Rotten business

I’ve written previously about the collapse of retailer BHS. This week, some of the grisly details began to emerge, as a parliamentary select committee began its investigations. Particularly striking was evidence given by former executives about its owner Dominic Chappell. Chappell – a thrice bankrupt former racing driver with no retail experience – bought BHS for £1 in in 2015. In the hearing, former finance consultant to BHS Michael Hitchcock called Chappell a Premier League class liar with his fingers in the till whilst Darren Topp, the former CEO, claimed that Chappell threatened to kill him.

Next week, Sir Philip Green, who, having ransacked the business, sold it to Chappell is also due to appear before parliament to answer questions about what happened to the pension fund. He is facing pressure to make good the fund’s £571M deficit and there are calls for him to be stripped of his knighthood.

BHS is now being wound down, with its 11,000 employees facing redundancy, because no buyer could be found. Yet, according to Chappell, there was a willing buyer who was dissuaded from the purchase by Green (something Green denies). This buyer was Mike Ashley, who is now to be called to give evidence about this.

By a strange coincidence, Ashley – founder and owner of retailer Sports Direct – also appeared before a parliamentary committee this week (despite attempts to avoid doing so). Sports Direct stands accused of failing to pay staff the minimum wage, and a litany of unpleasant practices with the effect that:

“There had been 110 ambulance call-outs to his main warehouse site in just over three years as workers suffered chest pains, stroke, injury, and five births or miscarriages – including one woman delivering her baby in the toilet – such was the fear, according to the union, of losing your job if you took time off … [with] allegations made that the time staff spent queuing to be partly strip-searched by security guards before leaving the factory had driven wages below the legal national minimum wage per hour, or that female workers were sometimes asked for sexual favours in return for longer hours.”

I suppose there is some comfort to be drawn from the fact that these cases are being investigated by parliament, and the increased power and activism of select committees is, I think, a positive development. And, of course, there are plenty of good and responsible employers.

Yet these two stories taken together seem to disclose something about the dire state of management practices in some and perhaps many parts of British businesses today, and about the, let’s say, unappealing characters who lead those businesses. And it’s not just in Britain. Last month Oxfam reported that chicken farm workers in the US were being denied toilet breaks and forced to wear nappies. This won’t come as a surprise to readers of my book, where (p.133) I give the example of a Californian factory in which workers were told to urinate in their clothes rather than take toilet breaks. Indeed, the poultry workers are rather humanely treated by comparison: at least they are allowed nappies.

The foundational study in Labour Process Analysis from which (to simplify) grew Critical Management Studies, was Harry Braverman’s (1974) Labor and Monopoly Capital of which the subtitle was ‘the degradation of work in the twentieth century’. Half a century on and we seem to be seeing degradation at work as the defining feature of the labour process; an all too literal labour process when women give birth in toilets to avoid losing their jobs.

Unsurprisingly shocking

I have not posted for a few weeks now, partly because I took some holiday at the beginning of April, partly because of pressure of work, and partly because I have been writing several blog posts for various sites working with the EU Remain campaign. The most recent of these can be found here for anyone interested and there are several more in the pipeline. And in the even more unlikely event of anyone being interested in my holiday, my new profile picture shows me emerging from a Norfolk pub (quite sober, I should say) whilst I was away.

So there’s plenty I could write about but I’ll focus on the news this week that the retailer British Home Stores (BHS) has gone into administration, with debts of over £1.3Bn and a pension deficit of £571M, leaving the 11,000 employees across its 164 UK stores in limbo, and creating much insecurity for former employees with deferred pension rights. Like all statistics, this depersonalises the reality but I visited my mother this week and, by coincidence, her care assistant used to work for BHS and told me how worried she was about her deferred pension. I tried to reassure her that the Pension Protection Scheme meant that 90% of her rights were assured, but for someone on (I guess) the minimum wage and with limited pension expectations that 10% matters, even if she trusts that the 90% will be forthcoming.

BHS is one of those high street stalwarts that seems to have been there forever – I can remember one of my sisters having a Saturday job there in the 1960s. In fact it goes back to 1928 and joins the long list of British companies, some of which I mention in my book (pp. 105-106), that have fallen by the wayside. There are all sorts of reasons for that, of course, from the rise of the internet to the growth of Pound shops. I actually go to BHS quite regularly to – look away now, kids – buy cigarettes and that branch, at least, seems faded, dilapidated and dated, and the staff demoralised.

That is because underneath the general trends in retailing there is another story to be told about BHS. Bought by the fabulously wealthy tycoon Sir Philip Green for £200M in 2000 he sold it for just £1 in 2015. In the interim, rather than investing in modernising the business it had been used as an enormous cash cow and systematically pillaged for massive dividend payments. Far from ‘adding value’ in the manner self-righteously claimed as the hallmark of dynamic entrepreneurship, value was ripped out of BHS and pocketed. There are now calls for a public inquiry into what happened but, whatever the details specific to BHS, it is just another case of the consequence of rapacious financial engineering of the new capitalism (discussed in chapter 5 of my book). Hardly less noteworthy is that its post-2015 owner was a company run by a twice bankrupt former racing driver with no retailing experience, and the demise of BHS comes as no surprise. Interweaved into this sorry saga are the usual array of offshore tax avoidance schemes and global investment bank advice.

Such stories have become so commonplace that they lose the power to shock. Even so, there is still a jolt of surprise in recollecting that as recently as 2010 Green was commissioned by the British government to make recommendations on improving its efficiency. Reading his report today, my immediate reaction was to think how thin it seemed – I have seen undergraduate student workplace projects with more depth. My second reaction was to recall how similar it was to the 2004 review of public sector efficiency by Sir Peter Gershon. In fact, on government procurement especially, the Gershon recommendations were nearly identical. It makes you wonder what the point is of these endless reviews – perhaps they have the same ritualism as public inquiries, about which I have written before.

Anyway, Green’s review concluded – surprise, surprise – that the way forward was for government to adopt the methods of the private sector, apparently unaware that this has been exactly the approach since the early 1980s, so what he was observing was the consequence of precisely the course of action he was advocating. And his headline finding was that the government was “failing to leverage both its credit rating and its scale”. In other words, the government should get on the wagon of the same financial engineering techniques that he was at the time so assiduously applying to bring BHS to disaster.

With the controversy now surrounding him, it’s unlikely that Green will in the future be asked to give advice on how the government should organize itself. But there will always be someone else – whether a faceless but fresh faced MBA from a big league consultancy, or whoever the currently lauded tycoon may be – to apply the same failed logic. Because however often it fails it is never discredited; worse, each failure provides the impetus for its re-application. That, too, has lost the power to shock.