Should Philip Green pay up?

Some weeks ago, when BHS went under, i wrote this blog that accused Philip Green of being little better than Robert Maxwell. Nothing has changed in the interim though it might today. Today Philip Green appears in front of the DWP/BIS select committee.

He has a straight choice, either he returns to his flotilla of yachts and lives out the rest of his days unloved, knighthood-less and a wart on the face of decent society, or he pays the money he (morally) owes his staff’s pension scheme.

I don’t think that technical arguments come into this, Green can hide behind lawyers and say he did nothing criminally wrong, but that won’t help (other than to keep him out of court).

The Pension Regulator presides over a system that depends on trust and if Philip Green wants to game that system, he can do. He will not go to prison, because – unlike Maxwell- he positioned every action he took – the right side of what little criminal law – there is.

But the moral compass is clearly askew and if it was guiding his yachts, that compass would have put those boats on the rocks long ago.


The simple choice between right and wrong

Philip Green’s weakness (in business terms) is his vulnerability to public opinion. If he didn’t care about his reputation , he would not be in front of the Select Committee today. His repeated plans to see the pensioners right, including the latest “project Thor”, shows that Green knew the damage the pension scheme could do. It could hole his reputation below the plimsoll line and that reputation is about to be torpedoed – today.

So we will wait and see what kind of an offer Green is going to make. Then we will reconsider our opinion. The damage he has already done to the prospects of his staff’s pensions is obvious, the distress and anger  of the families of those blameless individuals – who see Green and his yachts as symbols of a theft – all too evident.

I hope that Frank Field and his team and his colleagues from BIS will keep the image of the people who are due to lose out – clear in their thinking – when grilling Green. These people currently have no other champion.

There is a simple issue of right and wrong here and Green has to decide whether he wants to do the right thing or the wrong thing. There are no mitigating circumstances, no legal niceties.

Pay up or bugger off to your boats – for good.

************************STOP PRESS*********************************

The alchemy of Professor Green

There appears a new plan in the offing…according to the BBC

Sir Philip told MPs the new plan, being drawn up by accountancy group Deloitte, would offer BHS pensioners a “better outcome” than compensation available from the Pension Protection Fund, a lifeboat scheme which helps finance pensions after company insolvencies.

Perhaps it involves putting a yacht up as a contingent asset – now that’s what I call a lifeboat

 

About henry tapper

Founder of the Pension PlayPen, Director of First Actuarial, partner of Stella, father of Olly . I am the Pension Plowman
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8 Responses to Should Philip Green pay up?

  1. George Kirrin says:

    It’s interesting to read across to your other piece today, Henry, about Paul & Derek.

    The BHS pension scheme made 8.9% pa for the fifteen years 2001-2015. The deficit of £571m will be based on a discount rate beginning with a 3 or a 4 no doubt.

    Notwithstanding Derek’s comments about models and forecasts it would be interesting, surely, to consider an alternative in which the BHS trustees continued to earn investment returns well in excess of the PPF’s discount rate?

  2. Derek Benstead says:

    That’s a very good question. Looking at the BHS Pension Scheme’s actuarial valuation 2012, which is publicly available, it was 43% funded on its solvency basis, using a discount rate of 2.8% pa. To pay its benefits in full without further contributions, I estimate it would need to earn more than 7% pa on its assets. Could be done perhaps, but not with a high enough probability to be confident about it.

    We could do similar arithmetic on the British Steel Pension Scheme. Again using public information, it was 72% funded on its solvency basis in 2014. To pay its benefits in full without further contributions, I estimate it would need to earn around 4.3% to 4.5% pa on its assets after expenses. It seems to me that it is very highly likely this annual return could be achieved. Just don’t put all the investments in bonds. Cutting benefits now, as proposed in the DWP consultation, is premature. If the BSPS is allowed to run on, invested in productive assets, it may very well never happen that a benefit cut needs to be made.

    But BSPS may not be able to run on. If it runs out of sponsoring employers, legislation compels PPF assessment which would probably result in BSPS going into the PPF.

    • George Kirrin says:

      Would HMG not count as a last standing employer for BSPS, or is that called “state aid”?

  3. henry tapper says:

    I don’t think that anyone in Government would agree the PPF as being state aid (other than the state set up the apparatus). Perhaps that’s why the PPF is working?

    • George Kirrin says:

      I meant HM Government (Treasury or BIS) to act as last employer for British/Tata Steel, not the PPF.

      The PPF only guarantees around 90% of capped pensions. HMG could guarantee 100% uncapped if it wished and could get around the state aid objections.

  4. Mike Lacey says:

    Admirable sentiment Henry
    For Green to say he knew nothing about the deficit is bizarre. Pension liabilities are shown in the Balance Sheet as required under FRS 17.
    For him to say he was unaware of a balance sheet liability in the tens or hundreds of millions is not credible.

  5. ancientllm says:

    Seeing as how FRS17 posts pension fund deficits to the sponsoring company’s accounts, is Sir Philip saying he is, and was not, a fit person to run a business?

    Which begs the question, if the board of directors pays a dividend when there is a substantial debit in the accounts (the pension fund deficit) are they in breach of their statutory duties?

  6. henry tapper says:

    the bulk of the dividends were paid prior to the new rules governing clearance coming into place. The duties of the employer to fund the scheme properly were more moral than legal at the time.

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