Rishi Sunak made history in March when he unveiled the Government’s furlough scheme, underwriting 80% of a worker’s salary up to a total of £2,500 a month, courtesy of the taxpayer. By the end of May, the bill already stood at £22 billion. After the Chancellor agreed to extend the scheme to October, the Institute for Fiscal Studies predicted the total cost would balloon to over £80 billion. Although this figure was later revised downwards by the Office of Budget Responsibility to a more ‘modest’ £60 billion, these are no small sums.
As the UK begins to emerge from lockdown, it now becomes clear that a number of companies, which happily took advantage of the furlough scheme at the start of the pandemic, are beginning to have second thoughts. IKEA recently announced it plans to repay furlough payments to nine governments worldwide, including the US and Ireland. FTSE 100 distribution company Bunzl plc, buoyed by increased revenues from deals with supermarkets and provision of protective clothing to hospital staff during the pandemic, also announced it would do the same.
Are we seeing a genuine and welcome sense of corporate conscience emerging or, alternatively, could it be that these are companies trying to preempt a potential future public backlash? Put more simply, are some of these companies potentially trying to minimise their future risk of reputational grief when their boards decide to go back to paying shareholders dividends and executives bonuses?
We all remember, of course, the intense media and public pressure for companies to suspend dividend payouts and temporarily to reduce pay for senior management, at the start of the pandemic. The Financial Times reported on 8 May that, since the start of the outbreak, FTSE 100 firms had withheld nearly £24 billion of dividend payments for the period 2019-2021, according to stockbroker AJ Bell. Indeed, Bunzl itself cancelled its dividend for the first time in 27 years. These are eye-watering numbers.
Some of us will also remember the ‘naming and shaming’ of companies who courageously pressed on with making dividend payments after the lockdown, with EasyJet founder Sir Stelios Haji-Ioannou memorably blasting the “malicious” and “naïve” people who criticised dividend pay-outs to companies’ shareholders.
It could be that we are beginning to witness an interesting new pattern of corporate behaviour emerge in relation to the reimbursement of furlough payments. Similar to the banking bail-out in 2008-2009, the image of powerful corporates taking advantage of the taxpayers’ help still rankles with some members of the public. Take, for example, British Airways, which has already faced a very public mauling over accusations it used the furlough scheme to support the payroll costs of employees whom it later earmarked for redundancy.
As we emerge from lockdown, the boards of publicly quoted companies will want, even more strenuously than pre-Covid, to satisfy themselves that, should their management teams elect to repay furlough payments, returning taxpayers’ money is done for the right reasons and not as a way to ‘virtue-signal’ to markets or curry favour with their consumers and customers. Some may feel a more than modest degree of scepticism about the kinds of gestures made by Bunzl and IKEA.
Today there was media comment about the fact that bosses at several prominent FTSE companies are now back on full pay, shortly after (very temporarily) cutting their pay at the start of the pandemic. Is this more evidence of the same?