The collapse of BHS led to the loss of 11,000 jobs and put
20,000 pensions at risk. Sir Philip Green has been roundly
criticised for the fact that he offloaded an ailing BHS with
substantial pension deficits to a thrice bankrupt buyer with no
retail experience, who ultimately drove it over a cliff.
But Sir Philip is not the only one is the firing line. Lord
Grabiner, an eminent commercial barrister, served as the
non-executive Chairman of the Taveta Group boards which owned BHS
and were ultimately owned by Lady Green. MP's described Lord
Grabiner's performance in that role as
'complacent' and 'the apogee of weak
corporate governance'. Lord Grabiner could face
proceedings for disqualification as a director which, if
successful, would also prevent him practicing as a barrister and
possibly eject him from the House of Lords, where he sits as a life
peer. Disqualification proceedings can be taken against any
director or shadow director who has been a director in the last
three years of the company's trading.
The MP's quizzing Lord Grabiner referred to the
non-statutory UK Corporate Governance Code, produced by the
Financial Reporting Council (FRC). Although the Code does not apply
to private companies (such as those in the Taveta Group), MP's
described it as containing 'useful guidance for the
interpretation of the legal duties which apply to all
directors'. The Code stipulates that the Chairman is
responsible for leadership of the board and ensuring its
effectiveness on all aspects of its role. Non-executive directors
are there to scrutinise the performance of management and provide
A closer look at the Taveta Group company boards shows that they
were replete with friends and relations of Sir Philip, who were
unlikely to challenge him, constructively or otherwise. The FRC
specifically warns against creating boards which encourage
'groupthink' and advocates instead board diversity, not
just in terms of sex and race but also approach and experience.
Lord Grabiner himself appears to have been asleep at the wheel.
He played no active part in the decision to sell BHS. Instead the
board appointed a sub-group from Arcadia to look into the sale.
Surprisingly, this group had no parameters or guidelines, did not
keep minutes of their discussions and, crucially, were not required
to report back to the Board with a recommendation as to sale
options. Neither the Chairman nor the board as a whole were in any
position to question the work of the sub group. The full board only
knew that discussions were taking place, but did not know the
identity of the potential buyers or nature of the proposed
Directors (and non-executive directors (NEDS)) are required to
have regard (amongst other matters) to:
the likely consequences of any
decision in the long term,
the interests of the company's
the need to foster the company's
business relationships with suppliers, customers and others,
the impact of the company's
operations on the community and the environment,
the desirability of the company
maintaining a reputation for high standards of business conduct,
the need to act fairly as between
members of the company.
NED's would be well advised to articulate challenges to
management and board decisions in terms of these various
perspectives so that the board debates them fully. If there is no
forum for debate and the board is being steamrollered by one
individual, then the NED may have to resign and ensure that the
reasons for that resignation are recorded.
Good lawyers like Lord Grabiner never ask questions in court to
which they do not know the answer. Good directors, by contrast,
should be prepared to ask difficult questions to which no one may
know the answer and which require further analysis, investigation
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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