The British Home Stores pension scheme: privatised looting?

Published date01 July 2019
Date01 July 2019
AuthorIan Clark
The British Home Stores pension scheme:
privatised looting?
Ian Clark
On entering administration, British Home Stores owed its pension scheme £571 mil-
liona signicant employment relations issue of historical wage theft by investor
owner managers. The article locates lawfullooting of business assets in a framework
that builds on Ackerlof and Romers theory of bankruptcy for prot and connects this
to an empirical narrative on business re-structuring at British Home Stores towards
In May 2000, the Arcadia group headed by Phillip Green bought British Home Stores
(BHS) for £200 million. After sustained re-structuring of the business in March 2015,
Green sold BHS to Retail Acquisitions for £1. At this date, BHS was carrying a pen-
sion fund decit of £345 million. By April 2016, when BHS was wound up by Her
Majestys Customs and Revenues, the pension fund decit had grown to £571 million,
that is, BHS owed its pension funds £571 million. A parliamentary inquiry into the
collapse of BHS by the Department for Work and Pensions found that Green and
his investment partners hollowed out BHS to the value of £423 million in dividends
and charges paid to Arcadia and associated businesses. Similarly, the inquiry found
that during its 13-month ownership of BHS, Retail Acquisitions extracted £11 million
from the business in charges, dividends and salary payments for its leadership team.
Prominent observers of BHS under Phillip Green have described how the business
was looted(Shah, 2018: 282).
In a BBC radio interview, Frank Field MP, who chaired the Department of Work
and Pensions inquiry, went further than Shah.
He is worse than Maxwell, he plundered BHS and must now pay out at least £571 million to fund the
pension hole. (BBC Radio 4 Today programme, 25 July 2016)
Field later concluded that it might be a coincidence that the numbers extracted from
BHS approximate to those of the BHS pension fund decit. Fields statements and
observations raise two research questions; rst, in this case as in many others, the pen-
sion fund decit and associated corporate debt pile are not the result of an amorphous
pensions crisis. Rather, they result from the demands of investor value, the
Friedman doctrine on the aims of the rm and in the contemporary period the
nancialisation of businesses. Therefore, how does rm level re-structuring come to
Ian Clark, Nottingham Trent University, Nottingham, UK. Correspondence to: Ian Clark, Professor of
Work and Employment, Nottingham Business School, Nottingham Trent University, Nottingham, UK.
Industrial Relations Journal 50:4, 331347
ISSN 0019-8692
© 2019 The Authors Industrial Relations Journal published by Brian Towers (BRITOW) and John Wiley & Sons Ltd
This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribu-
tion and reproduction in any medium, provided the original work is properly cited.
enable the lawful diversion of employer contributions to nal salary pension funds to
other recipients? Second, fundamental defects in the regulation of incentive arrange-
ments for investorowner managers enable them to raise debt and borrow against
pension fund contributions in order to pay dividends and fees. So why is this diversion
and the manner in which it unravelled at BHS an employment relations issue? Both
questions are timely and thrown into sharper focus for workers as policymakers,
and key stakeholders consider issues around implementation of the dened benet
pensions white paper (Department for Work and Pensions, 2018). The white paper
focusses on worker protections therein and makes proposals around the regulation
and the consolidation of pension schemes. More critically, the article comes as the
Department of Work and Pensions is consulting on proposals to expand The Pensions
Regulators powers. Specically, reporting and anti-avoidance of employer liabilities
come under scrutiny with discussion on effective and persuasive imposition of civil
and criminal sanctions on those who oversee negligent schemes (The Pensions
Regulator, 2017, 2018). As part of this process in February 2019, the Work and
Pensions secretary unveiled jail terms of up to seven years for managers who oversee
wilful or reckless mismanagement of a rm-level pension scheme.
To address the two research questions, the article proceeds through four parts. Part
one makes a rst contribution to new knowledge and methodological innovation by
locating lawfullooting of business assets in a theoretical framework that builds on
Akerlof and Romer (1993), who outlined the idea of bankruptcy for prot. This for-
mulation generates new knowledge by outlining how moral hazard provisions pro-
vided by the state insulate investorowner managers of a business from the social
harm consequences of innovative uses of employer contributions to pension funds.
By further developing these theories and applying them to the winding-up and admin-
istration of BHS, it is possible to theorise how business owners have an incentive to
collapse a business into liquidation or administration. Part two outlines why the ap-
propriation of employer contributions to nal salary pension schemes is an employ-
ment relations issue. To connect the theoretical argument with empirical material,
part three grounds the theoretical framework in a narrative that details business re-
structuring at BHS towards administration under the ownership of Arcadia and
Retail Acquisitions. The narrative provides a further (empirical) contribution to
new knowledge by revealing how lawful uses of employer pension fund contributions
enable ownerinvestors to extract value from a business and the deferred incomes of
its workers. Lastly, part four provides a discussion of the two research questions and a
conclusion on the potential for the re-politicisation of pension fund contributions in
the wake of the collapse of BHS and other more recent pension fund collapses such
as that at Carillion. Before moving to part one, the remainder of the introduction
contextualises the BHS case during a period when nancialisationdominated the
management of many businesses and associated approaches to prot and surplus. A
brief denition of nal salary or dened benet pension schemes and the status these
schemes have in the UK follows this discussion.
1.1 Financialisation
The term nancialisation refers to a pattern of accumulation where prot making oc-
curs increasingly through nancial channels rather than through trade and commod-
ity (Krippner, 2005: 181). More recently, Thompson (2013: 475) has summarised the
literature on nancialisation as a growth or macroeconomic regime whose source of
332 Ian Clark
© 2019 The Authors Industrial Relations Journal published by Brian Towers (BRITOW) and John Wiley & Sons Ltd

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