The ethical capitalist is not in conflict with a profitable one
In creating an environment in which he put employees first, Julian Richer created a highly, successful and profitable business
Julian Richer has more than lived up to his name. Said to have a personal fortune of £160 million, he owns all but a very few shares in Richer Sounds, the hi-fi and TV retailer with 50-odd shops, 500 staff and a turnover of around £200 million a year. Yet the 59-year-old now wants to be known as a crusader for tax parity, has just penned a radical book about business ethics and is making plans to give the company to its 500 staff.
Richer, who says he wants a ‘kinder, fairer form of capitalism, believes the Chicago school of economic theory, typified by Milton Friedman and the Thatcherite obsession with shareholder value as the main measure of business success, was allowed to pervade much too deeply on the corporate scene. He is particularly upset about tax avoidance by the rich and is putting at least £100,000 a year into Taxwatch, an independent tax watchdog he is co-founding to highlight the opaque finances of multinational companies and individuals and expose tax avoidance.
Richer says he is ‘outraged by the status quo’ on this issue and sees a genuine threat to the system that helped create his wealth if action is not taken to redress some of the iniquities against the poor and less fortunate. He hopes the threat of disclosure will encourage corporates and tycoons alike to abandon the more egregious schemes.
He says: ‘Multinationals are getting up to all kinds of tricks and taking advantage of complex loopholes that people won’t think are right. Scandinavian countries have for years made publicly available the returns of every taxpayer. For business, reputation is everything. And Britain doesn’t like tax avoiders. If the public had a clearer idea of who all those avoiders are, they could do some real damage to the parties involved.’
All this represents something of a Damascene conversion for a money-maker who admits that he once paid himself in gold bullion to avoid paying National Insurance. ‘I treat my staff well because I want them to be motivated and happy.’
If the public had a clearer idea of who all those corporate tax avoiders are, they could do some real damage to the parties involved
Richer also concedes that his title for the book, the third tome he has penned, causes mirth in some quarters. ‘I have a close friend who’s a bit of a wag and he said that with a title like that the book would have to be very short,’ he quips. ‘It does cause raised eyebrows because people say How can capitalism ever be ethical?’
So, what happened? Some sources say Richer’s mission to clean up business has come about because he has ‘found God’. Richer talks more about his desire to level up the playing field and give credit to the decent business people out there who he says are keeping to the rules.
‘I wrote the book because I kept reading these terrible stories about bad business people ripping off everybody and I actually know a lot of people who do things properly, do pay their tax and are not offshore and doing everything they can to not pay their way,’ he says.
‘The story has to be told that there are a lot of good business people out there but the bad guys need to be kept in line, so they don’t have an advantage over the good guys because they don’t pay tax in this country, which is wrong.’
Richer’s ethical streak is evident in some of his past actions. But, having made his money, does he now believe that capitalism is inherently bad? Or is it only extreme behaviour within the system that offends him?
‘I describe it like this,’ he says. ‘I do think that capitalism is inherently bad. But it is not exclusively bad. It is a system based on greed, but you can be ethical within it with the right checks and balances. When I go to church on Sundays, I do believe that my cupboard is relatively clear. I am a trader. Those are my skills. It is what I do but I do care about the ethics of what I am doing.’
Aware that his money-making prowess under a free markets system would come under scrutiny in any call for tighter regulation, Richer also tries to make a distinction about capitalism in his book.
‘Let me say at the outset that I am an absolute believer in capitalism,’ he states on the back jacket. ‘I think it is the only economic system humans have so far come up that offers the real promise of personal prosperity and wellbeing.
‘However, I am also deeply aware of its shortcomings. People sometimes argue that either you are either a capitalist, in which case you accept its drawbacks, or you’re not. I don’t believe that.’
The book contends that ethically-run businesses are invariably more efficient, more motivated and more innovative than those that only care about the bottom line. Arguing that action is needed to put business back firmly in the service of society, it pinpoints six areas – employees, customers, suppliers, subcontractors, the environment and the state – where organisations have a responsibility to behave ethically.
The latter is defined around home-spun principles, such as It’s all about the people (his approach to employees) and What comes round goes around (his attitude towards customers). Then there are the policy recommendations. Richer says he has long felt uncomfortable about the different treatment of management and workers within organisations. He recalls a visit to a manufacturing sub-contractor in China when he found a VIP place laid out for him in an executive dining suite. Instead, Richer insisted on queuing up with the 2,000 workers downstairs whose lunch break consisted of standing up and drinking soup.
Committed to showing employees that they do something worthwhile, Richer Sounds gives 15 per cent of the company’s annual profits to charity, while its founder has long made it public that he intends to leave the business to its employees in his will. Now he is considering going further and giving staff the business before he retires. ‘I would like to do it in the next five years,’ he says. ‘It is something I am actively considering. I treat my staff well because I want them to be motivated and happy. But if someone who is screwing their staff and not paying them well, then they should be made to pay them a proper minimum living wage and not the one that the state decrees, which I think is too low.
‘You might ask what shareholders will say about all this but I would say they should have a long-term view. They shouldn’t just worry about their dividends twice a year.’ Richer is far too media-savvy to name individual business people of whose actions he disapproves. ‘We can all think of examples,’ he says. ‘I’d better not name any or I’ll get into trouble. Let’s just say that there are some actions in business that just won’t do and if people won’t change voluntarily they need to be made to.
‘I think we need much firmer legislation. Milton Friedman was all about there being no rules and maximum profits. I don’t think you can do that. If you don’t have rules in a football match, the game falls apart after a few seconds. And cars are wonderful things but if we didn’t have rules on the road, it would be a complete mess. Business is like that too, so I do think we need firm rules.’
Some of this sounds pretty radical for a millionaire former donor to the Conservative Party. Richer believes zero-hour contracts are ‘evil’ and should be outlawed unless employees request them. He also wants a higher minimum living wage to be introduced for gig economy workers, who he says should also get company pensions. In addition, he is against companies that ‘punish staff for being sick’.
‘At Amazon, if you have a day off you get a point against you, even if you have a sick note,’ says Richer. ‘If you have six days off, you get six points and lose your job, I don’t think that should be legal.’
He says the benefits of behaving ethically include low absenteeism, employee theft levels and staff turnover
Richer’s customer-first philosophy, meanwhile, is illustrated by his tale about discovering that an employee in one of his shops had tried to up-sell by telling a customer that a certain television on offer was a ‘bad’ product. He immediately despatched a director to apologise and give the customer a free television. Was this a little over the top? No, says Richer, whose only regret is that he didn’t issue the mea culpa personally.
‘One of my directors took it round because she lived in Brighton and I live in Yorkshire,’ he says. ‘We took flowers and gave her a television for nothing. It was the right thing to do.’ Richer has been scathing about executive pay levels at privatised water monopolies telling The Guardian that his ‘lovely but not very bright’ pet chicken Alan could run Thames Water.
He says the benefits of behaving ethically include low absenteeism, employee theft levels and staff turnover. Richer Sounds’ labour churn is 14 per cent, a rate almost unheard of in high-churn retail, while its employee theft rate, more commonly known as shrinkage, is just 0.1 per cent – one-tenth of the typical lower end of the range of most major retailers.
‘That means savings of millions of pounds a year,’ he says. ‘We have 12 free holiday homes for staff and the money we save on shrinkage pays for them many times over.’
Richer insists that these values and policies have been instrumental in his business success during a very challenging period for the retail sector. ‘We’ve had the onslaught of the Internet and loads of competitors have gone bust but we just seem to keep improving,’ he says. ‘I do put a lot of it down the way we do things.’
Born to parents who both worked for Marks & Spencer, Richer was schooled at Clifton College in Bristol, and started his business ventures aged 14. His first shop at London Bridge, opened when he was 19, is still ranked by the Guinness Book of Records as boasting the highest sales per square foot of any retail shop in the world.
Richer is now a business evangelist, having assisted Archie Norman with the turnaround of no-frills grocer Asda in the 1990s and now acting as an ‘independent adviser on culture change’ at Marks & Spencer, where Norman is chairman. He also claims some credit for the Shadow Chancellor John McDonnell’s speech about business and capitalism at The Labour Party conference and points out that Archbishop of Canterbury Justin Welby recently echoed his comments about zero-hour contracts being evil.
‘I am having a conversation with the Labour Party at the moment because they might be forming a government before long,’ he says. ‘They are hard left but I am saying You have got to respect us as long as we are ethical and responsible. John McDonnell actually used those very words in his speech because he can’t alienate the three million businesses in this country just because a few of them are bad.’
As for Richer, emboldened by the success of his business and philanthropic ventures, he doesn’t seem to mind any brickbats that come his way due to his insistence that business can perform better. It is going to take more than him and his business mates to change a system whose excesses and cyclical downturns have become viewed as an acceptable price to pay for wealth generation. Yet, if action to rebalance the corporate scales is indeed required, it needs to start somewhere. A push from a man who has comparative wealth in his surname is not a bad place to begin.