It’s hard not to be moved by the travails of BHS (or, as I grew up calling it, British Home Stores). After being founded in 1928, nearly 90 years later administrators have taken the decision to close the company after failing to find a buyer.
BHS was part of a sector in transition. Bricks and mortar retailers have been fighting a losing battle against online shopping, leaving them struggling to find customers. BHS was no exception.
Perhaps where we find the exception though is in the corporate governance supervising BHS.
Last week saw Simon Walker, the head of Britain’s oldest business group, the Institute of Directors, question governance at Arcadia Group, the parent company. In particular Walker wondered why the chairman, Lord Grabiner, seemed so relaxed about being disengaged from negotiations about the sale of BHS.
It is difficult not to agree. Grabiner wrote in a letter to the parliamentary committee investigating the collapse that he was “not involved”. It’s hard to understand his decision to be so remote from the sale process. The sale of such a significant part of the business should be on a chairman’s agenda as a risk issue, and attendance at key meetings, as well as going over crucial papers, should be part of the role.
But it’s worth asking a couple of questions here. Where does a chairman’s governance duty lay? Should it be so focused at parent or group level that selling a minority part appears not to cause so little concern?
Which, as we are witnessing, is a tragedy. Not just for a brand but more importantly for the 11,000 staff and the regiments of suppliers who have diligently kept BHS stocked with goods for sale.
Governance is not just for the benefit of executives and wealthy shareholders. Governance has much broader responsibilities.
And that’s what made the due diligence at the time of the sale so chilling. In off-loading the business to an owner with little or no retail experience, there seemed to be little care for the wider group of BHS stakeholders dependent on the company’s future prosperity. It seems BHS, as a business entity and a brand, was dealt with in isolation from the people who staffed it and the manufacturers that supplied it.
It’s worth asking: who carried the proportionately largest risk over the years as BHS struggled? Was it those with capital in the parent? Or, was it those who continued to back BHS by continuing to work for it full time year after year on the shop floor or in the back office?
Shouldn’t the chairman’s responsibility for risk extend to those on the shop floor as much as it does to the executive suite and shareholder register?
This should have been front of mind for board members in the years preceding the sale. The sorry state of BHS’s pension fund and the payments made to the group parent company by BHS in the years running up to the sale all point to a narrow view of the board’s responsibilities. That’s unfortunate and possibly why Simon Walker has called the BHS tragedy a “blight on the reputation of British business”.
But what the BHS debacle tells us most of all is that the UK, at least, still struggles to answer clearly the question: what or who is governance for?