Ted Baker reveals details of hugging probe

Ted Baker store Image copyright Reuters

Ted Baker's investigation into complaints about the conduct of its founder will be led by one of two recently appointed external directors.

Details of the probe, to be overseen by Sharon Baylay, will be announced on Thursday alongside a trading update, chairman David Bernstein told the BBC.

Male and female employees have come forward to sign a petition complaining about Ray Kelvin's behaviour.

He has allegedly hugged workers and kissed their necks and ears.

Mr Bernstein said the investigation would be "professional, impartial and move at pace".

Ms Baylay, who became a director in June, is a former Microsoft UK digital and marketing executive and has also been director of marketing, communications and audiences at the BBC.

Top investors in Ted Baker fear the alleged conduct of Mr Kelvin, who is also chief executive, could cause the firm serious long-term financial damage as well as raising cultural issues.

Shares in the company have fallen by a quarter since the allegations emerged over the weekend.

One leading shareholder in Ted Baker told the BBC the uncertainty was "a material problem".

"Ray Kelvin owns 35% of the shares in the company, you have a pretty weak board and he is the driving creative force at the company," said the investor.

Sacking him would mean losing "the man who built the company into the success it is - and you have a potentially big seller of the shares, which will impact the share price"

Whatever the outcome of the investigation, Ted Baker is another example of the problems shareholders have when investing in a public company that is the creation of an individual with the unchallenged influence and power that brings.

Risks

Shares in fashion label Superdry more than halved when its founder, creative force and major shareholder Julian Dunkerton left the company and began to sell down his holding.

Advertising giant WPP shares were already on the way down when founder Sir Martin Sorrell left but continued to fall another 20% after his controversial exit. He has already outbid his old company on one major acquisition.

There are other examples - it's pretty hard to imagine Sports Direct without its hard-charging, hard drinking (self-confessed) founder Mike Ashley at the helm.

When you buy into companies like these, you are buying into an individual rather than a firm with an institutional identity distinct from its founder.

That comes with additional financial risks as Ted Baker shareholders are already finding out.

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