   25 April 2016, 05:55

   Well said Tom .

   Definitely the knighthood must be stripped . Surely even Cameron’s crony’s could not be so shoddy as to neglect to do that ?

   Debt funded dividends following leveraged buyouts need to be prohibited or at least regulated .

   Why does the country insist on bestowing honours upon retailers who pedal Chinese tut like BHS , Sports Direct and M&S and hoteliers like Rocco Forte who treat employees so much worse that they would treat their own children ?

   These people should be treated as pariahs .

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   Evil Banksta

   25 April 2016, 06:24

   Tom, I will risk sticking my head above the parapet to defend Sir Philip because I’m quite sure that the facts don’t justify your criticism.

   The accounts of BHS Group Limited show (https://beta.companieshouse.gov.uk/ will let you read them for free) that the last dividend that was paid by BHS was in 2006 (£42.8m), so almost a decade ago. If you look back through the accounts you will also see that the large dividend paid to Lady Green was not solely funded by BHS (it paid just under £200m of it). As at 2007 the pension scheme deficit was £22.5m. Since that time no dividends have been paid. You write:

   ——-“It is perfectly legal for a business owner to use distributable reserves, that is to say profits after tax, to pay dividends to himself or his Mrs, to those who own a business. But if he does so leaving the balance sheet, and/or a pension fund deficit, in an unsustaianble state it is at best utterly unethical and at worst reckless.”——-

   But I can see no evidence whatsoever to justify that as a claim. A dividend last paid in 2006 is hardly causal to where BHS find itself today. When that dividend was paid in 2006 the business and the pension fund looked rosy.

   What has actually brought BHS down is low gilt yields and you’ll see the consequences of that across the board this year with masses of companies with large defined benefit pension schemes. Pension scheme liabilities are discounted at an interest rate closely linked to gilt yields. As gilt yields have dropped the pension scheme liabilities have risen dramatically. Some pension schemes that have invested solely in long-term corporate bonds, gilts and index-linked gilts have been “matched” and hence as the liabilities have risen the assets have risen at a similar rate. But there’s lots that haven’t.

   I would imagine that Philip Green is gutted about BHS failing and the stain that this will being to his reputation. But I would expect those comments to come from the ignorant left who don’t understand economics and finances.

   Businesses fail, they often fail for reasons outside of your control, like governments across the globe artificially depressing the price of debt. A dividend paid almost a decade ago does not cause the problems at BHS today.

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   Simon Hodges

   25 April 2016, 06:44

   I believe he also collected £150 million renting stores to BHS that his family owned personally via various vehicles.

   http://www.theguardian.com/business/2016/mar/25/bhs-pension-regulator-sir-philip-green-analysis

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   alcira16247

   25 April 2016, 07:06

   Hear! Hear! Unarguable…….Green and his actions are a disgrace!

   Terrific article, Tom!

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   adge

   25 April 2016, 08:22

   Think you’ll find money made from service companies and renting to BHS. Sound familiar? Capitalism is like a nuclear reactor- very good at producing power/wealth but has to be encased in concrete/rules to keep the wide boys under control.

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   Marvin

   25 April 2016, 08:40

   Didn’t Gideon employ fat phil in 2010 to show the government how to be more businesslike in their own asset stripping program ?

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   turbograndad

   25 April 2016, 08:48

   Nah, its all par for the course, why so indignant, yet another benighted high achiever fat slob, doing what comes naturally.
   Capitalism has no moral compass Tom, you know this, its rogue, aggressive, brutal, enslaving, institutionalizing, counter productive,and has to be paid for.
   Its free market , bollocks, that makes the world go round.

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   Marvin

   25 April 2016, 10:08

   The killer for the balance sheet seems to a reappraisal in 2009 of the present value of the pension assets resulting in a 159m hit that wipes out the balance sheet effectively. A small part of this is to do with the crash but most of it has to relate to underprovision in previous years I would have thought which makes any dividends taken out previously worth a second look. I am no pensions expert though.

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   Cheeky Chappell

   25 April 2016, 13:01

   I think we need a piece on serial bankrupt Dominic Chappell, whose Retail Acquisitions appears to have snaffled up a useful 25m greasy ones in management fees, salaries and wages, legal and professional fees and interest payments since tossing a gold coloured coin into the hat.

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    FishBarrel

    25 April 2016, 14:23

    Rangers sold for a quid and Duff and Phelps were the administrators. BHS sold for a quid and Duff and Phelps are the administrators. What’s that about lightning striking twice. Crazy, Duff and Phelps are part of one of the biggest fraud court cases in Scotland and yet they bag one of the largest administration clients in the UK.

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    GuySalamo

    25 April 2016, 15:28

    Philip Green bailed out when he sold the company to Dominic Chappell of Retail Acquisitions for One Pound sterling.
    Anyone spoken to Dominic’s Bryanston neighbours for their opinion of him? Thought not.

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    BLUEFREW

    26 April 2016, 03:13

    The problem isn’t Green per se. The bigger problem is the people who have enabled him and others like him, namely the banks (HBOS in Green’s case).

    Moral hazard does not exist for the banks, so they don’t have to take the consequences of their lending decisions. The fact is Green and Chappell have emptied the tills, which were full of the money the bank lent them. Same as countless other people, especially on AIM.

    The real cause of this outrageous behaviour is 0.5% interest rates for 7 years and £375bn of QE. While the man in the street can barely afford to put a roof over his head, a few individuals are making out like bandits.