Pentland: good sports

Since regaining full control of family-owned Pentland Group, CEO Stephen Rubin has overseen a growing but socially responsible business that is looking forward to the Olympics more than most. Marc Smith reports…

Family-owned Pentland Group was named a joint winner of the JPMorgan Private Bank and Institute for Family Business UK Family Business Honours Programme in May. The annual award judged the company to be outstanding in the key categories of business success and social responsibility. In particular, the independent evaluation committee applauded Pentland for its demonstrable commitment towards its employees and the community at large.

"We are all very flattered, humbled and proud to win the award," second-generation executive chairman Stephen Rubin exclusively tells Families in Business. "It's nice to know that people recognise what we are trying to do."

Pentland is a consumer brand management business that includes the design, sourcing, marketing and distribution of names such as Lacoste shoes, Speedo swimwear and sports and fashion retailer JD sports.

The business began back in 1932 as the Liverpool Shoe Company, selling shoes to a range of retailers. But the shift towards brand ownership began in 1981 when Rubin bought sports brand Reebok and the business began to operate on a much larger scale. When Rubin sold his remaining 30% stake in Reebok for $770 million in 1991 it was called one of the greatest ever investments by a British company.

Public versus private ownership
The company is first and foremost a family business, as evidenced by the family's decision to take the company back into private family ownership in 1999. Asked what the driving motivation behind this decision was, Rubin is clear. "We were trading at a discount to our assets and to the value of our brands. Consequently no-one was getting the benefit," he explains. "We began buying in company shares because we felt it was a profitable thing to reduce the capital."

When the family had bought up approximately 70%, they were forced to make a decision: carry on buying up shares and get de-listed from the stock exchange or buy out the minority investors on what Rubin calls "an honourable basis". He formed an independent committee, a deal was struck and the family got the green light from 99% of the minority investors in a vote. "Although with hindsight we overpaid at the time, we have more than made it up since then. I think that the fact that we kept our name and that everybody was happy was much more important to us," says Rubin.

Such a way of thinking is one that many other families can empathise with and Rubin is keen to highlight the freedom and long-term outlook that the private sector brings to both the family and the business. In particular, he is glad not to have to deal with "the sniping from analysts" and those only interested in making a quick buck. He recalls the story of an institutional investor he went to see in the US who had bought $2 million worth of shares. "By the time the plane touched back down in the UK a few days later they had sold them for a nice profit," says Rubin, who clearly believes this is not the right way for an investor to behave.

Pentland has a reputation for being management friendly according to Rubin, and the family has never done a deal "where we have been hostile to management." In fact, the family's reputation is such that, like Warren Buffett, they are actually invited to get involved with potential acquisitions. Returning to private ownership has, therefore, been a delight. "We really feel that it's the way we want to go from now on," he says.

The family hasn't rejected the public company ethos completely, however. Rubin admits that they have kept reporting and other standards close to those of a public company – a case of merging the best of both worlds.

Punching above their socially responsible weight
Pentland is one of the numerous clothing and footwear businesses that have had to deal with the spectre of poor labour practices at manufacturers in emerging economies – family-owned GAP, for example, has been in the headlines over the past few years for complaints over child labour at its factories.

Rubin says the family is acutely aware that a lot of the products it sources and sells are labour intensive and that, especially during the current climate when rising raw material costs are squeezing such manufacturers, it is determined to make a difference to the misery in some countries. Although Rubin believes they cannot make a huge difference to any country's economy, he says the company "puts its head above the parapet and makes more of a noise that it should given our size."

To ensure everybody – employees, stakeholders, clients and customers – is aware of and sticks to the ethical standards the company has set itself, Pentland has published a set of policies covering business conduct, employment standards (for the group and for suppliers), environmental policy and ethical sourcing.

The ethical sourcing policy states that Pentland will only do business with suppliers "that adopt and implement our standards or have their own policies that reflect the same values." While acknowledging that there are "some difficult issues within our supply chain", Pentland takes a very proactive approach to understanding why they come about; it meets with local organisations and institutions to establish the local standards and level of implementation before they do any actual work with a supplier. There are several principles that the company has developed which underlie this approach. These include:

- Developing a strong business relationship with suppliers to ensure constructive dialogue over the long term.
- Basing such relationships on trust and respect.
- Engaging with local institutions to monitor standards.
- Establishing worker representation committees.
- A policy of disengagement with a supplier if there is poor management attitude and disregard for workers' welfare.
- Implementing this strategy across a sector or region as poor practice rarely occurs in isolation.

Rubin is critical of other larger corporations who fail to make the difference their clout provides and points the finger at chairmen "who have just a few years to go until they pick up their pensions and don't want to get involved in causes that at best won't really reflect on them and at worst could cost them their job."

The company's critical stance means it is there to be shot at if things go wrong, but Rubin says that this is what makes it stronger. It is actively engaged in a number of organisations that help with corporate social responsibility: Pentland is a UN Global Compact member and a "Caring for Climate" signatory.  It is the main sponsor of the UN Environment Programme's Global Forum for Sport and the Environment and a member of the Clinton Global Initiative.

The family brand
The family influence extends to Rubin's wife, Angela, and two daughters who sit on the board. His son, Andy, is CEO of the main subsidiary, his other son, Paul, is with an exciting new company venture and his son-in-law, Barry, works on the company's venture side.

bin says, as executive chairman himself, he is sensible enough to know that he is too old to deal with products that are mainly sold to young people. "I don't want to be involved in the day-to-day bureaucracy any more – I've been there, seen it, done it," he explains.

There are no formalised governance structures in place as Rubin says there has been no need for them because the family has not been big enough to warrant them. Nevertheless, he reveals that they are currently working on appropriate structures for the future with external advisors.

Of more immediate interest is Andy's role heading up the operational side of the business. "He is much more structured, more digital than I am and he has very good presentational skills," says Rubin of his son's qualities. He sees Andy as being part of "the case study generation" – the more theoretical learning approach that has seen Andy through Trinity College Cambridge and Harvard Business School.

Although other fathers are critical of this approach, preferring to see the next generation get their hands dirty at the earliest opportunity, Rubin does not see this as being a problem. "This case study method can give you the experience at a very much younger age. Everything can be overrated and everybody can be too organised of course, but I do think there are advantages to it."

Rubin describes himself as having experience from "the university of life", and says he and Andy have very different strengths. "I would not be as methodical in my approaches as he is.  The main thing my father taught me was never to worry about the profit that you will make," he says. "Worry instead about the risk factor – what you will lose if you are wrong – and if you can't afford to lose that money then don't do the deal no matter how much you think you could make."

Although it is Andy who is involved operationally day to day, Rubin is happy to act as a host when required during important conferences or meetings. But he is determined not be "a nuisance" and feels he shouldn't be around the office while his son is running the show as he thinks this will undermine the new man in charge.

Consequently, Rubin opened a family office 10 years ago where he concentrates on matters that are personal to him – notably human rights. His association with such a noble cause began when he co-founded the Reebok Human Rights Award and the Ethical Trading Initiative. Then, as president of the World Federation of the Sporting Goods Industry, he called a conference on human rights in Switzerland in 1995, which resulted in the elimination of child labour in the soccer ball industry in Sialkot, Pakistan.  
He says he devotes roughly 50% of his time to non-profit work, which includes a dizzying array of affiliations: the International Business Leaders' Forum, Arts and Business, The Prince's Trust, and The Prince's Foundation for Children & the Arts.  He is a Trustee of Crimestoppers, chairman of the Parliamentary Committee Against Antisemitism, president of the Holocaust Educational Trust and has served as vice chairman of the Council of Christians and Jews and as world
president of The Textile Institute.

His current focus is on what he calls "probably the two most important things in the world today": sport and religion. He speaks passionately about harnessing sport for peace by getting everybody to acknowledge that it doesn't matter what religion you believe in as long as the ultimate aims are good. "Let's all work together and stop man's inhumanity to man," he proclaims.

This is, naturally, a pertinent topic in an Olympic year when the games are being held in a country that has come in for some heavy criticism for its human rights record. To give the subject added spice, Rubin is on the British Olympic Association's Appeal Committee for Beijing.

Unlike many politicians, however, he doesn't dodge the issue. "The Olympic Games have engendered massive improvements in the way China has hauled itself into the Western philosophy of what we think about human rights," he says. "Of course things are not at the level that everybody is saying we would like them to be and of course there are problems, but compared with what they were they are much improved."

He takes issue with "do gooders" who think the situation can be changed overnight as the philosophies of the West and East are so very different. He cites a meeting he had as part of the WFSGI/IOC delegation to China. "A Chineseman said to me that there is no doubt his country will eventually accept western values and will come onto the world stage, but they need to indoctrinate generations of Chinese to understand that what they have always been taught is not the case in the rest of the world."

Rubin believes the West must make allowances for the Chinese as this journey towards democracy is a marathon not a sprint. While not everyone on the world stage agrees with this sentiment, it is worth noting that, just like a family business, creating a lasting legacy takes time, communication and a belief you can make a positive difference.