Local pain, global protest for Burberry. Endgame?

February 15, 2007

Burberry announces the closure of a factory manufacturing its polo shirts. The story has familiar features to it. The factory is the main source of jobs in the former mining village of Treorchi, in South Wales. After a local campaign which attracted celebrity support, the factory closes. (Updated posting)

treorchy_station2.jpg

Today a local community completed the first stage of its grieving over the loss of the Burberry manufacturing site. The march by the workers from the gates of the factory was accompanied by many from the community and the internationally celebrated choir associated with the village. The action was in the first instance for those directly affected, and caught out the media circus that had pitched up to witness the event.

Not for the first time, I remember the words of Dylan Thomas

Do not gentle into that good night..

Good men, the last wave by, crying how bright
Their frail deeds might have danced in a green bay,
Rage, rage against the dying of the light

The Original post

The closure comes as a shock to the community. The high-profile company had been recording successful financial returns, and had been expanding internationally. A well-organized campaign seeks to reverse the company’s closure decision.

Burburry has been around for a century and a half, during which time its products have become associated with a special aspect of British cultural life, the Establishment as fashion- setters. Its high profile brand image and its luxury clothes and accessories can be found wherever celebrities and gentry gather together. Even its recent embrace by members of that recently identified sociological group the chavs seems somehow an inevitable if unhelpful endorsement of its essential Britishness.

Over the last few months, a high-publicity story has developed after the company announcing its intentions of closing its factory manufacturing polo shirts, in South Wales, with the intention to shift manufacturing to China. The reaction against the decision quickly grew, and gained support from a range of celebrity figures (with rumours that a certain member of he Royal Family with Welsh connections was far from pleased with the decision).

To assess the developing story, a little history will not go amiss. Burberry was founded in 1856 by the young Thomas Burberry, an ambitious Draper’s assistant. By the 1870s the firm had specialized in clothing for outdoor pursuits catering to the well-off to such good effect that its wares became increasingly fashionable. Thomas strengthened his reputation through his invention and patenting of gabardine with its unique characteristics of water resistance and yet moisture permeability. By the turn of the century Burberry was providing extreme climate gear for intrepid Arctic and Antarctic explorers. In the First World War, the thriving firm supplied British Officers with trench coats, an item that has been reinvented as a fashion item ever since. The famous Nova plaid pattern arrived in the 1930s, emerging from its discrete location as a lining for those elegant military trench coats.

In 1955, the firm was acquired by Great Universal Stores, the conglomerate that had developed from the Manchester based mail-order business of Abraham and George Rose founded in 1900, and transformed since the 1930s, by Isaac Wolfson into one of the great British institutions and the source of wealth of the Wolfson foundation.

For several decades Burberry retained its increasingly plaid and staid image until the late 1990s with the arrival of a dynamic American fashion expert. Rose Marie Bravo had been a well-regarded President of the Saks Fifth Avenue fashion outfit, having worked her way up the firm. She brought additional wide fashion experience to Burberry, and and succeeded in transforming the brand using top models such as Kate Moss, and Footballer David Beckham. In should be added that fashion insiders considered that another important factor was the contributions from the top fashion designer Christopher Bailey whom she head hunted from Gucci in 2001. http://www.bockinfo.com/041116postcard.htm Share value was to increase eight fold in five years.

[A leadership note: Aside from the main story, the changes at Burberry offer plenty for the student of leadership. Attempts to explain the changes as coming from a superleader seem less convincing than approaches involving a complex mix of leadership roles, i.e. distributed leadership]

Corporate Governance at Burberry

In 2003, one of the earliest of shareholder protests in the UK was led by The National Association of Pension Funds (a pressure group) against the financial package agreed by Burberry with its American CEO. The arrangement would have paid her in excess of £13 million on dismissal. The NAPF made it clear that they had no concerns about Bravo’s remuneration, and her high worth to the company. Their concern was the lack of performance incentives in the overall package. RMB was clearly an extremely valued asset to the company. In retaining their prize asset, Chairman John Peace said at the time that the group was aware that some aspects of its executive pay policy “might be construed not as best practice from a UK perspective”.

The Difference for Treorchi

By that time, there had been repeated stories that GUS (as it had renamed itself) was preparing Burberry for its sale. And so the spin-off from GUS took place, in late 2005, followed by the decision to close the Treorchi factory.

The economic argument was made that the Polo shirts produced in Wales were costing nearly three times as much as they would if manufactured in China. This has been a familiar story as countless manufacturing jobs have been lost to the Far East over the last decades. Why should this be different?

Several factors are deployed by the vigorous campaign against the decision, which attracted widespread celebrity support and which spread internationally. First, the firm continued to report growing profits, and the Factory in Wales could not be shown to be making a loss for the group. That alone has not protected units from dismemberment within a company under pressures to achieve ‘the numbers’. Here, however, the Company brand rests on its unique heritage, the quality of its goods, and their Britishness. Will this brand image survive a campaign pointing to the willingness of the Company to source overseas? M&S grasped that nettle some years ago, and the decision may or may not have contributed to its subsequent bumpy financial ride.

Corporate social responsibility

Another factor may also come into play. In reading the current report from Burberry I was struck by the Corporate effort to address matters of Corporate responsibility. It has strengthened its executive efforts in this area. The Keep Burberry British campaign on its home webpage simply let the Burberry statement on Corporate Responsibility speak for itself.

‘ For Burberry, corporate social responsibility (“CSR”) involves considering those social, environmental and ethical issues that if managed improperly could pose a threat to the Group’s assets, reputation and the Burberry brand.. Michael Mahony, the Company Secretary, is responsible for CSR matters and chairs the CSR committee which meets regularly ..[The company is dedicated to] maintaining acceptable labour, environmental and social practices in the Group’s supply chain, and to providing a working environment that is conducive to the recruitment and retention of the widest possible range of talented staff, and which is a safe and healthy place to work …New members of the CSR committee in 2005 include a dedicated CSR Manager, focused on ethical supply chain issues, the Director of Audit and Risk Assurance and a Quality Assurance and Supply Operations Manager. The Group continues to draw support from a team of external CSR advisers’.

A critical theory perspective

Reading the company report I had been struck by the corporate claims of social responsibility. Many social scientists are turning to critical theory to explain such behaviour. Writers such as David Collins and David Boje would have a field day starting from an examination of the Burberry CSR statement. It struck me as one that will require a great deal of explaining by the Corporate PR agents (and its leaders). Increasing it is a web-based issue of campaigning interest, and one that is coming more and more to public attention.


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