Comment: Ted Baker's lack of PC credentials didn't cause its accounting collapse, but they didn't helpComments Off on Comment: Ted Baker's lack of PC credentials didn't cause its accounting collapse, but they didn't help
Ted Baker’s founder and hug-happy Ray Kelvin was clearly no big fan of political correctness in the workplace.
But it wasn’t only in his dodgy personal conduct that Ted has come last in the retail “woke” stakes.
Its handling of the processes around auditing its accounts has repeatedly fallen short of saintliness.
Today’s embarrassing admission of accounting failures – brought to light by a new finance director – will lead to inevitable questions of whether the lack of appropriate governance was the cause.
First, the chargesheet.
Best practice states that, to counter groupthink, non-executive directors shouldn’t spend more than nine years in post. Yet Ted’s audit committee chairman Ron Stewart, has been there nearly 11 and its FD (until his recent retirement) 17.
For similar reasons, the PC brigade say companies shouldn’t have the same auditor for too long. Yet KPMG has been Ted’s since 2001.
They also say auditors shouldn’t jeopardise their independence by flogging clients other lucrative services. Yet in 2013 and 2014, Ted gave KPMG a juicy contract to advise on a commercial dispute. The accountancy watchdog fined KPMG £3 million over that one.
But it’s far from clear if today’s accounting howler would have happened without the seemingly cosy relations between firm, director and auditor.
Fashion is fickle. Putting a value on ageing stock is a mixture of art, science and guesswork; one paparazzo’s shot of a celeb in LA sporting last season’s shorts can trigger a flood of orders and triple the value. The sight of Jeremy Clarkson in a pair might do the opposite.
Ted’s report and accounts for last year specifically discuss this problem, so the board can’t be accused of failing to address it. You can bet some at Ted will swear the old numbers were right and didn’t need adjusting.
Perhaps the problem is this; multiple breaches of best practice may not inherently cause a crisis. But when you get one big problem – hug-gate, in Ted’s case – don’t be surprised to see your other breaches come back to haunt you in the court of City opinion.
Wetherspoon’s Tim Martin might not agree, and it may make life duller, but in plc life, it’s better to be good.