Foul play lurking in the City: There are no excuses for bosses abusing their positions for inappropriate behaviour, says ALEX BRUMMER

An encouraging sign amid the recent departure of Paul Marchant from the rapidly expanding, budget fashion retailer Primark is the firm stance taken by Associated British Foods (ABF) chief executive, George Weston.

While Diversity, Equality, and Inclusion (DEI) regulations may have faced setbacks following Donald Trump’s return to the White House, there is no justification for leaders exploiting their authority for improper conduct towards colleagues.

Regrettably, the retail, business, and financial sectors have cultivated a reputation for such occurrences.

The Confederation of British Industry (CBI), a prominent employers’ organization, has been tarnished by similar accusations. In the fashion industry, Ted Baker suffered reputational damage due to the actions of its founder, Ray Kelvin.

Harrods is still grappling with the reprehensible behavior of the late Mohamed Al Fayed.

Turning to the financial world, the BBC drama series Industry offers a raw depiction of abusive practices within investment banking.

In a real-world example, Crispin Odey was recently penalized £1.8 million by the Financial Conduct Authority (FCA) for obstructing investigations into allegations of sexual misconduct.

Additionally, former Barclays CEO Jes Staley is contesting claims at the FCA’s Upper Tribunal that he misled regulators concerning his relationship with the disgraced financier Jeffrey Epstein.

As head of a family-controlled business, holding approximately 58 percent of ABF shares, Weston was well-positioned to address Marchant’s transgression decisively.

Weston has affirmed that ‘high standards of integrity are paramount.’ However, the inquiry conducted by City law firm Herbert Smith Freehills into the event that led to Marchant’s exit raises unresolved questions regarding corporate governance at Primark.

Given Marchant’s 16-year tenure as chief executive, concerns may arise within ABF that further claims could surface following this disclosure.

Indeed, it has emerged that there was at least one prior complaint concerning inappropriate communication.

Considerable uncertainty remains. When Bernard Looney was dismissed as chief executive of BP for misleading the board about his personal life, he faced significant repercussions, forfeiting £32.4 million in potential compensation and bonuses.

As a subsidiary, Primark is not required to publicize Marchant’s remuneration or the details of his departure settlement.

Minority shareholders in ABF may justifiably question the absence of openness surrounding the severance package for an executive instrumental in growing Primark’s operating profits from £250 million to over £1 billion. The justification for confidentiality in these circumstances is questionable.

Weston and his team have yet to finalize succession plans. ABF finance director Eoin Tonge is assuming interim leadership.

ABF has historically been open to external recruitment, often targeting executives from Marks & Spencer.

Working in Dublin, with its lower tax rates and proximity to attractions like Guinness, premier rugby, and renowned bloodstock breeding and racing, could be a highly attractive prospect for potential candidates.

Investing in Innovation and Technology

Notably absent from the recent Spring Statement was any mention of research and development (R&D). If the UK aims to become a leader in defense, high-tech industries, and life sciences, prioritizing and incentivizing R&D investment is crucial.

Recent data from the Organisation for Economic Co-operation and Development (OECD) highlights China’s commitment to innovation. China increased its R&D expenditure by 8.7 percent in 2023, compared to 1.7 percent in the US and 1.6 percent in the EU.

Innovation-driven Israel leads OECD countries, allocating 6.35 percent of its total output to R&D, followed by South Korea at 4.96 percent and the United States at 3.6 percent.

The United Kingdom has fallen behind Germany and now aligns with the OECD average, investing 2.8 percent of its output in R&D.

The UK’s strong scientific research base is evidenced by Nobel Prizes awarded to Cambridge University and successful companies like Arm Holdings and DeepMind, although both are now under foreign ownership. The additional £400 million allocated to drone technology and AI for defense is a welcome but insufficient step.

Utilizing the tax system to stimulate R&D, accelerate economic growth, and create high-quality employment opportunities should be a fundamental policy objective.

Thames Water and Private Equity Concerns

Customers of Thames Water might find temporary relief as private equity firm KKR reportedly approaches with an offer to address the £3 billion financial shortfall in the utility company’s balance sheet.

However, this potential solution involves further debt-fueled assistance for a utility already burdened by excessive financial engineering.