Corporate Governance and Ethical Issues in the Collapse of BHS: A Critical Evaluation

Main Findings

Prepare a 1,500 word report critically evaluating the corporate governance and ethical issues in relation to the collapse of BHS.

1. Discuss the advantages and drawbacks of different forms of business organisation.

2. Identify the key regulations and codes applying to companies and directors.

3. Apply the legal and ethical principles examined to actual and hypothetical scenarios.

British Home Stores (BHS) was sold by Sir Philip Green (originally bought by him for £200m in 2000), to Dominic Chappell for £1 in March 2015. In April 2016, 14 months later, BHS collapsed owing suppliers millions of pounds. At the time of its collapse, its total debts were £1.1 billion, its main unsecured creditor being its pension fund, which had a book deficit of £200m (although the market value to fully finance this deficit was anticipated at £571m). As a result of BHS’ collapse 11,000 employees lost their jobs and 20,000 people eligible to claim pensions were affected. Between 2002 and 2004, despite having large debts, BHS paid dividends of £423m, primarily to Sir Philip Green and his wife. Prior to its collapse both Dominic Chappell and Sir Philip Green extracted millions of pounds using various different methods.

Two house of commons Select Committees accused Sir Philip Green of appalling judgement and excessive greed but no legal crime. Dominic Chappell faced no specific charges in relation to his part in the collapse of BHS but was subsequently jailed, in
November 2020, for six years after evading tax on the £2.2million of income he made from the deal to buy BHS from Philip Green.
Whilst BHS was a “family-owned company”, not a PLC, and so arguably not strictly subject to corporate governance regulations, companies of such a size as this are expected to comply with similar corporate governance provisions as best practice. As a result of the collapse of BHS, a review was conducted into the corporate governance regulations for large non-PLC companies which resulted in the development of the Wates Principles for such companies to follow.

Since then, there has been further discussion as to whether large public interest companies of this nature should be subject to full corporate governance procedures and it is currently part of a consultation paper into a major review of corporate governance and audit oversight.

You should produce a 1,500-word report in an electronic form via word. It must include:

• Setting out what the report will cover (see main findings below) and clearly setting the context of why corporate governance regulation is currently an important issue (150 words)

Corporate Governance Requirements and Evaluation of BHS's Failures

• Identification of the main Corporate Governance requirements BHS should have followed, a critical evaluation of how the Company failed to meet its risk management and board oversight requirements and whether this was facilitated by the lack of corporate governance regulation for large non-PLC companies (750 – 850 words).

• Two examples of how the Company failed in its ethical behaviour and a critical evaluation of how this contributed to the overall failure (400 - 450 words).

Conclusion

• A brief summary of the key Corporate Governance regulations the Company should have complied with, the extent to which it complied with them and the main reasons for the scandal/failing. (200 words)

The number of words included for each section above is purely as guidance to assist you rather than definitive numbers so there is flexibility within this.

A key element of University-level thinking and your subsequent working life is the ability to critical analyse and evaluate information, usually from multiple sources, in order to develop an argument.

This is different to descriptive writing which is used to set the background and to provide evidence rather than to develop an argument.

You will be expected to undertake research in the Press, academic and other professional journals, to discuss the potential implications fully. A large amount of research has been undertaken in respect of corporate governance and ethics. A number of these articles will be provided to you throughout your block via Moodle and listed, with links on your learning road map for each week.

Others can be obtained through a search on google scholar or within the MMU library. Reference to such articles will, therefore, be expected. Failing to include such research or reference to it, may significantly impact your mark.

Further guidance to support you with the assignment will be provided in weekly lectures and tutorial and should you need further support or guidance, you can speak to one of the unit leaders during their weekly student hours. You will be expected to complete your assessment in stages over the week which will coincide with the learning for those weeks.

• Use professional language in your report.

• Attend all lectures and engage fully in tutorial sessions

• You must use your own words

• You must reference your work fully

• You must read this assignment brief and the supporting assessment criteria!

• Do not leave completion until the last day

• Do not submit late – see the Late Submission section for details.

The assessment criteria are detailed in the forms overleaf. The marks will be awarded based on the assessment criteria and so it is vital that you refer to this.

The coursework is to be 1,500 words in length + or – 10%, excluding citations, headings, tables/figures, references and appendices. A 5%-mark reduction will be applied for word counts outside (above or below) these limits.