As the biggest high street insolvency since the fall of Woolworths in late 2008, with almost 11,000 employees, more than 160 stores and a reported pension fund deficit of £571 million affecting some 20,000 pensioners, it was hardly surprising that the failure of BHS led to a joint inquiry by the Business, Innovation and Skills and Work and Pensions Committees of the House of Commons.

The inquiry focused on the sale of BHS by Sir Philip Green and its acquisition by Dominic Chappell. It led to some tough questioning of the pair by MPs. In a damning report, the Committees found that a number of failures led to an 'at any cost' disposal of the company and its pension deficit to an unsuitable new owner. Sir Philip Green is undoubtedly a larger-than-life character who has built up a major retail empire. However, politicians criticised his fellow directors for failing to provide independent oversight or challenge in a corporate group "run as a personal fiefdom by a dominant individual".

BHS was an unlisted private company, which means that the UK Corporate Governance Code (Code) did not apply to it. The Code sets standards of good practice in relation to board leadership and effectiveness, remuneration, accountability and relations with shareholders. All directors, however, owe a series of duties to their companies under the Companies Act 2006. The non-executive directors in this case appear to have failed to control the excesses of the other directors, protect the company's long term sustainability and reputation or oversee the sale of the company.

The Institute of Directors (IoD) has written to the new Prime Minister calling for a review of their voluntary corporate governance guidelines for unlisted companies since there is a public interest in how they are run. The IoD plans to republish its guidance for directors of unlisted companies in the autumn. In a separate move, Theresa May has announced plans to put employees and consumers on company boards and to make annual shareholder votes on executive pay packages binding rather than advisory, as a way to make businesses more accountable. No details are available yet so we don't know whether all companies will be affected or whether it will apply to public companies only or those above a certain size.

Nevertheless, in a separate statement, ICSA last week stated, "As the professional body for governance, we strongly welcome the emphasis that Prime Minister Theresa May has placed on rebuilding trust in business. Good governance is key to this important objective." This statement follows the ICSA's own letter to the Prime Minister setting out suggestions as to how she can reform governance at private companies following the collapse of BHS.

The House of Commons Committees described the BHS situation as "the unacceptable face of capitalism". It is to be hoped that this sad episode in British retail history will lead to a review of how large privately-owned companies are governed, in order to increase public and investor confidence in them.

First published in The Retail Bulletin (6 September 2016)