Sports Direct tycoon Mike Ashley has bowed to pressure from the City and withdrawn his controversial participation in the firm's bonus scheme, despite winning approval from shareholders.
Sports Direct shareholders voted earlier this month for a bonus plan that will give £200m worth of shares to 3,000 permanent staff, including Ashley, if earnings double by 2019. It was Sports Direct's fourth attempt to push through a big payout for its billionaire founder, who owns 58% of the company and is deputy chairman.
Although shareholders voted the scheme through, it ran into trouble almost immediately when leading investors who had opposed the deal began plotting a revolt at the firm's annual general meeting in September. Disgruntled investors were planning to vote against the re-election of chairman Keith Hellawell and other board members in co-ordinated measures through the Association of British Insurers' (ABI) investment committee and the National Association of Pension Funds (NAPF).
Sports Direct announced on Wednesday that Ashley had decided to withdraw from the bonus scheme.
"Mike Ashley, executive deputy chairman of Sports Direct, after discussion with the remuneration committee, has informed the board that he does not wish to be awarded any shares under the 2015 Bonus Share Scheme."
Ashley, who does not take a salary from the group, has also indicated he is not looking for any other bonus plan to be put before shareholders while the current scheme is in place, effectively drawing a line under his bid for a massive payout.
The U-turn took the City by surprise. Retail analyst Nick Bubb said: "Maybe Mike realised that he would end up getting too much of the share scheme and would thus squeeze out the staff, which would be counter-productive ....
"Plenty of people thought Mike Ashley shouldn't need any more motivation, given his huge shareholding in the company, so presumably that is what will keep him going from now on ... For example, a 10p dividend would generate him income of well over £30m, which would keep the wolf from the door."
The move was welcomed by the Institute of Directors. Roger Barker, director of corporate governance, said: "Mike Ashley is to be congratulated for recognising the governance concerns associated with this pay plan. As a director, senior executive and major shareholder of Sports Direct, he occupies a position of unique influence in the organisation. By taking this step, he is helping improve external perceptions of Sports Direct's governance, which will ultimately be beneficial to all stakeholders."
Ashley's decision to withdraw means Sports Direct's 3,000 full-time employees will be entitled to a bigger share of the windfall from the 25m shares. However, the vast majority of Sports Direct workers, mostly employed on zero-hours contracts, will get nothing. Around 90% of the company's 23,000 employees are employed on the controversial contracts, meaning they work unpredictable hours, with no sick pay, holiday pay, or entitlement to a bonus.
Hellawell indicated that Ashley's inclusion in the company's regular bonus scheme may have caused unhappiness among staff. "Following recent unhelpful speculation surrounding his potential allocation, [Ashley] is determined to ensure that there is the maximum number of shares available for the eligible employees."
The firm declined further comment.
While Sports Direct has been performing robustly, the bonus saga has left some investors with awkward questions about Sports Direct's leadership.
A top 20 shareholder who had intended to vote against the re-election of Hellawell told the Guardian earlier this month: "The overriding impression created by this episode is of an incredibly weak board."
Sports Direct, which has more than 600 stores in Europe, including 400 in the UK, has just announced plans to launch in Australia and New Zealand, and is expected to unveil another strong set of sales figures on Thursday.
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