Sir Philip Green vs Select committee
Discussion
sidicks said:
Welshbeef said:
But no one could foresee the financial crash and 0.5% interest rates could hey
If you make a conscious decision not to hedge your risks then you have to accept the consequences.This is the issue with vast cumulative provisions and changes to mortality assumptions which back date pre change of owner should be charged back to the previous and previous and previous owners not the prevailing one as it will likely bust them.
Welshbeef said:
You cannot hedge against everything and if you did then Fannie Mae and Freddie Mac collapse too so your not covered.
This is the issue with vast cumulative provisions and changes to mortality assumptions which back date pre change of owner should be charged back to the previous and previous and previous owners not the prevailing one as it will likely bust them.
1. You can easily hedge the vast majority of risks within a DB scheme. They are a number of specialist LDI firms set up to do just that.This is the issue with vast cumulative provisions and changes to mortality assumptions which back date pre change of owner should be charged back to the previous and previous and previous owners not the prevailing one as it will likely bust them.
2. You can also hedge longevity risk.
3. When you buy a business you take on the risks of that business. Including the pension scheme. If you believed the assumptions underlying the scheme valuation were outdated (e.g. Longevity) you would rec-calculate on your preferred basis and then adjust the price for the business accordingly.
The new owner has full responsibility.
sidicks said:
1. You can easily hedge the vast majority of risks within a DB scheme. They are a number of specialist LDI firms set up to do just that.
2. You can also hedge longevity risk.
3. When you buy a business you take on the risks of that business. Including the pension scheme. If you believed the assumptions underlying the scheme valuation were outdated (e.g. Longevity) you would rec-calculate on your preferred basis and then adjust the price for the business accordingly.
The new owner has full responsibility.
Hence Green has no responsibility to pay anything. 2. You can also hedge longevity risk.
3. When you buy a business you take on the risks of that business. Including the pension scheme. If you believed the assumptions underlying the scheme valuation were outdated (e.g. Longevity) you would rec-calculate on your preferred basis and then adjust the price for the business accordingly.
The new owner has full responsibility.
But let's say you buy a high volume low margin company with a few previous owners the acturaries and expert advice tell you the scheme is balanced on day of purchase then say 5 years later a shock wave hit financial crash and NICE tells us longevity has increased not only for live working staff but retired staff who were retired before you bought the company.
Then the new amount you need to pay in over 20 or even 40 years makes it a break even or loss making business? What do you do? Why shouldn't the previous owners who might have thought it but not hedged and passed the provision over to you get away with it?
Welshbeef said:
But let's say you buy a high volume low margin company with a few previous owners the acturaries and expert advice tell you the scheme is balanced on day of purchase then say 5 years later a shock wave hit financial crash and NICE tells us longevity has increased not only for live working staff but retired staff who were retired before you bought the company.
Then the new amount you need to pay in over 20 or even 40 years makes it a break even or loss making business? What do you do? Why shouldn't the previous owners who might have thought it but not hedged and passed the provision over to you get away with it?
So previous owners should partake in any future liabilities?Then the new amount you need to pay in over 20 or even 40 years makes it a break even or loss making business? What do you do? Why shouldn't the previous owners who might have thought it but not hedged and passed the provision over to you get away with it?
Isn't this the whole point of hedging?
Welshbeef said:
Hence Green has no responsibility to pay anything.
I agree. I thought you were arguing that when Green (or his wife) owned the company that had no responsibility to resolve any underfunding which may have resulted prior to their purchase of the company.Welshbeef said:
But let's say you buy a high volume low margin company with a few previous owners the acturaries and expert advice tell you the scheme is balanced on day of purchase then say 5 years later a shock wave hit financial crash and NICE tells us longevity has increased not only for live working staff but retired staff who were retired before you bought the company.
If the actuaries gave your poor advice you due the actuaries.If you chose not to listen to the actuaries then it's your problem.
Welshbeef said:
Then the new amount you need to pay in over 20 or even 40 years makes it a break even or loss making business? What do you do? Why shouldn't the previous owners who might have thought it but not hedged and passed the provision over to you get away with it?
Because you took over the liabilities when you bought the business. In the opposite scenario, would you expect the current owners, having profited from high mortality, to pay back cash to the previous owners?!
Edited by sidicks on Tuesday 26th July 15:55
The Surveyor said:
crankedup said:
mcdjl said:
RYH64E said:
The harsh reality is that business owners largely run their businesses for the benefit of their shareholders, employees are but a necessary evil. My business is run for my benefit, I'd like to think that I treat my employees well and pay them fairly, but the reason I turn up to work everyday is to make enough money to keep myself and my family in the style to which we're accustomed, not for the benefit of my empoyees. I don't mind making a reasonable contribution to my employees pension funds (and am now obliged to do so), but what's needed to keep some of these large pension funds fully funded is completely unreasonable imo, so I'm not surprised when owners act as Green has acted.
Do you have a high staff turn over? If my boss viewed me as an evil (necessary or otherwise) he'd need to pay me more than fairly or really enjoying my job to keep me.When the success of a high-street business comes down to tiny margins the sales floor margins become much more important than the staff to those at the top of the ladder. There is something about the rag-trade which draws in people of a mercenary persuasion I think, from Victorian mill owners to far-east sweat shop managers, to the likes of Philip Green and Mike Ashley.
crankedup said:
Well yes and no, although you make good points the greed seems manifest in many as if it's the normal way to behave and be congratulated. From the fast food chain store that refused to pay staff on duty at the counter and cooking stations during the time what customer foot fall was low to the car show room with markups of 60% and more simply for putting metal on the forecourt. The airlines who jack up the ticket price when oil price increases but do not lower same when the oil price drops. Same goes for the utility Companies we are lumbered with, in fact it seems an inherent business requirement to maximise profit whilst dropping service levels and front of office staff. We have a long way to drop until we are back to mill owners morals but sure as hell we do seem to be on that trajectory.
That's where competition kicks in...sidicks said:
crankedup said:
Well yes and no, although you make good points the greed seems manifest in many as if it's the normal way to behave and be congratulated. From the fast food chain store that refused to pay staff on duty at the counter and cooking stations during the time what customer foot fall was low to the car show room with markups of 60% and more simply for putting metal on the forecourt. The airlines who jack up the ticket price when oil price increases but do not lower same when the oil price drops. Same goes for the utility Companies we are lumbered with, in fact it seems an inherent business requirement to maximise profit whilst dropping service levels and front of office staff. We have a long way to drop until we are back to mill owners morals but sure as hell we do seem to be on that trajectory.
That's where competition kicks in...Karl Marx was correct when he said the world will be ruled with just half a dozen massive global companies owing everything.
crankedup said:
Karl Marx was correct when he said the world will be ruled with just half a dozen massive global companies owing everything.
Nah.Even in an oligopoly situation, with enormous barriers to entry, foreign competition exits or a Regulator is >meant< to do an efficient job.
The Surveyor said:
I would be less inclined to view this as evidence of a 'Capitalist Society' by stating that this is an approach by retailers in general, the market-trader mentality.
When the success of a high-street business comes down to tiny margins the sales floor margins become much more important than the staff to those at the top of the ladder. There is something about the rag-trade which draws in people of a mercenary persuasion I think, from Victorian mill owners to far-east sweat shop managers, to the likes of Philip Green and Mike Ashley.
I used to work in a shop and the joke was that it would be much easier to keep the shop stocked and how management wanted it without customers getting in the way. If that joke had been half serious or shown to the customers the chain would have closed long before it did.When the success of a high-street business comes down to tiny margins the sales floor margins become much more important than the staff to those at the top of the ladder. There is something about the rag-trade which draws in people of a mercenary persuasion I think, from Victorian mill owners to far-east sweat shop managers, to the likes of Philip Green and Mike Ashley.
With something where people contact and selling is still part of the work load cutting costs and going as cheap as possible (Asda/Tesco) is one way or valuing the staff and reaping the rewards is another (John Lewis). Theres space for both
I haven't followed this closely so apologies if it's been covered. When Green sold was the pension fund underfunded, I don't mean in hindsight I mean at the time? Secondly if it was underfunded at the time wouldn't the new owner have been taking that liability on, presumably in exchange for a lower all in price on the main business assets? Were the dividends taken at a time the pension fund was known to be underfunded?
turbobloke said:
Welshbeef said:
Why shouldn't the previous owners who might have thought it but not hedged and passed the provision over to you get away with it?
Because you effectively colluded by letting them, via sloppy due diligence?This company or companies who gave you the best advice money could buy will go bust if you try to sue them and the amount they could pay you is minuscule so the problem exists and is not solvable.
If you take acturaries full review of the pension fund independently and it gives the all is good position but hen due to Misselling of financial derivatives and NINJAS causing the biggest economic and financial crash since the Great Depression then what? If everyone predicted such downsides no one would ever buy anything.
Can you clarify your perception between Sloppy and good due diligence.
sidicks said:
Welshbeef said:
Hence Green has no responsibility to pay anything.
I agree. I thought you were arguing that when Green (or his wife) owned the company that had no responsibility to resolve any underfunding which may have resulted prior to their purchase of the company.Welshbeef said:
But let's say you buy a high volume low margin company with a few previous owners the acturaries and expert advice tell you the scheme is balanced on day of purchase then say 5 years later a shock wave hit financial crash and NICE tells us longevity has increased not only for live working staff but retired staff who were retired before you bought the company.
If the actuaries gave your poor advice you due the actuaries.If you chose not to listen to the actuaries then it's your problem.
Welshbeef said:
Then the new amount you need to pay in over 20 or even 40 years makes it a break even or loss making business? What do you do? Why shouldn't the previous owners who might have thought it but not hedged and passed the provision over to you get away with it?
Because you took over the liabilities when you bought the business. In the opposite scenario, would you expect the current owners, having profited from high mortality, to pay back cash to the previous owners?!Edited by sidicks on Tuesday 26th July 15:55
Also your last point is incorrect as the Pension protection prevents previous owners walking away from pension liabilities - when will pre Green BHS owners be pulled into this or is the rule just the last but one owner? I'd like to see the definition
Welshbeef said:
Well the last bit is the point the Govt the press and all BHS X staff believe previous owners Green and whoever owned it before him needs to pay up - actually they only want Green - why he is the only one with any money current owner bust previous owner likely dead then.
What less informed people believe is somewhat irrelevant!Welshbeef said:
Also your last point is incorrect as the Pension protection prevents previous owners walking away from pension liabilities - when will pre Green BHS owners be pulled into this or is the rule just the last but one owner? I'd like to see the definition
What do you mean? How do you mean the PPF prevents owners walking away?Previous owners of the liabilities do indeed transfer the liability to the new owners. Those owners have full liability unless the company goes bankrupt, in which case the PPF steps in.
sidicks said:
Welshbeef said:
Well the last bit is the point the Govt the press and all BHS X staff believe previous owners Green and whoever owned it before him needs to pay up - actually they only want Green - why he is the only one with any money current owner bust previous owner likely dead then.
What less informed people believe is somewhat irrelevant!Welshbeef said:
Also your last point is incorrect as the Pension protection prevents previous owners walking away from pension liabilities - when will pre Green BHS owners be pulled into this or is the rule just the last but one owner? I'd like to see the definition
What do you mean? How do you mean the PPF prevents owners walking away?Previous owners of the liabilities do indeed transfer the liability to the new owners. Those owners have full liability unless the company goes bankrupt, in which case the PPF steps in.
http://www.telegraph.co.uk/business/2016/04/26/bhs...
Welshbeef said:
Let's say you didn't the best money could buy but then the financial crisis happened wiping out vast amounts of the pension fund and then the govt yeilds plummeted ?
This company or companies who gave you the best advice money could buy will go bust if you try to sue them and the amount they could pay you is minuscule so the problem exists and is not solvable.
If you can't afford to take the risk, then you hedge the risk. It's that simple.This company or companies who gave you the best advice money could buy will go bust if you try to sue them and the amount they could pay you is minuscule so the problem exists and is not solvable.
Welshbeef said:
If you take acturaries full review of the pension fund independently and it gives the all is good position but hen due to Misselling of financial derivatives and NINJAS causing the biggest economic and financial crash since the Great Depression then what? If everyone predicted such downsides no one would ever buy anything.
If you can't afford to take the risk, you hedge the risk.Welshbeef said:
Can you clarify your perception between Sloppy and good due diligence.
Investigating the assets and liabilities of the pension scheme is basic due diligence.Welshbeef said:
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