Ted Baker founder Ray Kelvin’s resignation was perhaps inevitable given the nature of the allegations surrounding him, but the thought of Ted without Ray is a strange one.

Kelvin stepped down from his role earlier this week following allegations of misconduct such as ‘forced hugging’, which he has repeatedly and vehemently denied.

He has been replaced at the helm by former chief financial officer Lindsay Page, who will continue as acting chief executive, while chair of six years David Bernstein will take a more hands-on role after adding ‘executive’ to his title.

But Kelvin’s departure raises a big question – how will the business fare without him?

Ted’s disciple

The world of a business founder is, understandably, often dominated by the business they have nurtured – their ‘baby’, so to speak.

There are few founders quite so entwined with their business as Kelvin. While he always insisted that he and the eponymous Ted were worlds apart, Ted Baker was his creation, muse and guardian, all wrapped into one.

“He is iconic, I am a disciple,” Kelvin told Retail Week last summer.

Kelvin – who billed himself as “the closest man to Ted Baker” – first conceived the idea of a brand centred around a character when fishing one day. He dreamt up a “dapper gent”, a character he could imbue with certain qualities.

“He had that passion, energy and entrepreneurial spirit. But those passionate cultures can become like fiefdoms”

Rita Clifton, BrandCap

Ted and Kelvin may have shared similarities and differences, but it was Kelvin’s qualities that brought Ted Baker to life.

“Ray is like a lot of people who start businesses,” says BrandCap chair Rita Clifton. “He had that passion, energy and entrepreneurial spirit. But those passionate cultures can become like fiefdoms, where it is difficult to see the beginning and the end of a person and corporate culture.”

“A company can become a victim of its own success,” asserts leadership consultancy YSC’s head of Europe, Sam Gilpin.

“For some leaders, it can be relatively easy to lose touch with the business reality of their behaviour and how this reflects on the company as a whole,” he adds. “This is especially true of founders, who often resist the oversight brought by good governance and strong professionalised functions.”

Corporate governance

Even prior to Kelvin’s resignation, Ted Baker had taken steps to shore up its procedures. When Kelvin took a leave of absence in December, an internal independent committee drafted in law firm Herbert Smith Freehills to investigate the allegations against him, as well as the retailer’s policies, procedures and handling of HR-related complaints.

That investigation is expected to conclude at the end of the first quarter, or early in the second quarter of 2019.

Ted Baker has emphasised that it wants to “ensure that, while the many positive and unique aspects of Ted’s culture are maintained, appropriate changes are made”. To that end, it has enlisted Sharon Baylay as its designated non-executive director for engagement.

But some industry observers question the validity of this plan.

Ted’s culture was so tied up with Kelvin that those responsible for corporate governance never properly interrogated its best parts

As noted by The Guardian’s financial editor, Nils Pratley, “there is something ridiculous about Bernstein declaring now that the board is ‘determined to learn lessons from what has happened’. He has been on that board since 2003, and has chaired it for the past six years, which ought to have been enough time to get a feel of the culture.”

Ted’s culture was so tied up with Kelvin that those responsible for corporate governance never properly interrogated its best parts – and so missed the opportunity to grow it beyond him.

This proved to be a particularly serious mistake in Ted Baker’s case, as Kelvin’s departure leaves such a gaping hole in life at the business.

“Now, very strong founder-led organisations are codifying their culture so that everyone owns it and it’s not just shaped by an individual,” says culture consultancy Dragonfish managing director Niall Cluley. “We are seeing start-ups doing that intentionally and early on in a business’ life.”

Of course, codifying a culture needs perspective.

“When you stop being curious and connected to the outside world and you start believing your own publicity, it can be dangerous,” says Clifton. “That drive and the imagination need to get passed into the business to a set of successors who want to take it on without the unacceptable behaviour.”

Business performance

Ted Baker will report its full-year results on March 21, having issued a profit warning at the end of last month, which it attributed to foreign exchange headwinds, additional product costs and a write-down in the value of its stock. 

Pre-tax profits for the year to January 26 are now expected to come in at around £63m. Analysts’ consensus had previously been £74m.

Despite the profit warning, Ted Baker’s top line has remained fairly robust, having performed well over Christmas – total sales climbed 12.2% in the five weeks to January 5 – with no apparent impact from the allegations surrounding Kelvin.

“Ted clearly needs to draw a line under Ray’s behaviour and move forward”

Jefferies

As a result, some in the City are confident about the business’ future prospects without Kelvin at the helm.

“Ted clearly needs to draw a line under Ray’s behaviour and move forward,” says broker Jefferies. “We believe Lindsay Page and the team can ably lead Ted (as they have done in the past) but anticipate that the board will undertake a thorough review and search for potential new management to lead Ted in its next stage of growth.”

Ultimately, Kelvin believed Ted was more than a differentiating marketing aid and instead helped him to make decisions. “He lives here, he is part of us. He is an extension of what we do and how we think. I really do feel he exists,” he said last summer.

The question for Ted Baker, then, is whether Kelvin managed to bring Ted to life sufficiently for somebody else to become the person closest to him.