Governance Watch - Issue 45

by Dina Medland in London


It has been only a week since first media reports on the goings-on at Patisserie Valerie, which said it had discovered "significant, and potentially fraudulent, accounting irregularities" and a £1 million unpaid tax bill. We were told: "The board has now reached the conclusion that there is a material shortfall between the reported financial status and the current financial status of the business." It thrust Chairman Luke Johnson, CEO Paul May, Finance Director Chris Marsh and auditors Grant Thornton into the spotlight.

Roll on the calls for reform of the accounting profession and of audit as an indicator of corporate health. 

Next, Finance Director Chris Marsh was arrested and released on bail. Serial entrepreneur Luke Johnson “described the cake chain’s near-collapse as a nightmare, as he said the company had run up nearly £10m in secret overdrafts.” The directors say they were completely unaware of these overdrafts. Alongside the Chairman, the CEO, and the Finance Director, there are two other men on the Patisserie Valerie board

Mr Johnson then agreed to give £20m of his own money to keep the business afloat. “There were 2,800 jobs at stake, there was 12 years of effort that I and colleagues had put into the business and the board were determined not to allow the business to go into administration,” he told the Sunday Times. 

Every day has brought a new revelation. By Monday, Patisserie Valerie CEO Paul May had stepped down as a non-executive at the Restaurant Group, one of Britain’s biggest dining groups. 

What next?  Shares in Patisserie Valerie Holdings remain suspended until it can give more details of its accounting issues, but it has forecast earnings before interest, tax, depreciation and amortisation for the year to September 2019 of around £12m, rather than the £31m that analysts had been expecting. 

Crystal Amber, an investment fund, said over the weekend that it had made a rescue proposal for Patisserie Valerie which was not considered by the board, reported the Financial Times. 

Patisserie Valerie has called for an emergency shareholder meeting on November 1st to approve an emergency share issue. “In a circular convening the meeting, Patisserie Valerie warned that failure to agree the share issue would be likely to result in the company entering administration” reports the FT. 

This is a story to keep watching closely. But the only individual in the bright spotlight around Patisserie Valerie so far to lose their job has been the female CEO of Grant Thornton UK, its auditors.

Women and Leadership 

Sacha Romanovitch, the first female boss of a major City accountancy firm, is to leave by the end of the year, it was reported on Tuesday. She has become well known both for championing purpose as well as profit, for advocating audit reform, and for challenging the status quo.

Simple minds on social media have connected her departure from Grant Thornton with its audits, jumping immediately to the ongoing Patisserie Valerie affair. It is worth noting some of the intelligent media coverage, by contrast.

An opinion piece in the FT headlined Grant Thornton’s Sacha is out, but it’s not down to Valerie runs with the sub-heading “The firm, and industry, has lost a much-needed advocate of audit reform.” And here is the FT editorial on her departure.

Ms Romanovitch’s departure should make us think about women and leadership, and whether we are getting anywhere on the two coming together. I wrote this piece on Forbes in 2016 – and it must have resonated, as it has had more than 65,000 views. A year later, I wrote another quoting Ms Romanovitch as saying: “established notions of leadership are letting women down.” We need fewer heroes in leadership, she suggested. But do the men at the top see it that way? 

Amended 18 October due to technical error.

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