Why do they lie?

Lady Green took out a record £1.2bn tax-free dividend from Arcadia in 2005.

The dividend – or the cash used to pay it – had already paid corporation tax. You can;t take a dividend without that having happened.

Ed Miliband, the shadow business secretary, echoes his views: “Employees should not pay the price of Philip Green’s greed. His family extracted the largest dividend in history from Arcadia. The least he can do is help plug the deficit.”

Do we get to come after your money Ed? For whatever you might have done in office? Or are you going to claim limited liability for me but not thee?

24 thoughts on “Why do they lie?”

  1. So Much For Subtlety

    I know my opinion on this is not popular but let me restate the obvious – there is a lot you can do that is legal. I am sure that the Greens have top notch legal advise telling them exactly what is legal. And I am sure that a couple of bent wide boys are perfectly capable of looting their companies’ pension funds in a way that is entirely legal.

    But that doesn’t mean they should – or that I can’t express an opinion on what scum they are when they do. Well the libel laws probably do mean I can’t but they shouldn’t.

    The Greens do an excellent impression of a bunch of crooked wide boys looting their companies before they go bust. Perhaps that is unfair. Perhaps not. But it is such a very good impression.

    So whatever the law is, some people are going to express views. It would be better if the people who owned companies were decent chaps and not wide boys. If they are not decent chaps, one day the law may be changed in ways that we do not like.

  2. Dividends are paid to shareholders. Another word for “shareholder” is “owner”.

    “Lady Green took £1.2bn of her own money from Arcadia in 2005” doesn’t whip up the same level of outrage though.

  3. So Much For Subtlety

    Did Lady Green take £1.2 billion of her own money? I would not complain if it were so. Arcadia has collapsed with debts of £750 billion.

    The sums that the Greens have had to put up to secure the pensions of their workers has been fairly trivial – not actually trivial but not big either – “Two years ago, Green agreed a £385m support package with the pension regulator in exchange for the watchdog’s support for a restructuring of his business.”

    So another way to put that would be that the Greens borrowed £750 million, they took out £1.2 billion, the government forced them to give back $385 million leaving them just under a billion quid in the money.

    And their workers will lose a large proportion of their pensions.

    You know, you do not have to be very left wing to find this abhorrent.

  4. Well, it WAS Lady Green’s money since it was accumulated profits of Arcadia and Lady G owned Arcadia. Borrowing money doesn’t create distributable profits so the money taken out wasn’t created by that £750m debt.

    Was it wise? For the on-going survival of Arcadia, hindsight tells us it wasn’t. But if I owned a company that had been doing well and had accumulated profits and looked like it might continue to do so, I might be tempted to take out a great chunk of it. Why am I in business? To make money. What should I do with that money once it is made. Leave it forever in the company on the off-chance that things go wrong? Prudence suggests that some sort of working capital should be left there and maybe a ‘rainy day’ back-up but to leave everything the company makes inside the company in perpetuity ‘just in case’ would mean there was never any point in going into business in the first place.

    But take a step back. Suppose Lady G had been UK resident and taken that £1.2bn out. Yay. She would have paid a lot of UK income tax. Where would Arcadia be? In exactly the same situation. Would the UK government have said “well, as you paid income tax a few years ago, we’ll step in and save Arcadia”? Of course they wouldn’t have. Arcadia would have gone under anyway.

    So the tax position of Lady G was and is irrelevant to the survival of Arcadia. It’s a smoke-screen.

    “And their workers will lose a large proportion of their pensions.”

    The thing is, the pension fund would have been fully funded at the time contributions were made into it. I’m not sure whether it was DB or DC but if DB, every such pension fund has suffered from the unfortunate combination of people inconveniently living longer and the stock markets problems over the last few years. The extent to which the owner of the business can be held responsible for that is debateable. Perhaps at the time employees and employer should have been asked for higher contributions. Perhaps the stock market will recover, we’ll have a boom and the suddenly the pension deficits will disappear. Maybe the twattish decision to stop pension funds being able to reclaim tax on dividends could be reversed and all the money lost by that could be contributed by the government? Who knows.

  5. “. And I am sure that a couple of bent wide boys are perfectly capable of looting their companies’ pension funds in a way that is entirely legal.”

    Whats the betting that the Arcadia pension fund has exactly the same (or indeed more) assets than it did at the time of the dividend payments and the sole reason the pension deficit is the artificially created (by the State) low rate of return that is available for pension funds to invest at long term?

  6. So Much For Subtlety

    But take a step back. Suppose Lady G had been UK resident and taken that £1.2bn out. Yay. She would have paid a lot of UK income tax. Where would Arcadia be? In exactly the same situation.

    But the position of the lenders to Aracadia and maybe the pension fund would have been very different.

    No doubt there is some theoretical difference between a pound that has been borrowed and a pound that has been moved through some balance sheets, across some borders, into and out of some bank accounts, only to end up in Ms Green’s hot little hands.

    Just as there is a difference between the owners of a company paying themselves some of their profits and the owners of a company stripping the assets of a company that they know is about to go bust.

  7. Just as there is a difference between the owners of a company paying themselves some of their profits and the owners of a company stripping the assets of a company that they know is about to go bust.

    “about to go bust” is doing a lot of work to cover more than 15 years.

  8. The Greens do an excellent impression of a bunch of crooked wide boys.

    It’s possible they might indeed be that, but – unless any of us know them personally – it’s the media that presents that impression.

    No doubt there is some theoretical difference between a pound that has been borrowed and a pound that has been moved through some balance sheets, across some borders, into and out of some bank accounts, only to end up in Ms Green’s hot little hands.

    There’s nothing theoretical about a debt. The creditor will generally expect their money back.

  9. So Much For Subtlety

    Bloke in Wales February 14, 2021 at 10:49 am – ““about to go bust” is doing a lot of work to cover more than 15 years.”

    Maybe he saw the writing on the wall early. Who knows? What we do know is that Philip Green’s companies keep going bust leaving creditors and pensioners with little to nothing. Shortly after it turns out that a whole lot of what look like related-parties transactions have taken place leaving Mrs Green with hundreds of millions.

    Now it may all be luck. I must be very unlucky because I have never had a company I own go bust owing billions and leaving my wife hundreds of millions in hand. But you have to admit, that sort of luck happens a lot to the Greens.

  10. “His family extracted the largest dividend in history from Arcadia.”

    Whereas Miliband’s family extracted one of the most preposterous Oxford admissions in the last few decades when it wangled brother David in.

    (Maybe not quite so preposterous as Polly’s, I’ll grant you.)

    Come to think of it, didn’t David wangle an adoption by using the privilege of having an American wife? Didn’t the boys wangle a reduced Inheritance Tax bill too? I mean, why don’t they take pride in paying needless tax to the state that provided them with pretty good livings?

    Lovely family, the Milibands. Wide boys? Perhaps.

  11. So Much For Subtlety

    dearieme February 14, 2021 at 12:08 pm – “I mean, why don’t they take pride in paying needless tax to the state that provided them with pretty good livings?”

    I stand second to none in my contempt for the Millibands. We took in their father. He repaid us by trying to bring about a Soviet victory in the Cold War. The apples did not fall far from that tree.

    At least Green did something useful with his life. Wide boy or not, he is harmless by comparison.

  12. The formula is simple and widely imitated. Buy some unloved shops cheap. They are cheap because the stock market considers the likes of Dorothy Perkins as dogs.
    Revive the brands and give them an extra decade of life. The stock market thinks this revival is permanent and values accordingly. Cash rolls in at once (on sale) and rolls out slowly (to suppliers).
    Take dividend from cash at bank.
    Should we all have noticed that shops like Dorothy Perkins were still dogs? Should Green have admitted it? How and why?

    Dubai based Philip Day has done the same trick with Jaeger and Austin Reed. Mike Ashley is trying it with Debenhams and so on. Someone will come along soon to do it to M&S, John Lewis and other brands nearing their sell-by date.

  13. The Greens do an excellent impression of a bunch of crooked wide boys looting their companies before they go bust.

    They live on superyachts in the sun rather than prison cells. The correct summary of your position is that they do an excellent impression of a bunch of law-abiding wide boys looting their companies before they go bust.

    This immoral behaviour vs illegal behaviour argument is complex, particularly as morals are rather subjective. Indeed, it’s the difference between legal and illegal that defines the difference between personal and public affront. If behaviour is sufficiently widely regarded as abhorrent it will be made illegal by an accountable legislature. The Green’s behaviour has not meet that standard.

    Successful business people in free-market capitalism are almost always ruthless because compassion is almost always inefficient, and free-market capitalism punishes inefficiency. Generally here we appreciate the invisible hand so should we not accept that it’s the ruthlessness that makes it invisible? What cuntishness was it that led to billion pound companies employing thousands supplying millions?

    There are loads of complete bastards out there rising the tide that floats so many boats but there does seem to be something about the Greens in particular that vexes some people.

  14. “So Much For Subtlety

    “But take a step back. Suppose Lady G had been UK resident and taken that £1.2bn out. Yay. She would have paid a lot of UK income tax. Where would Arcadia be? In exactly the same situation.”

    But the position of the lenders to Aracadia and maybe the pension fund would have been very different.”

    How?

    The whole point of ‘Limited Liability’ is that liability is limited. There would be no more recourse to the lenders if Lady G were in the UK. The dividend was taken in 2005. Arcadia went bust in 2020. It would be some stretch of logic that connected the events.

  15. A comparison with Fred Goodwin might be apposite. Also Carillion where the CEO and CFO declared large dividends and promptly resigned, leaving the group to collapse about 18 months later

  16. On reflection, the Carillion pair took huge bonuses rather than declaring dividends, explicitly enriching themselves,at the expense of shareholders

  17. So Much For Subtlety

    snag February 14, 2021 at 10:27 pm – “SMFS doesn’t seem to like the Greens very much. They couldn’t possibly be, by any remote chance, Jewish perhaps?”

    You know, I do believe they might be. The Millibands too (at least in theory). I am pretty sure it is a coincidence.

    But even if it is not, the fact that the Greens are Jewish doesn’t make them nice people or make them immune from criticism. Any more than it made Cap’t Bob Maxwell immune. Well it did in his case as a lot of people were clearly very careful not to say he was a crook because of the anti-semitism charge. But it shouldn’t have.

  18. @Tim

    I know you write in other places about stock market plays. Defined benefit pension plans are a huge problem at the moment because the Ogden rate is utterly divorced from reality: is there an argument for investing in companies whose pension schemes appear to be problematic but in reality are not, and is there a way of working out the difference between problematic on paper and actually a cause for concern?

  19. So Much For Subtlety
    February 14, 2021 at 9:21 am
    Did Lady Green take £1.2 billion of her own money? I would not complain if it were so. Arcadia has collapsed with debts of £750 billion.

    Do you have a source for that £750 billion? It seems ridiculously high, even in the days of QE.

    Also, everyone keeps suggesting that £1.2bn is the highest ever dividend, but I don’t believe that. Possibly the highest dividend ever paid to a non-corporate shareholder.

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