Philip Green and the BHS Pension Scandal: A Cause of Change in British Company Law?

Today’s post is a short reactionary post to the statements made today by the Prime Minister, Theresa May, regarding the potential future of Company Law in the U.K. With regards to the protection of pension funds within large businesses, Mrs May stated that ‘today I am setting out our [the Conservative Party] plans, if elected, to ensure the pensions of ordinary people are protected against the actions of unscrupulous company bosses’. In light of this, this post will look at the propelling rationale for this election campaign agenda, and also look at the reality of the situation by asking whether the Government would really punish the bosses of the largest and most influential companies in the country.

The reason why the issue of company pension funds is being debated by the leaders of the main political parties in the U.K. is, predominantly, because of the scandal that emanated from the collapse of large British retailer British Home Stores last year. In Financial Regulation Matters, we have already discussed this scandal from two perspectives: the first post was concerned with the conduct of Sir Philip Green with regards to his selling the retail icon to a less than stellar businessman, and his subsequent pledge to ‘sort’ the crisis that emerged with regards to the £500 million deficit in the company’s pension pot for its employees; the second post analysed the proposal by Frank Field to incorporate corporate governance standards aimed at public companies within the realm of private companies in the U.K., which took the form of proposing that private companies should abide by the Financial Reporting Council’s corporate governance code. So, rather than go over those stories in any great detail again, we shall instead focus upon the aims of the Prime Minister.

Theresa May started by stating that ‘safeguarding pensions to ensure dignity in retirement is about security for families’ which, whilst clearly a worthwhile endeavour, should be considered against the backdrop that she recently hinted at removing the ‘triple lock’ on pensions in the U.K. – a system which guarantees that the basic state pension will rise by a minimum of either 2.5%, the rate of inflation, or average earnings growth, whichever is larger – but one digresses. In terms of the proposals hinted at in the PM’s speech today, she stated that the Pensions Regulator would be able to impose large fines of bosses who ‘wilfully left a scheme under-resourced’ and that some company directors could be struck off in more serious cases. Labour leader Jeremy Corbyn, in offering his party’s proposed plan on the issue, stated that one element of his so-called ’20-point plan to end the “rigged economy”’ would be to amend company takeover rules to protect employees’ pensions. At this point it is important to note that these issues were only raised today and will, hopefully, be elaborated upon in much more detail by the candidates, as it is rightly being regarded as a pressing social problem. However, the call to further empower the pensions regulator is, in theory, a welcome call and could go some way to addressing this extremely important issue. However, the question is ‘will this proposed change in company law have a demonstrable effect upon the status quo?’

It is here that, in the style that underpins every post here in Financial Regulation Matters, it is important to look at things as they actually are, not how we would like them to be. Whilst the BHS scandal highlighted the incredibly transgressive nature of businessmen like Sir Green, the approach taken by the state – whether that be via Parliamentary Committees, or regulators – was particularly woeful. We saw, live, the utter disregard that people like Green have for the state and the people who they harm on the way to their successes. We saw how the Parliamentary Committees tasked with bringing Green to account were bullied and scolded by the billionaire. We saw how the establishment, with the support of the media, heralded the potential removal of Green’s knighthood as the best deterrent against his conduct. We saw all this, and for this reason we should consider the potential that these alterations to the companies laws in the U.K. will make little difference when it comes to the most influential figures within the arena of big business. If we add to this the understanding that the trajectory of Brexit negotiations is likely to see the U.K. pandering to big business in order to repair the damage that leaving the Union will create, then it creates further uncertainty as to how, in any genuinely effectual manner, the Government will rebuke those who they need to navigate what will be, almost undoubtedly, particularly choppy waters in 2019. It is hoped that the Companies Act 2006 is amended to further protect the pension pots of employees in companies in the U.K., but whether those alterations will result in the next Philip Green being struck off from being a company director is, arguably, highly unlikely. So yes, Mrs May, it is very important, for the dignity of employees, that their retirement funds are protected now – the question for the British electorate is ‘is she true to her word?’