I REFER to the collapse of BHS, the famous high-street retailer in the United Kingdom, which is now closed.
This episode exposes how corporate law has not kept up with the times.
Fundamental to protecting companies from their owners was the age-old law that prohibited the paying of dividends if there are insufficient retained earnings in a company (made of accumulated past profits less losses).
This was how the law drafters back then sought to protect companies from their greedy owners.
However, these days, that law is meaningless as controlling shareholders, even those who own less than 50 per cent, are clever in loading the companies with so-called management service and advisory fees which have no limitation as dividend payment rules.
So, even when a company is making losses, the owners still manage to take millions out, subject to having cash in the company, even if bank borrowings pay for this. As it is impossible to decide what the correct level of management or advisory fees is, this is akin to daylight robbery and a crime without punishment.
What is happening in BHS is akin to how the previous owners of Liverpool football club siphoned off millions from it to service their borrowings in the US, almost destroying the club.
The only way to stop this is to mandate that these fees and any/all payments to shareholders be passed at a company annual general meeting.
At the very least, other shareholders can wonder why so much is being paid when a company is suffering losses. It would also be wise to prohibit any payment to shareholders if a company is making losses. Obviously, this needs work, as monthly salaries often get caught in this.
Appointed company administrators must get back the millions paid as the first step.
We also should look at the folly of company pension schemes being administered by the company itself. This should no longer be allowed.
All pension schemes must be administrated by professional managers and each and every contributor has one vote each in the running of this scheme.
R. KRISHNAN,
Kuala Lumpur