28 July 2016

Leader: On capitalism and insecurity

The truth behind Philip Green's business practices is out, as Theresa May pledges to ensure the benefits of growth are shared amongst workers.

By New Statesman

Although it sounds contradictory, we should count ourselves lucky to read about the hideous business practices at Sports Direct and the management failures that led to the collapse of British Home Stores (BHS). Such stories are hard to investigate and even harder to bring out into the open. That both firms were excoriated by select committees proves that parliament still has teeth.

It is less comforting to wonder why the two retailers were allowed to operate as they did in the first place. Sports Direct pursued “Victorian” working practices, according to Iain Wright, the chair of the committee on business, innovation and skills. The firm is being investigated over allegations that it did not pay the National Minimum Wage, while staff were treated in a “punitive” and “appalling” manner. They were penalised for taking breaks to drink water, and some claimed that they were promised permanent contracts in exchange for sexual favours.

Days later, another select committee castigated Sir Philip Green, the former owner of BHS, describing what had happened at the company as the “unacceptable face of capitalism”. The Green family extracted more than £300m from BHS – “systematic plunder”, according to the parliamentary report – even as its pension fund was accumulating a deficit of £571m. Although the committee also criticised Dominic Chappell, who bought BHS a year ago, it concluded: “The ultimate fate of the company was sealed on the day it was sold.”

It would be easy to dismiss Sports Direct and BHS as isolated cases. Yet there is an important connection between them and it is one that illuminates the tides in British politics. Both highlight how economic insecurity has become central to the lives of far too many people in the UK.

Sports Direct treated workers with contempt and left them terrified of losing their employment. The downfall of BHS, meanwhile, cost 11,000 workers their jobs and left its pensioners needing government assistance. Sir Philip Green retains his title, although the shadow chancellor, John McDonnell, has called for it to be rescinded. After all, the committee found “little to support the reputation for retail business acumen for which he received his knighthood”.

In this climate, it is easy to understand the widespread mistrust of private companies. As the business, innovation and skills select committee report concluded: “Although Sports Direct is a particularly bad example of a business that exploits its workers in order to maximise its profits, it is unlikely that it is the only organisation that operates in such a way.”

Anger about the behaviour of companies such as BHS and Sports Direct is rife and was palpable during last month’s referendum on the European Union. In Bolsover, the constituency in which Sports Direct has its main warehouse, 71 per cent of voters opted to leave the EU. Little wonder that voters there did not feel inclined to listen to warnings from the same big businesses that treated them and other people they knew so badly. The company, whose buildings occupied the site of a former coal tip pit, also relied on immigrants who would be less able to insist on employment rights.

Now that the problems have been elucidated so clearly, we must strive to find solutions. As Britain negotiates its exit from the EU, the hard-won labour gains of the 20th century – workers’ rights, provision of state pensions and the minimum wage – must be protected and expanded.

The new Prime Minister, Theresa May, has rightly taken heed of public anger against corporate greed. She has pledged (in statements that could have come from Ed Miliband) to curb irresponsible behaviour and ensure that the benefits of growth are shared. She has supported ideas such as worker representatives on company boards and strengthening the power of shareholders by making their votes on director remuneration binding, rather than advisory.

While the Conservatives audaciously try to portray themselves as the “workers’ party”, Labour must campaign hard to ensure that Mrs May backs up her promising rhetoric with meaningful policies. For the good of the nation, business leaders such as Sir Philip Green and Mike Ashley of Sports Direct must be held to account for their actions.