I have never met Dominic Chappell, Mike Ashley or Philip Green, but I am sure they hard to resist once they are on a roll and the fact that the latter two are really rich can only add to their clout. The Parliamentary Committee hearings over the past few days have been gripping and the business conduct exposed is a reflection of our times.
One factor in this is that the borderline between plucky entrepreneur and someone pretty close to an asset stripper has become blurred and institutions are much less fussy about the conduct of businesses they are prepared to support or bring to market. Combined with a climate that encourages the kind of businessman (or entrepreneur as the like to be known), with only a hazy idea of where the ‘line’ is, this makes for a volatile combination. It was not that pre Big Bang institutions were shy of making money or backing someone slightly racy, but their own self interest encouraged them to maintain their longer term reputation in a time before we all became short termist. The difficulty now is that the institutional imperative to preserve reputation as its future stock in trade has disappeared- markets are global, loads of buyers and sellers and.. hey everyone is doing it! Take Sports Direct, it never had any interest in strong corporate governance but the sponsors clearly did not think it was their responsibility to address this before the 2007 flotation, when the shares were oversubscribed and subsequently slumped. In the case of Phillip Green he had huge amounts of admiring publicity over the gargantuan dividends paid to his wife in Monaco, but nobody seemed to care much whether a pretty standard retail business could support such a distribution and it now seems pretty clear that it could not. The government’s admiration for this uber rich trader was subsequently recognised by making him government efficiency Czar, in the hope he could sprinkle some magic wealth dust on the complex business of government procurement. The saying goes that there is ‘no such thing as an ugly rich man’, but governments should have higher standards.
None of this is new of course, Trollope laid it all out in ‘The Way we Live Now’, published in 1875. A parable for our times that would make excellent required reading for banking and MBA students.