Philip Green:The Unacceptable Face of Capitalism

[00:00:09] Morning folks and welcome to today's episode called Philip Green, The Unacceptable Face of Capitalism. And I'm going to kick this off with an excerpt from Oliver Shaw's excellent book on Green, it's called Damaged Goods. Mr. Toad-like in appearance, with a bulging belly and a mischievous grin, Green turned into a business celebrity, often spotted on the front row of fashion shows between Kate Moss and Anna Wintour.

[00:00:34] Nut-brown from the Riviera Sun, his silver hair slicked back into a rat's tail, he relished the role he had carved out for himself as the retail industry's roguish uncle. Bankers from Goldman Sachs and HSBC fell over themselves to offer him money and advice. Simon Cowell and Ronnie Wood attended his parties. He paid his wife almost £2 billion in offshore dividends from his high street empire

[00:00:59] and made two headline-grabbing hostile takeover attempts for Marks & Spencer's. He was knighted by Tony Blair and it all came crashing down in 2016. And this is the story that I'm going to tell today. Philip Green, the one-time king of the high streets, the opulent lifestyle, the aggression, the bullying, the greed. It is a cracking story. Enjoy.

[00:01:27] So Philip Green, born March 1952, Croydon, South London. It's a middle-class Jewish household. Both parents were very entrepreneurial. His father owned an electrical goods retailer. His mother owned a laundress, petrol station, buy-to-let properties. Very unusual for a woman back then. Tragically, his father died when he was just 49 in 1964. Green himself was only 12 at the time.

[00:01:51] So his mother Alma, she really became the key influential figure in his life at this stage. And she was the first of two women who Green really adored and actually listened to. He left school at 16, got a job with a shoe importer in East London. And while he never showed much drive or ambition at school, it was clear he was determined to make it in the clothes business.

[00:02:21] He had a lot of confidence. Or in America, you might say a lot of spunk. As we can see from this quote from a business guy who dealt with him at that time. He was straight out of school and quite full of himself. He was clearly someone who thought he was going to go a long way, even at that stage. So he spent a few years learning the rag trade. And then in 1973, at age just 21, he set up his own business. And the following years were really where he hustled. Not every venture worked out.

[00:02:51] But he had a sharp mind, quick wiss, enormous amounts of self-confidence. He had, I suppose you could say, a certain charm, you know, that was mixed with a lot of aggression. He had a good grasp of numbers. And he realized that he excelled at buying excess stock from bankrupt and in trouble retail companies. And then selling them on to other retailers. So it was risky, scrappy deal making.

[00:03:18] Now in 1980, to much fanfare and publicity, because he really did court the press from fairly early on. He opened his own shop in Mayfair. He stocked up with designer labelled clothes. Again from retailers that had gone into receivership. So the margins were high. In 1981, he famously launched this celebrity branded denim venture with the actress Joan Collins.

[00:03:40] And while this wasn't a success, this link with celebrities, it becomes a constant throughout his life. I'm not sure if you're familiar with the term star fucker. It was coined by Rupert Murdoch. He was referring to Peter Mandelson, the British politician. Because he was implying, this is back in the noughties. He was implying that Mandelson was overly keen on mingling with celebrities and power brokers.

[00:04:08] And how relevant that is now when we look at the trouble Mandelson is currently in over his association with Jeffrey Epstein. Anyway, it's fair to say that from a very early stage, Green was a star fucker. He craved the pixie dust that celebrity's sprinkle. Anyway, his big break came in 1985 with two deals. First, he bought a bank book retailer, Bonanza Jeans, for about £1 million. Now they had huge inventory that their bank had undervalued.

[00:04:37] So Green, he sold the inventory and within a month he was able to pay back the bank. Basically then getting the retail stores for nothing. And then he merged that with another distressed retailer called Gene Genie, for which he paid £65,000 for an option to buy it. Then he negotiated with the wholesalers and manufacturers to bring costs down. Now, negotiate is a nice way of putting it.

[00:05:02] Because Green is famous for his bullying, aggression, for shouting, cursing, threats of physical abuse. This is a style he picked up from associating with known gangsters. One in particular being Anthony Tony Schneider. He was a West End London loan shark who apparently punched Green and knocked him down after they fell out.

[00:05:28] Anyway, Green turned the business round and then sold it to the jeans company Lee Cooper. For somewhere between £3 million to £7 million. It's hard to get a definitive figure on this. So this was 1986. Green was 34 years old. He was still slim at this stage, sporting a Spandau ballet hairstyle. And the press, who I mentioned he did court, they called him the Gene Genius.

[00:05:56] And because he was such a wheeler dealer, it's really hard to know how wealthy he was at this stage. But here's a very good account of his lifestyle. Again from Oliver Shah's excellent book. And this is from one of Green's business partners. After a brutal 12-hour day, he would be chauffeur driven to the Ritz Casino in his Bentley. We'd have dinner there and he would gamble on the tables. He had power and all the girls would be impressed. There'd be loads of champagne, caviar, food, whatever he wanted.

[00:06:24] When he won, he won loads. When he lost, he lost loads. He'd thump the table and everybody would be watching. Then in 1988, he invested most of his Lee Cooper money and millions more that he raised from friends and business associates into Amber Day. This was another struggling retail company. Crucially though, it was a public company and he became CEO. Now Green, he isn't what you'd think of when you think of the CEO of a public company.

[00:06:52] But by moving manufacturing to Hong Kong for cheaper supplies, combined with his instinctive retail knowledge, the company's profits go from £3 million to £10 million. And so, initially, his barrow-boy kind of trading style, it went down well with the city and the share price more than doubled. But, I mean, running a public company, it requires transparency. And transparency and green do not go well together.

[00:07:19] He went through five different firms of stock brokers over four years. So, that made the city kind of uneasy. And then in the early 90s, there's a recession in the UK and sales crashed. The company missed an earnings forecast. The stock plummeted. Then, there was an investigation into some shady share buying. And while no charges came out of it, it revealed Green's connections to some pretty unsavoury characters.

[00:07:47] There was a convicted fraudster, as well as the loan shark I already mentioned, Anthony Tony Schneider, because he was one of the investors in Amber Day. And so, as a result, Green was ousted. And this resulted in two things. First, it left Green with a big chip on his shoulder. A real resentment towards the city, the investment community in London, which he saw was full of posh boys who were prejudiced against him.

[00:08:14] And it also turned Green off public companies. He vowed that he would never, ever run a public company again. Now, I mentioned that his mother was the first of two influential women who Green adored and actually listened to. And the second woman is Tina Palos, who he married in 1990. She owned a boutique in London with her first husband. So, she was familiar with the retail business. And she plays a central role in Green's life from here on in. And in his business life.

[00:08:44] And whatever else I think about Green, he appears to be totally devoted to his wife. And they would go on to have two children together. Now, after the Amber Day, I suppose humiliation you call it, Green went back to what he knew. Wheeling and dealing, but on a much bigger scale. First, he bought Olympus. This was a high street sports retailer that was being hugely mismanaged by Sears. Now, I need to point out, this isn't the US Sears.

[00:09:12] This was a UK retail and financial services company. So, totally separate. And they were so desperate to get rid of Olympus that Green was able to buy it for just £1, plus inherited debt of around £20 million. And he turned it around within three years and sold it for £330 million and netted £45 million. Next, he bought Sears itself for £548 million.

[00:09:39] With backers that included the reclusive billionaire Barclay twins. They are fascinating characters who I will cover at some stage. Because Green realised that the inventory and the building that Sears had were worth more than the company itself. So, he simply acted as the liquidator. It was a classic example of buy low, break up, sell high. And within six months, he and his fellow investors made about £280 million profit.

[00:10:07] So, now, flush with cash and emboldened by his success and with some heavy hitters willing to fund him, including big banks lining up. He started laying the groundwork to buy one of UK's most treasured retailers, Marks & Spencers. Or M&S, as everyone over here calls us.

[00:10:28] But then, reports came out that his wife had bought about £25 million worth of M&S stock only days before Green's intentions would become public. And the British press had a field day over this. His banking advisors, they got the frights and Green had to back off. But not before calling his banking advisors. Double-barrelled and it begins with C and ends with S. Or as my granny would say, see you next Tuesday.

[00:10:55] Again, he was referring to the so-called posh boys in the city with their hyphenated names. Anyway, by this stage, Green and his family had moved to Monaco, where he and his family continued to reside tax-free. Now, you might be asking, as I was asking, well, how is Green able to swoop in and extract such value from these retailers? Well, for context, at this time, much of Britain's traditional high streets, it was struggling.

[00:11:22] You had changing consumer habits, you had rising competition from supermarkets and discount chains. You had years of underinvestment, had left an awful lot of the major retailers undervalued. In that they were land rich, but cash poor. And so they were vulnerable to take overs. And Green, with his very much enhanced reputation and big backers, he was ideally placed to take advantage of it.

[00:11:46] And so it was in May 2000 that he swooped again, this time buying British Home Stores, or BHS as it's called, for £200 million. Now, this was founded in 1928. It had 156 outlets. And it sold everything from electronics to furniture and perfume and groceries at discount prices. But it was floundering at this stage.

[00:12:10] For the next 18 months after he bought it, Green, he worked 15 hour days, redesigning the stores. He tore through the inventory. He forced out slow moving stock, went back to suppliers demanding deeper discounts. And it worked. At least in the short term. Profitability improved. And two years after the purchase, BHS was valued at £1.6 billion. But what really made the headlines wasn't so much the turnaround.

[00:12:40] It was the huge dividends Green took out. £422 million in the first two years. Nearly double the company's actual profits during that time. And this is a pattern that we'll see repeats itself as Green moved on to his next big deal. So this came in 2002 when he bought Arcadia for £850 million. Putting in only about £10 million personally himself. The rest borrowed.

[00:13:09] And after the deal was done, his wife Tina held 92% of the company. Now at that time, Arcadia had about revenue of £2.3 billion. It had 2400 outlets. But it was struggling to increase margins. But it did have great brands like Topman, Topshop, Burton, Dorothy Perkins, Evans, Miss Selfridge. All under the one roof. And Green, he immediately sold off some of the weaker brands. And he turned it round into a roaring success. At least initially.

[00:13:39] This is from Fortune magazine around that time. Green astounded the city, London's financial district. With the speed at which he turned BHS and Arcadia around. And paid back much of the debt he used to take them private. He did it so effortlessly that the cry went up that he'd stolen the franchises. For much less than their worth. And in that same article, they went on to describe Green's retail expertise. Green attributes his success not to cheap acquisitions.

[00:14:08] But to a lifetime of plying the rag trade. He can price a fabric simply by rubbing it between his fingers. He can look at a rack of coats and predict which ones won't sell next season. He obsesses with presentation from the floor plans to the lighting. In short, he's a manager's worst nightmare. True, he was a manager's worst nightmare. But he was also a nightmare for anyone to work with. And this is important. Former Topshop employees described toxic workplace encounters with Green.

[00:14:37] Here's an example of him berating a female employee. This is what he said to her. You're absolutely fucking useless. I should throw you out of the window. But you're so fat, you'd probably bounce back in again. And now it should be noted that at this stage, Green himself was no Slim Jim. So as a result of all his success, the huge dividend he'd taken out from BHS, the turnarounds, his public profile was sky high and the press were calling him the king of the high street.

[00:15:06] And he and his wife Tina were spending extravagantly. For example, for his 50th birthday in 2002, at a cost of £5 million, he chartered a private jet to fly 200 guests to a five-star hotel in Cyprus, where the entertainment included Tom Jones, Earth, Wind & Fire, Rod Stewart. And to give you an idea of the type of parting Green and Tina enjoyed,

[00:15:32] the following, again from Oliver Shaw's book, forgive me Oliver, I'm leaning on you a lot, but it's a fantastic book. This is where he writes, where Shaw writes about the atmosphere in the plane before taking off. There was a heavy handed joke about cocaine. A polite voice told guests, I would like to introduce you to the captain. An image of a bog-eyed pilot appeared on the screen. His name is Charles. Some of you may have been this high with Charlie before, but for others, it's a new experience.

[00:16:02] There was applause and laughter. Ha ha. So, he's parting, having a great old time of it, making loads of money, and he is hugely still ambitious. And in 2004, he goes again after Marks & Spencers. And this one turned into a very public and bruising row. So Green realised that to get M&S, he needed a CEO that would be respected by the city. And the top retail guy at that time was Stuart Rose.

[00:16:32] He was very suave, or being well-respected by the city. He had actually run Arcadia before Green bought it, and Rose had made £25 million from that sale. So Green offered him the top job if his bid for M&S was successful. But Rose turned it down. He knew what Green was like. He didn't fancy becoming Green's gopher. Then, the M&S board moved really fast. They sacked their CEO and brought in Rose as the CEO.

[00:17:00] So literally overnight, Rose went from being Green's potential ally and potential CEO into more or less his primary obstacle for taking over M&S. And this began what the press called a dirty war. There were allegations that Rose's phone records and bank statements had been intercepted. Green's advisers at Goldman Sachs, they were accused of running a smear operation. Now Green's camp fired back.

[00:17:25] They accused M&S of encouraging Rose to mislead Green during their initial meetings. Finally, in July 2004, M&S rejected Green's offer of £9.1 billion. And Green was furious. And then there was this famous public bust-up with Stuart Rose. One British newspaper ran with the headline, M&S fight turns into a punch-up. So the story goes that Green was in his limo and spotted Rose going into the M&S headquarters.

[00:17:54] I mean, it sounds to me like Green was lying in wait for Rose. And this is from a newspaper that reported on it. Green is said to have grabbed Rose by the lapels and yelled, Oi! I want him well with you! Green, famous for his volcanic temper, then reportedly said, I thought you wouldn't be rich. You could have made £250 million with me. Rose replied, I didn't want the money. I just wanted the M&S job. Excuse the accents. The newspaper goes on.

[00:18:24] Worried staff who witnessed the row were ready to call security. But then the two men suddenly realised they were on the edge of a serious flare-up and started laughing. They parted in good humour. Brilliant. I love it. Anyway, I wouldn't feel too bad for Green because in October 2005, Arcadia paid a dividend of £1.2 billion to Tina Green in Monaco. So, tax-free, the largest single payout in British corporate history.

[00:18:53] And to fund it, Arcadia borrowed £1 billion in senior bank debt. So that dividend was more than four times Arcadia's pre-tax profits that year. The company, it was basically borrowing money and passing it directly to its owners. It made huge headlines. Critics were rightly saying that Green was loading Arcadia with this. And as a result, it would struggle if retail conditions turned against it.

[00:19:23] They were right, though it would take another decade for that all to come out. But for now, and we're in 2006, things were looking very rosy for Green. That year he was knighted, becoming Sir Philip Green. A recognition, really, that top shop under his ownership. It really had become this genuinely significant cultural force. It was a huge story.

[00:19:47] Now, central to that stas, of course, was his and his wife Tina's understanding that blending celebrity with business, it was a powerful way of not only burnishing their credentials, but also helping their business. And Green associated himself with a who's who of big names of the noughties. In 2005, for example, Beyonce performed at his son's bar mitzah. The total cost of the bar mitzah was four million pounds.

[00:20:13] But no celebrity relationship defined this era more than his partnership with the model Kate Moss. Like she was his, his muse. She was the embodiment of what top shop was trying to be. And Moss was brought in to design collections for the brand when the first collection went on sale at the Oxford Circus flagship store in spring 2007. The queues just stretched all around the block. And this was the moment, really. This is the height of his power.

[00:20:44] And Green's family wealth at this stage was estimated to be about five billion pounds. And because he was so visible, always at parties, always hanging out with celebrities, he featured a lot in the press. And he was very keen to try and control the press narrative around him. Now, I already mentioned how he treated staff. Well, the press didn't fare much better. So, here's one of the journalists who writes about his phone call from Green.

[00:21:12] He picked up his phone and he hears Green on the other end. You fucking onion. You don't fucking get it. The reporter goes on to say,

[00:21:51] And maybe some journalists did get an invite to have a cup of tea, but not all of them. And I know his staff never got invited to a cup of tea and never saw the funny side of his behaviour. And I really think it's important to call him out on this. I already mentioned the way he treated staff. These weren't just one-offs, one or two occasions. This happened all the time. Here's a quote from a manager.

[00:22:16] You don't want to sit in meetings with young buyers, some of whom are inexperienced, and see them demolished and sworn at. You would see young women particularly reduced to tears. Philip would often have a meeting before he flew off in his jet to Monaco. And he would pick on one person and just batter them. Anyway, it's now in 2009 and Topshop opened its first American flagship store on Broadway in Manhattan. Huge fanfare, but the timing was tricky. You had the global financial crisis.

[00:22:46] Also, US consumers, they found that the quality didn't always match the price tag. Especially when Zara was offering higher quality, H&M was often significantly cheaper. And it was around this time, I think, that Green either just took his eye off the ball. Or just didn't have the wherewithal to move with the times. Or maybe he was just taking too many flights with Charlie. Who knows? The criticism is that he became more out of touch with the high street trends.

[00:23:15] He never really bought into online shopping. I mean, that is such a mistake. He famously lived off his Nokia brick phone. Never got a smartphone. So, he sort of really insulated himself from the changing winds that were happening in retail at that time. Fast fashion chains like Primark, Zara, H&M. Like, they were able to switch their ranges in a heartbeat. And they were beating Green's outlets.

[00:23:42] Now, not that you'd think it as Green continued to splash the cash. He spent over £6 million on his 60th birthday in 2012. This was held over four days in Cancun. The guests included Naomi Campbell, Leonardo DiCaprio, Gwyneth Paltrow. And then for entertainment, he had Robbie Williams, Stevie Wonder, CeeLo Green. The Beach Boys sang at an outdoor barbecue. But, by 2015, the wheels were coming off.

[00:24:09] BHS reported a pre-tax loss of £21 million. And this wasn't a once-off. The company had been hemorrhaging money for years. And crucially, it had a pension deficit of £571 million. Almost exactly equal to the £586 million in dividends that Green had taken out of the business over the years. And on top of that, the company owed a further £250 million in debt. So, Green needed out.

[00:24:35] And in his desperation to get out, he made a decision that really would define and rightly define his legacy. Because he sold BHS for £1 to a guy called Dominic Chappell. A guy who was bankrupted three times and had zero retail experience. And just 13 months later, BHS collapsed. 11,000 jobs gone. And in those 13 months while he owned it,

[00:25:04] Chappell had taken £17 million out of the business. Including a £1.5 million loan used to pay off the mortgage on his parents' house. Now, he was subsequently jailed in 2020 for six years for tax evasion. But the £1 sale, it hadn't been a genuine rescue attempt at all. This was Green just offloading a liability and not giving a damn about the business, the employees and their pensions.

[00:25:31] And just as BHS went bust, the press found out that at that very moment, that Lady Green had spent £38 million on luxury homes. So, the public outcry was enormous. Politicians came for him. And in June 2016, Green was summoned before a joint parliamentary committee for a session that lasted over six hours. And it didn't go well. At one point, and you really gotta Google this and see it on YouTube, Green turned to one of the MPs and said,

[00:26:00] Stop staring at me. It's making me uncomfortable. I mean, that line became more or less the media shorthand for the whole story. You have this billionaire in Parliament telling an elected representative to look away. Nothing to see here. Now, on the pension deficit, he did offer a kind of confession. And this is a quote from him. It's my fault. The answer is, it wasn't dealt with. We're here and we have to find a solution. It's not my style to blame anyone. Close quotes.

[00:26:29] Because he then went on to blame everyone else. And this is from a man who, by his own admission, he was such a micromanager that when he took over BHS, he claimed to have saved £600,000 simply by ordering new coat hangers. So it just wasn't credible. And he was branded the unacceptable face of capitalism. And it didn't help that in the middle of all this, he then took delivery of a £100 million super yacht called Lionheart.

[00:26:58] I mean, as one prominent businessman said, quote, It's really the character of Philip Green that makes it so completely interesting. He is the most vain man and pugnacious. And it's just interesting to find him on the ropes for a bit. If you're consistently flashy, consistently rude and very rich, you can't then be surprised if nobody likes you. And so by now the politicians were threatening to remove his knighthood. The press, which had once called him the king of the high street,

[00:27:28] they had a new name for him, Sir Shifty. And so eventually, after much stalling and then to-ing and fro-ing, in 2017, Green agreed to pay £363 million into the BHS pension scheme. But then, a second crisis arrived. In July 2018, the Daily Telegraph published an investigation that alleged that several members of staff had been paid significant settlements

[00:27:55] and had signed NDAs to prevent them speaking publicly about allegations of sexual harassment and racial abuse. Now, Green denied everything. And because the NDA is held, nothing could be proven. I mean, at least not legally, but the damage to his reputation. That was very real. And his business reputation continued to take a hammering because Arcadia was now failing. Green had starved the business of investment.

[00:28:24] We already mentioned that, but especially investment into digital and online. And it showed. Like by 2018, the company had losses of £177 million and it was also sitting on a huge pension deficit. Then came COVID. Arcadia stores closed overnight. And unlike its rivals, ASOS, Boohoo and others, which all had strong online presences, Arcadia had nothing really to fall back on. And in November 2020, Arcadia went into administration

[00:28:52] and brands like Topshop, Doherty Perkins, its top brands, they were snapped up by its online rivals. So, Green now lives aboard his £100 million super yacht. And yeah, he still has money, although his fortune is now put at just £1 billion. But you know, outside of the money, he has lost so much. Like his reputation as the king of the high street,

[00:29:17] the guy who just had an innate feeling for how the fashion business worked, that's gone. And on top of this, he's rightly viewed, I think, as a greedy bully. And that is not a good legacy. But I gotta say, I always try and see both sides. But for Green, I have very little sympathy for bosses who get off on reducing employees to tears.

[00:29:42] So you reap what you sow, a bit of karma, and it makes for a fascinating story. And that brings us to listeners' emails. And this one is from John, who'd love to hear the story of Sam Altman. And believe it or not, I didn't have Altman on my list. And I'd really like to dig into this. So I might actually do this one sooner rather than later. I might do it for next week. Anyway, thanks so much for listening, John, and for the recommendation. And remember, if you have any comments, any corrections,

[00:30:10] or any story that you'd like me to cover, email me at info at gbspod.com. All the best, folks.