Despite Brexit, a change in prime minister and cabinet, and continuing wranglings in the Labour Party, I have to hand it to the members of the work and pensions and business innovation and skills committees. With MPs facing ever more pressure and public criticism, I am impressed by the speed in which the joint committees have worked to issue their extensive report on the demise of BHS. Is it the final chapter? No, because it is now down to the separate committees to delve deeper and come up with solutions to the issues they have identified, but at least the building blocks are now in place showing how the changes might look.

Readers will know that I have been fascinated by BHS, predominantly from a pensions perspective, although I have been intrigued by the entire sorry saga. The downfall of BHS and reputational damage to Sir Philip Green has “film” written all over it. It could actually be a trilogy! No doubt there are already a few names in the hat to play Sir Philip and Dominic Chappell.

The joint committees issued the results of their inquiry on Monday 25 July. The conclusions reached will really come as no surprise at all – and the tagline picked up by the majority of the press the day after was "the unacceptable face of capitalism". A summary of the conclusions is as follows:

  • The evidence received during the inquiry is said at times to have resembled a circular firing squad – with witnesses appearing to harbour the misconception that they could be absolved from responsibility by blaming others. Sir Philip was pointed out as the worst example of this and he, Dominic Chappell, their respective directors, advisers and hangers on were all culpable.
  • The sale did not have to proceed as it did – there were inadequate checks, circumvention of regulatory concerns, heavy incentives for advisers, personal rewards for Dominic Chappell, friends and associates and the Traveta group was operated as a personal fiefdom of a singular dominant individual, namely Sir Philip.
  • Sir Philip drove the deal, because BHS had become a millstone threatening his reputation. He is singled out as knowing that Chappell was wholly unsuitable as a purchaser and he overlooked or made good each of Chappell's shortcomings and rushed the sale.
  • Chappell was out of his depth, being over optimistic to the point of arrogance. He failed to recruit a retail expert to compensate for his own lack of experience, to secure funding on commercial terms, to address BHS's property leases in a timely way and to tackle the company's long-term underperformance. Although Chappell had referred to rewards for risk as being the foundations of entrepreneurship, he was in fact taking no risks at all. The rewards that he took, on the other hand were lavish. In putting in his "home team first", he and his fellow directors were personally enriched as BHS failed around them. The committees said that in effect he had his hands in the till. His description of £2.6 million that he personally took, in addition to an outstanding £1.5 million family loan as a "drip in the ocean" was found by the committees to be an insult to the employees and pensioners of BHS that he let down.
  • It was the Green family who benefited significantly from BHS. In his early years of ownership, Sir Philip cut costs, sold assets and paid substantial dividends offshore to the ultimate benefit of his wife. He failed to invest sufficiently in stores or reinvent the business to beat the prevailing high street competition. In a comment, which no doubt cuts like a knife, they said that they found little evidence to support the reputation for retail business acumen for which Sir Philip received his knighthood.
  • Sir Philip gave insufficient priority to the BHS pension scheme over an extended period. His failure to resolve its problems has contributed substantially to the demise of BHS. Sir Philip owes it to the BHS pensioners to find a resolution urgently. The committees note that this will undoubtedly require him to make a large financial contribution. He has a moral duty to act, a duty which he acknowledges. The committees said they have no doubt that Sir Philip has heartfelt affection for BHS, noting that it to an extent created him but it could also bring him down.

Each of the substantial elements to the demise of BHS is covered in great detail in the full report which can be found using this link. The ongoing inquiries will lead to a change to company law in terms of the rules on corporate transactions and a tightening of corporate governance for private companies. We will also see greater powers given to the Pensions Regulator and perhaps the possibility of a part merger of the Regulator with the PPF. Readers will recall that throughout the oral evidence our view was that there would be changes in these areas and this is backed by the statements now given about the ongoing inquiries:

Company law – to be considered by the business, innovation and skills committee

  • The demise of BHS was the result of a series of bad business decisions and personal greed. The committees fear however that some of the failures which allowed this to happen are not unique to BHS. Its lessons merit broader consideration of the framework in which companies operate. This is not anti-capitalism and they also make the point that they want entrepreneurs to be encouraged and to accept that business failure is an inevitable part of the process. However, they have noted that reputable businesses are appalled by the events of BHS.
  • The inquiry has exposed how capitalism can be worked to the advantage of directors, financiers and advisers at the expense of employees and the wider public interest. Recognising the deeply concerning examples of corporate governance in this case brings into question the adequacy of the existing company law and corporate governance regulation, particularly in relation to large private companies. Also BHS has highlighted the fact that private companies are not subject to the same transparency requirements and codes of conduct as their public counterparts, but this in no way absolves them of their wider responsibilities. It is also recognised that Parliament is likely to be cautious about imposing onerous new duties on British companies, but if large public or private companies do not behave in accordance with the ethical standards that society expects then further regulation may need to be considered.

Pensions – to be considered by the work and pensions committee

It is recognised that operating defined benefit occupational pension schemes is perhaps the greatest challenge facing long-standing British businesses. The committees noted that in an environment of rising longevity, interest rates close to zero and intense international competition, defined benefit pension liabilities accumulated in a different age can appear burdensome and unaffordable. They make the point that it should not be forgotten that these liabilities are promises of deferred pay to employees and say that it is imperative that the regulatory framework does not allow sponsor companies to evade those responsibilities and in doing so pass the burden onto other schemes that pay the PPF levy. There may be a case of stronger and more pro-active regulation but it is equally important that balance is found to enable otherwise viable companies to continue to operate. There is also recognition that the jobs of those currently in employment are inevitably in some competition with the pension entitlements of their predecessors.