March '25: Damaged Goods by Oliver Shah. The Rise and Fall of Sir Philip Green

In this March edition of Founders’ Chronicles, I decided to read about another ‘baddy’ of the business world: Sir Philip Green. Okay, maybe ‘baddy’ is a bit strong - unless you’re a member of the BHS pension scheme- but he’s certainly a highly controversial figure.

This book has been on my reading list forever, but for some reason, I never quite got around to it. Perhaps it’s because I had a friend who never said, “I work for Arcadia Group,” but instead, “I work for Sir Philip Green.” Something about the way it was said made it feel more like a cult than a retail empire, and I was less interested in reading about cults.

This is yet another story where the founder's narrative (he wasn't really a founder he bought up businesses on the cheap) doesn’t always align with reality. If you’re brave enough and shrewd enough, you can build a persona that people assume is true - even if it’s built on sand.

For Sir Philip Green, the narrative was that he was “the UK’s greatest retailer.” The reality? That persona enabled him to become one of the UK’s most prolific asset strippers. The fact that this came at the cost of thousands of individuals’ pensions and jobs makes this more than just a story of a business that went bad. A pension is often a retiree’s biggest asset, particularly a defined benefit pension. So if someone risks other peoples' retirement in order to pay themselves billions, those people are bound to be furious.

I liked this book, although I found the beginning overly complex - I almost needed to write it down to keep track. The early days of Green’s career are full of so many twists and turns that it’s nearly impossible to follow. But by the end, you get a real sense of the characters involved. It was also a valuable warning for someone like me - who’s perhaps a bit too trusting at times - in business, people aren’t always who they seem.

Key Lessons:

1. The Midas Touch, or Just Lucky? In business, you don’t always have to be great - sometimes, you just need to be lucky. Having actually failed a few times and become a bit of a joke, the deal that really propelled Green was JJB’s purchase of Sports Division. Even though he wasn’t the main shareholder, it landed him ￡36m (which he moved to a tax haven), enough to establish himself as a serious player. The deal itself? A disaster for JJB, massively overpriced. But sometimes, you don’t need skill - you just need to be in the right place at the right time.
2. Leverage: Friend or Foe? I have mixed feelings about leverage. When used correctly, it can supercharge your equity returns and make you look like a genius. But get it wrong, and it becomes a noose around your neck. In fairness to Green, he played this leverage game masterfully, using leverage - and the banks - to make massive acquisitions, and pay himself big dividends, while taking on minimal personal risk.
3. Beware Pension Liabilities Even writing this feels boring. But defined benefit pensions, in hindsight, made little sense - which is why new schemes no longer exist. The idea was simple: employees contributed, and the company guaranteed a lifelong pension. That worked fine when markets were strong and assumptions about returns were optimistic. But when markets turned, companies were left plugging enormous pension deficits. Green understood this - he just didn’t care. The people that bought BHS and took on the debt had no idea.
4. The Blinkers Effect There are countless examples of companies failing to see the next big shift - Kodak and digital cameras, Blockbuster and streaming, and so on. Green clearly failed to grasp what online retail would do to his business. These missed moments are well-documented, but it’s always worth asking: what’s coming over the hill?
5. If It Looks Wrong, It Probably Is In 2005, Green (via his wife) took a ￡1.2bn tax-free dividend. That didn’t stop him from being celebrated by the government and being knighted. But did this feel right? Personally, I think people should pay their taxes rather than loading up companies with debt to fund massive payouts. It sometimes seems like a game among the ultra-wealthy to avoid tax as if it’s a badge of honour. I tend to side with Warren Buffett on this - it’s morally wrong for billionaires to pay a lower tax rate than their secretaries.

As I’ve mentioned in previous blogs, the assumption that a big and successful company will always be big and successful is flawed. The problem is, this assumption infects everyone—employees, customers, shareholders, governments, and even the founders themselves. In business, you must constantly earn the right to exist, no matter how successful you’ve been in the past or how strong your reputation is. That’s one of the reasons I love business—it’s always evolving.

And I’ve got a feeling that one Elon Musk might be about to learn this lesson the hard way.

#founderchronicles, #founders, #entrepreneurship