The recent collapse of BHS leaves little doubt that many corporate ‘vampires’ have no qualms about being caught sucking us dry.
Myths are one of the ways society explores the things which are morally ambiguous or challenging. They point to unmentionable truths and fears by telling stories at a tangent to reality. Recent events at BHS and Valeant in the US have given new meaning to a recurring myth since the Renaissance: Count Dracula has become the vampire capitalist.
In Victorian times, vampires were usually characterised as aristocrats in castles, mythical incarnations of the feudal rentiers sucking dry the oppressed, pitchfork-wielding peasants. In modern Hollywood telling of the myth, vampires have been portrayed as the ultimate capitalists, earning compound interest over hundreds of years and secretly owning our society through the power of their money; shadow bankers with a clinical aversion to sunlight and taxes.
Theirs is a cold world, full of objects and experiences they can’t enjoy. But such is the burden of living forever in a constant state of teenage pout (if the equally endless Twilight series was anything to go by). I wanted to yell, ‘for God’s sake go out and get some vitamin D and cheer up’, but I am not sure my (then) teenage daughters would have approved.
In reality, however, the vampires of myth are relatively passive investors. They aren’t interested in anything but remaining in the shadows. They don’t seek wealth and fame, just the money and a private life away from zealous people with wooden stakes. In our analogy they are what is called ‘private wealth’, usually run by managers of ‘family offices’. Family offices control much of the private assets in the world and exist to ensure they are handed on from generation to generation via our sprawling, global, private banking system. Despite the claims of social mobility, by far the most prevalent way to get rich is still to inherit it.
That said, there are those who rise from rags to riches. Sir Philip Green was one of those stories; a man who made his own way up the ladder by building and buying a huge retail empire. He was feted as a retailing genius owning some of the biggest names on the UK high street (and US main street). He was unsuccessful in his attempts to buy Marks and Spencer and in the end succeeded in buying another high street behemoth, BHS. Mike Ashley, the equally self-made owner of Sports Direct affectionately calls him ‘Emp’ (short for ’emperor’) and he in turn calls his erstwhile competitor ‘Little Emp’. Sometimes it is the small things that tell you all you need to know.
Sir Philip has the airs of a man who believes that wealth is there to be flaunted. A man who measures his success by the length of his yachts (yes, plural) and the thickness of the gold plating on his custom-made Monopoly sets. His reputation on the high street as an entrepreneur has brought him recognition from the establishment too, including a knighthood and a roving brief in Whitehall to combat ‘waste’ (a euphemism for bureaucracy). Sir Philip is also a man who believes in the benefits of globalisation and the free flow of money across borders. In his case, this means the flows of dividends to Monaco where his wife lives in residence and holds the shares to his empire. He is emperor in name only then.
The collapse of BHS and specifically the huge deficit in its pension fund has raised serious questions from MPs, regulators and the financial pages about the way that business was managed and how a business that generated large dividends for its shareholder could end up in such a state. Prior to the business going into administration, the Pension Regulator was in negotiation with Philip Green (who sold the business for £1 to a relative unknown in 2007) about paying back some of the profits his wife made to make up the hole in the pension fund’s liabilities. The regulator wanted north of £200m, Sir Philip, according to some reports, was offering £40m in cash and a write down of a loan he had on the business for the same amount. We have to hope that BHS’s 11,000 employees and thousands of pension beneficiaries get a good outcome from this process and a buyer who sees a long-term future for one of our high street brands.
It would be easy to demonize one man and call out the pitchforks and flaming torches. I am sure that Sir Philip will not enjoy his session in front of two parliamentary committees even if he succeeds in his attempts to get his strongest critic, Frank Field MP, barred from chairing the discussion. But just as in the case of the financial crisis, this is not a story of bad apples in the barrel or lonely vampires in the shadows. Sir Philip doesn’t strike me as a man who avoids sunshine or the media spotlight when the going is good. Modern vampire capitalists hide in plain sight. They are the wealth creators whose trickle-down effect is supposed to lift us all out of penury.
The lesson of this particular myth is not about individual greed, but about how money and power are no longer democratically accountable. Financialization, the process by which assets (things of value in society) are owned by increasingly complex and globally fast-moving means, takes away our ability to control and direct our resources to the greater good.
Evidence of the trickle-down from the Green family’s wealth in Monaco is hard to measure (unless you have cornered the market for gold Monopoly figures). Let’s be clear, this is a story about how individuals can extract value from a company within the law with all its ‘greyness’, and not about the creation of value in the economy. As the shareholder of the company, the Greens owned a claim to the revenues, but that was not without the risk of ‘owning’ the liabilities too. It is important that selling the company for a nominal amount does not become a template for equity holders to socialise the risks whilst privatising the rewards of holding corporate capital. We all know how the moral hazard of banks being too big to fail went in 2008-9 and we don’t want the same to happen to the billions of pounds in company pension scheme liabilities; i.e., becoming too big to bail and leaving the Pension Protection Fund on the hook for the bill.
It is worth noting that on the latest figures, UK company pension funds eligible for this protection scheme (levies on their assets pay for the scheme’s insurance) were in deficit on their liabilities by more than £300bn. Of just over 6,000 schemes, two out of three did not have sufficient assets to cover their liabilities. While that is not the same as being ‘bust’ it shows just how important it is that companies fulfil their responsibilities to their pension members as they do to their shareholders.
Investment in a company is about more than money. And running a company is about more than ‘shareholder value’. It is also about supporting and realising the purpose of that company: the social license for which it is allowed to make a profit, using public infrastructure, qualifying for tax breaks, getting grants etc. Big banks nearly bankrupted our economy in 2008 prompting a wave of new regulation and controls to be implemented. We can’t let vampire capitalists suck the economy dry for short-term gain. Our captains of industry demand recognition, rewards and privilege, and they should carry the can when their navigation goes awry.
By Bruce Davis