There are now calls for closer scrutiny of large UK private firms in order to "prevent another BHS"

There are now calls for closer scrutiny of large UK private firms in order to "prevent another BHS"

The UK's Work and Pensions Committee is calling for the corporate governance requirements for public listed companies to be extended to large private firms in order to prevent another collapse similar to that of retail chain BHS.

In response to the Government's consultation on corporate reform, the Committee yesterday (12 February) published a report calling for company directors to have a new duty to pension schemes, and for Insolvency Service reports to be published whenever there is "significant" public interest.

It says private firms with more than 5,000 defined benefit pension scheme members should abide by the Financial Reporting Council's (FRC) Corporate Governance Code on a comply or explain basis. A report by the Committee lists the top 30 largest private companies in the UK, with many household names like John Lewis, Clarks, Matalan, River Island, and the Arcadia Group falling under these parameters.

A joint inquiry into the collapse of BHS and the origins of its huge pension scheme deficit was set up by the Committee in April last year. BHS was a private company but the effects of its collapse spanned widely: not least to its thousands of employees and pensioners.

The fashion retail group, owned by Retail Acquisitions, had operated 163 UK stores, with 15 franchise partners operating a further 72 stores in 19 countries. It began winding down in June after more than eight decades of trading, resulting in the loss of up to 11,000 jobs.

Multiple offers were made for the apparel and homewares retailer, but none were able to complete a deal due the working capital required to secure the future of the company. BHS was burdened with a GBP571m pension deficit.

Committee chair and MP Frank Field said: "For a company with a big social and economic footprint like BHS it is simply not enough to be accountable to shareholders – particularly when one shareholder owns most of the stock. The sorry tale of its sale and collapse, putting 11,000 people out of work and leaving a pension fund GBP571m in the red, with 20,000 pensioners facing an uncertain financial future, was a result of gross failures of corporate governance.

"Would the story have played out the same way if its directors had to be open about the financial decisions they were making for its future? The finances and leadership of a company with so many people depending on it should be open to scrutiny."

Click here to read the Committee's full report.