- Created: Friday, 15 July 2016 10:43
- Written by Barnaby Philips
Billionaire businessman Mike Ashley was branded ‘the unacceptable face of modern capitalism’ by The Guardian in an editorial on 7 June, the day after he smirked his way through a parliamentary ‘grilling’ that exposed the appalling treatment of his staff at Sports Direct. Such a verdict begs the question: what is capitalism’s acceptable face? Perhaps it’s British mining companies which ‘employ’ seven-year-olds for $1 a day in the Democratic Republic of Congo or the sweatshops in South Asia fuelling British capitalism’s sustainability, to name but two examples. Sir Philip Green, chairman of the Arcadia Group of retail stores, has also recently faced the theatre of humiliation – if nothing more – of parliamentary scrutiny. He took millions of pounds in dividends out of BHS - then owned by Arcadia - before it went bust, dumping 11,000 people into unemployment. But these two grinning creeps merely serve as capitalism’s ideal villains – greedy and selfish ‘bad eggs’, aberrations put down to individual immorality, as opposed to all the ‘good’ capitalists who play by the 'rules', letting the universally exploitative and parasitic system itself off the hook.
It was The Guardian’s undercover investigation which exposed the cruel treatment of Ashley’s Sports Direct warehouse workers on 9 December 2015. Although hardly surprising, the findings are certainly shocking. For starters, staff aren’t even paid the paltry legal minimum wage. Under permanent suspicion of stealing stock, they are kept at work beyond contracted hours and prevented from leaving until they’ve been subjected to humiliating security searches. As a result, staff were paid an effective rate of about £6.50 an hour against the then statutory rate of £6.70, saving the FTSE-100 firm millions of pounds at the expense of some of the UK’s poorest workers. It was also found that Sports Direct docks 15 minutes of pay for being so much as one minute late for work, with ‘six black marks’ justifying instant dismissal.
Even more shocking is the revelation of 110 ambulance call-outs to the warehouse on the outskirts of Shirebrook, Derbyshire, including 38 times when workers had complained of chest pains. Five ambulances had been called in birth and miscarriage-related matters, including one woman who gave birth in the toilets.
Whether the state forces Sports Direct to reimburse the estimated £20m owed to cheated workers remains to be seen. Ashley can easily afford it, of course, and that would be the extent of his punishment.
If they hadn’t already been screwed by Sir Philip Green, BHS workers may have felt as if they had dodged a bullet when it transpired that Ashley made a last minute bid for the 88-year-old retail outlet. The deal broke down, of course, because he wanted to buy it for £1 without taking on any responsibility for the £571m pension deficit.
In the biggest retail collapse since Woolworths in 2008, efforts to find a buyer for BHS have now failed and all 163 stores will close. According to the BBC, staff at one London store were only informed of the decision by a journalist (BBC, 2 June).
Duff & Phelps, the administrator, said that ‘although multiple offers were received, none were able to complete a deal due to the working capital required to secure the future of the company’. It also warned that unsecured creditors to BHS, including landlords and suppliers, were likely to receive less than 3p for every £1 owed. Listed landlords British Land, intu, NewRiver and Land Securities are among those that face losing out. In a further case of bourgeois infighting, their bid to form a creditors’ committee to scrutinise the collapse for themselves has been rejected (Evening Standard, 28 June).
Gregg McClymont, head of retirement savings at Aberdeen Asset Management, said: ‘This is bad news for its pensioners and current staff members of the pension scheme. More widely, BHS's fate, and the ongoing Tata process, are a reminder that [defined benefit] pension promises are expensive and depend on the solvency of the sponsoring employer.’
This story of corruption and deceit goes far beyond the machinations of the Green family. The Financial Reporting Council is now investigating the conduct of PwC for its audit of BHS’s accounts in the year to 30 August 2014, the last full year it was controlled by Green. MPs also want the regulator to examine the previous years when PwC audited BHS, and the accountancy firm’s audits of other companies in Green’s retail empire. The investigation is expected to focus on why PwC signed off BHS as a going concern when it was reliant on support from its parent company, Taveta, the Green family’s investment firm. FRP was appointed as a second administrator after the Pension Protection Fund raised concerns about the relationship between Green and Duff & Phelps. ‘They are, as Philip refers to them, his ponies, and they do exactly what Philip tells them to do,’ Dominic Chappell, Green’s BHS successor, told MPs (The Guardian, 22 June).
Two parliamentary committees investigating the collapse revealed that Green and his advisers had believed last March, around the time he sold the company for £1, that ‘insolvency was inevitable’ if the £571m pension deficit could not be restructured. He claimed his critics were merely ‘jealous’ of the dividends he made. Green’s ‘performance’ was described in The Guardian as ‘one of the most aggressive’ in memory. At one point he accused an MP of ‘excessive staring’. He also claimed that he moved to the tax haven of Monaco for ‘health reasons’. Green has offered £80m towards paying the pension black hole but authorities are reportedly demanding £275m – almost £300m short of the total (The Guardian, 15 June).
In the largely inconsequential theatre of these ‘grillings’, Green easily fended off attacks by producing his own figures or claiming he was not involved with specific events. Instead he deflected blame onto his successor. Both have been wrestling in filth. Chappell, a former racing car driver with no previous retail experience has been declared bankrupt three times. He already stood accused of taking a £90,000 loan from BHS to pay a personal tax bill. Now the chief executive Darren Topp has accused him of trying to pay for a family holiday to the Bahamas on company expenses. Topp says that Chappell also asked for his salary to be paid early so that he had the money for a holiday. Astonishingly, the human resources department agreed to the payment on the basis of ‘hardship’. As for the £90,000 loan, Chappell claims he asked for the money because he was away from the office and did not have access to his credit card or banking log-in details (The Guardian, 23 June).
Separate documents released by the committee from Olswang, Chappell’s advisers, claim that Green forced Retail Acquisitions into buying BHS earlier than it wanted to. The document also claims that Retail Acquisitions only discovered on 26 February that it was buying BHS with the pension deficit, as opposed to Green restructuring it separately (The Guardian, 29 June).
Meanwhile, the leading British banker at Goldman Sachs has apologised to MPs for not previously admitting that the bank was approached by Green about offering a £40m loan to BHS when it was bought by Chappell. Michael Sherwood, a vice-chairman of the bank, claimed he had forgotten the conversation with Green and that a formal request for the loan did not materialise.
Speaking of nepotism, Green sold one BHS store in Ealing to his own stepson, property developer Brett Palos. Through his Thackeray Estates firm, Palos – an Arcadia board member – bought the store for £6.9 million, and sold it for a £3 million profit to developer Southern Grove.
On 19 June, Green took delivery of a £46m private jet, to add to his speedboat, helicopter, and three yachts. He is awaiting delivery of a £100m 'superyacht'.
And so we can see how the stink of a couple of ‘bad eggs’ starts to filter through other parts of the private sector, abetted by a capitalist state. Mike Ashley and Sir Philip Green may be the very worst of a bad bunch, but the capitalist system relies on the practices which enable these billionaire tycoons to trample over workers without a care in the world.