MPs demand an end to secrecy after BHS affair
Ex-boss Sir Philip Green back under fire in bid to clean up private firms
SIR PHILIP Green is facing a fresh attack from MPs this weekend who have named his Arcadia fashion group as a key target in a major crackdown on secretive private businesses.
The Work and Pensions Committee of MPs – chaired by Green’s fiercest critic, Frank Field MP – has called for more openness and accountability from large private companies citing Green’s ownership of BHS as a ‘lamentable’ example of how such firms are sometimes run.
Field told The Mail on Sunday the BHS case was like an X-ray of wider business. ‘It’s showing up all that is rotten in the private company sector,’ he said. ‘We aren’t going to let this issue go away.’
The MPs are demanding that directors should be made more legally responsible and are calling for tough rules to curb the power of heads of big firms.
The revelations are detailed in a report published today after a probe triggered by BHS’s collapse. The report states: ‘Sir Philip, a dominant personality, ran his companies as a personal empire with boards taking decisions with reference to a shared understanding of his wishes rather than the interests of each individual company.’
It goes on to highlight what it describes as the ‘complacent performance’ of its chairman Lord Grabiner. The report says the collapse of BHS had laid bare ‘a paucity of publicly available information’ on the firm’s weak financial position and the ‘absence of a voice’ within it for pensioners.
‘BHS was a private company but the effects of its collapse spanned widely while those who owned it took lavish rewards,’ it says. ‘Wider awareness about the state of the BHS pension scheme may have pressured Sir Philip Green into taking more action sooner.’
The Work and Pensions Committee noted in the report that it has been ‘frustrated’ in its efforts to obtain information about the £190million pension deficit at Arcadia, Green’s other business. The latest calculations on the Arcadia pension deficit are 18 months out of date. It could be far higher after the fall in yields on Government bonds, also known as gilts, during the period.
Speaking of the Arcadia group, Field said: ‘The pension group board is stuffed full of people who are employed by Arcadia and the deficit is rising. The Select Committee is not getting the information we want on the state of the pension deficit.
‘No public company would dare behave like this and we need to bring private companies in line with them.’ Green declined to comment.
The recommendations in the report, seen by The Mail on Sunday last night, came as billionaire Green was poised to agree to hand over a payment expected to be £350 million in a deal with The Pension Regulator to plug the gaping BHS deficit.
The massive payment would help to cut the losses still facing BHS pensioners almost a year after the firm’s collapse.
As well as targeting Green’s empire, the report lists the 30 largest private employers which it believes should be made more accountable including Virgin Atlantic, Specsavers, Matalan, New Look, Iceland and River Island.
The committee wants big private corporate employers – those with more than 5,000 staff in their pension scheme – to comply with the Financial Reporting Council’s corporate governance code. That means they would have to match the standards for management transparency and accountability already required for stock market-listed companies.
Among the specific requirements of the code is that ‘no one individual should have unfettered powers of decision’.
The FRC’s UK Corporate Governance Code is not legally enforceable, but the proposed new regulations would apply pressure on firms to clearly state their boardroom procedures or else be required to explain why they wish to keep information a secret.
Directors’ responsibilities to pensioners should be enshrined in the Companies Act, the committee said. The report also says that the Insolvency Service should publish reports into the collapse of firms where there is ‘significant public interest’.
The recommendation follows a number of high profile cases where large retail firms went bust leaving the public to pick up the bill for redundancies and the Pension Protection Fund was left to rescue pension members.
Electrical chain Comet is cited as an example of an ‘important’ insolvency where no report was ever published. Despite requests from opposition politicians for the insolvency report into Comet to be made public, the Government has refused saying it is legally obliged to keep such investigations secret.
The Government has already said it will publish the Insolvency Service’s report into the collapse of BHS.