‘Ethical Capitalist’ Urges U.K. to Let Some Businesses Fail
(Bloomberg) -- Julian Richer, author of the “Ethical Capitalist” and a retail entrepreneur who handed control of his company to his employees, said the U.K. government should collect on the loans it made to support Covid-stricken businesses.
“Some businesses deserve to go under,” Richer said in an interview. “They’ve ripped off their customers, they didn’t invest, they bled their companies dry, they used dodgy tax schemes to get as much money out of their companies as they could. Where’s the surprise that they’ve hit the wall?”
The remarks feed into the debate about how much support Chancellor of the Exchequer Rishi Sunak should give to businesses forced to shut during lockdowns to control the coronavirus. While growth is bouncing back, the economy remains 5% smaller than it was before the virus hit the U.K. in February 2020.
The Federation of Small Businesses and the Ownership at Work research group have suggested Sunak allow them to write off debt built up through “bounce back” loans from the Treasury in exchange for following Richer’s example of establishing Employee Ownership Trusts, designed to incentive business leaders and empower workers.
Richer rejected the idea of allowing companies to convert state-backed loans into equity for their staff as a “complicated cop-out for businesses.” He said Richer Sounds is working on its accounts and will repay the grants it received when the figures are finalized.
In 2019, Richer transferred to his staff 60% of his shares in his company, an electronics retailer called Richer Sounds, which he started as a teenager. Richer sees a difference with what he did, saying, “if businesses borrow money they should pay it back, if they can.”
The electronics chain didn’t escape unscathed from the coronavirus recession. It was forced to close its 51 stores during three national lockdowns, including one permanently. Two-thirds of staff were furloughed, while the rest worked from home. Richer Sounds now makes 30% of its sales online or by phone, double the previous portion. Having long emphasized the importance of in-person customer service in retail, Richer concedes that in-store sales will never return to pre-Covid levels because “people are nervous going to shops.”
Outside his day job, the author of “The Ethical Capitalist: How to Make Business Work Better for Society” has set up seven charities to address the economy’s ills from zero-hours contracts to tax avoidance. They include Tax Watch, which describes itself as “dedicated to compliance and sound administration of the law in the field of taxation.”
Richer also wasn’t enthusiastic about the historic agreement by G-7 finance ministers aimed at forcing the world’s biggest multinational tech giants to pay tax where they earn revenue instead of where they’re based. He said the meeting in Cornwall, England, was “a lot of photo shoots at huge cost and precious little decided.” He pointed to analysis by Tax Watch suggesting a policy change will mean “very substantial tax cuts” for tech companies because they will also remove a digital services tax.
Another of Richer’s ventures is the Good Business Charter, which accredits companies and charities that make 10 pledges. They’re required to pay the real living wage, publish tax policies and close pay gaps on gender, disability and ethnicity. One of the program’s latest signatories are the city of York and the insurance company Aviva.
In the aftermath of the pandemic, “consumers are desperate to know where to spend their money,” says Richer. “You go on to a war footing when the bombs are flying but businesses have been generally very well looked after financially and now the dust has settled, the subject of responsible business has come to the forefront.”
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