Sir Philip Green leadership failure and personal greed led to collapse of BHS, MPs say

 
James Nickerson
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The report said Green has a moral duty to make a financial contribution to the pension resolution (Source: Getty)

Sir Philip Green is ultimately responsible for the failure of BHS, according to senior MPs who today publish the findings of a parliamentary inquiry in the retailer's collapse.

The joint inquiry by the work and pensions select committee and the business, innovation and skills select committee found that Green's family became "incredibly wealthy" during their 15 year ownership of BHS, leaving the retailer and its pension fund weakened to the point of collapse.

Frank Field, chair of the work and pensions committee, said: “One person, and one person alone, is ultimately responsible for the BHS disaster. While Sir Philip Green signposted blame for 11,000 job losses and a gigantic pension fund hole to every known player, the buck stops with him.”

In the hard-hitting report, the MPs cite personal greed and a litany of leadership failures as two of the factors leading to the retailer's failure. They say the manner of its collapse leaves a stain on the reputation of business, and exposes gaps in company law.

"[Green's] reputation as the king of retail lies in the ruins of BHS. His family took out of BHS and Arcadia a fortune beyond the dreams of avarice, and he’s still to make good his boast of ‘fixing’ the pension fund. What kind of man is it who can count his fortune in billions but does not know what decent behaviour is?” said Field.

Read more: Sir Philip Green knighthood will be reviewed, Cabinet Office says

The MPs urge Green to follow his “moral duty” to BHS pensioners that are facing hefty cuts to their pensions. They say he should make a large financial contribution to the retailer's pension fund which is £571m in deficit.

"To an extent, it [BHS] created him; it could also bring him down," the MPs added. Green's knighthood is under review by the Cabinet Office while the BHS debacle has also attracted interest from the Serious Fraud Office, the Insolvency Service and the Financial Reporting Council.

The MPs argue that the story of BHS also begs much wider questions about gaps in company law and pension regulation that must be addressed. These matters will now be the subject of further inquiries.

The 60-page report details how Green's family, who owned BHS from 2000 to 2015, cut costs, failed to invest sufficiently in the business and paid substantial dividends offshore which ultimately benefited his wife to the tune of £307m.

A series of failures then led to the disposal of the business last year to Dominic Chappell and his Retail Acquisitions vehicle. MPs branded Chappell "manifestly unsuitable" and a "chancer."

Iain Wright, chair of the business select committee, said: “There was a complete failure of corporate governance, with Philip bulldozing the sale through, without proper oversight or challenge from his weak and impotent board."

Read more: Another 700 jobs at risk as more BHS store closures confirmed

Writing in today's City A.M. Richard Graham, who sits on the work and pensions committee, says “We learnt, above all else, that BHS was run like a medieval fiefdom, with absolute control by the Boss, shaky governance, and only lip service responsibility to its defined benefit pension fund."

Goldman Sachs is also criticised in the report for its involvement in the sale which went far beyond the "preliminary observations" the bank claimed to have made to Green. The report said: “They enabled their prestigious name to be cited as that of gatekeeper to the transaction. This added lustre to an otherwise questionable process.”

When the retailer collapsed into administration 13 months later, the shortfall in its pension fund was revealed at £571m.

"The actions of people in this sorry and tragic saga have left a stain on the reputation of business which reputable and honourable people in enterprise and commerce will find appalling,” Wright said.

"Whether Philip Green has a legal duty to top up the BHS pension scheme will be decided by the Pensions Regulator. But this report shows that he has a clear moral duty to do so,” said Steve Webb, director of policy at pensions giant Royal London.

The Institute of Directors head of corporate governance, Oliver Parry, said: “In the UK we have a very strong corporate governance ethos in the listed sector, but there clearly needs to be improvements in the unlisted sector. The case of the sale of BHS to Chappell is an example where effective corporate governance clearly broke down.”

A spokesperson for Green declined to comment.

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