174.The demise of BHS was the result of a series of bad business decisions and personal greed. We fear, however, that some the failures which allowed this to happen are not unique to BHS. Its lessons merit broader consideration of the framework in which companies operate. We will do so from a pro-capitalist perspective. We want entrepreneurs to be encouraged and accept that business failure is an inevitable part of the process. Reputable businesses are, however, appalled by events at BHS. Those events set out a path of further investigation for the two Committees.
175.This inquiry has exposed how capitalism can be worked to the advantage of directors, financiers and advisers at the expense of employees and the wider public interest. This deeply concerning example of corporate governance brings into question the adequacy of existing company law and corporate governance regulation, particularly in relation to large private companies. That private companies are not subject to the same transparency requirements and codes of conduct as their public counterparts in no way absolves them of their wider responsibilities. Parliament is rightly cautious about imposing onerous new duties on our companies; but if large public or private companies do not behave in accordance with the ethical standards that society expects, further regulation may need to be considered. Ultimately business has a moral responsibility to operate within a framework which enjoys the confidence of the nation. These are issues to which the Business Select Committee will look to return.
176.The future of occupational pension schemes is perhaps the greatest challenge facing longstanding British businesses. In an environment of rising longevity, interest rates close to zero and intense international competition, defined benefit pension liabilities accumulated in a different age can appear burdensome and unaffordable. It should not be forgotten that these liabilities are promises of deferred pay to employees. It is imperative that the regulatory framework does not allow sponsor companies to evade those responsibilities and, in doing so, pass the burden onto other schemes that pay the PPF levy. There may be a case for stronger and more proactive regulation. It is equally important, however, that a balance is found to enable otherwise viable companies to continue to operate. The jobs of those currently in employment are inevitably in some competition with the pension entitlements of their forebears. Investigating how to secure a fair and sustainable settlement will be at the centre of the Work and Pensions Committee’s ongoing inquiry.
22 July 2016