CEO reputation

Updated on 26/07/2016

*Following the investigation, the Committees have now released a damning report on BHS, determining that Sir Philip Green had “systematically extracted hundreds of millions of pounds from BHS, paying very little tax and fantastically enriching himself and his family, leaving the company and its pension fund weakened to the point of the inevitable collapse of both.”

MPS have therefore held Green primarily responsible for the issues that BHS’ pension scheme is now facing. The Guardian reports that “a series of bad business decisions and personal greed,” on Green’s part led to the end of BHS.

MPS noted: “Sir Philip Green, Dominic Chappell and the respective directors, advisers and hangers-on who all got rich or richer are all culpable, with the only losers the ordinary employees and pensioners.” The UK’s Cabinet Office has also announced that it is considering the removal of Green’s knighthood.*

The reputation of a CEO and their ties to their company can be hugely important to the success of a brand. If a CEO reputation is compromised, the success of their companies can be at risk. So how much emphasis should a CEO put on their online reputation?

Sir Philip Green is the latest high-profile CEO whose public reputation has come under scrutiny. The 64-year-old is the chairman of Arcadia Group, one of the leading fashion retailers in the UK. The group portfolio includes Top Shop, Burton, Dorothy Perkins and formerly British Home Stores (BHS). Green was knighted in 2006 for his continued work in retail and charity, prior to the downfall of BHS from 2009.

BHS

Green’s sale of BHS for just £1 in 2015 led to widespread criticism and unrest. After a turbulent year with new owner Dominic Chappell, the company has fallen into administration leaving 11,000 workers in danger of losing some, or possibly all, of their pensions.

BHS is a well-known, longstanding and cross-generational brand which, much in the same way as Woolworths, sparks public interest and emotion. Not only are people’s jobs on the line, but also huge amounts of empty spaces will be left on the high street.

From Green’s perspective, the Arcadia Group pumped £254m into the firm in the early days of its ownership since 2000, before seeking a buyer as the organisation deteriorated in the six years before its sale in 2015. The fact that he sold the business for just £1 implies that he was keen to offload the struggling business, arguably having seen the iceberg that was to come.

He sold the company to Retail Acquisitions, led by Chappell, who has previously been bankrupt three times, and the company is now being wound down after administrators failed to secure a rescue deal. According to the Guardian, Green’s family and other investors made millions of pounds in the 15 years of his ownership while the company’s value deteriorated.

Commons hearing

Throughout the case, which has become an issue of national interest due to the pensions, Green has maintained his colourful personality. In parliament, he often interrupted and spoken over MPs when questioned earlier this month. He also looked visibly bristled when proceedings displeased him, saying one MP was “really disturbing” in the way he looked at him and accusing committee chairman Iain Wright of being “really rude”.

Reputation of Green

Green’s good CEO reputation and image, as well as his knighthood, now depend on his promise of a solution to the BHS pension scheme, according to MPs.

In a joint statement after the hearing, Frank Field, chairman of the work and pensions committee, and Iain Wright, chairman of the business, innovation and skills committee, said: “We hope he will come up with an offer that is satisfactory to the Pension Regulator. However, he doesn’t only have to satisfy the Pensions Regulator – he is before the bar of public opinion. Much of his reputation now depends on how generously he responds.”

Field said that “a lot of credibility now rests on a very generous settlement” from Green and that the payment of £571m would be “quite cheap” for a restoration of public opinion.

Green promised to resolve the problems facing the pension scheme and apologised for the collapse of the department store chain. But as yet, he has declined to disclose any details about his rescue plans. His wife, Lady Tina Green, will now face the parliamentary committee’s questions on the case.

Reputation of a company

At this current time, it is unlikely that Green’s other companies will feel the pinch during the ongoing saga with BHS.

Compare that to Virgin’s founder and owner Richard Branson, which have a heavy link between company and CEO reputation. In 2013, the entrepreneur’s online reputation was valued at £263m and much of Virgin’s brand is based on the transparency and honesty of Branson.

Calls for Green to bail out BHS are warranted, but is that Green’s priority when his current businesses continue to thrive? That all depends on how much he values his personal reputation – is it worth £571m?