Sports Direct's board under pressure as City investors lose faith

Mike Ashley at Tup Tup Palace

A City investment firm is to vote against the re-election of Sports Direct’s non-executive directors and executive deputy chairman, Mike Ashley, at the retailer’s annual shareholder meeting on Wednesday.

Ashley Hamilton Claxton, corporate governance manager at Royal London Asset Management (RLAM), which owns about £8.3m of Sports Direct shares, said: “We have lost confidence in the board and are very concerned about the long list of corporate governance failings that have not been addressed.”

The investment firm, which manages a total of £83.4bn of assets, particularly singled out the attendance record of Ashley, who founded the company. “We question how a board can effectively function when the executive deputy chairman fails to attend four board meetings, even if they are unscheduled,” Hamilton Claxton said.

While RLAM’s shareholding is small – less than 1% of Sports Direct’s stock – the firm’s strong stance is the first sign that City investors are being swayed by growing criticism of the retailer’s practices.

Sports Direct also faces protests outside the meeting at its headquarters in Shirebrook and at 17 stores around the country by members of Unite dressed as Dickensian workers. The union is demanding an end to “Victorian” labour practices at the Shirebrook warehouse, and want a commitment to pay the living wage, as calculated by independent analysts, of £7.85 per hour.

Luke Primarolo, Unite regional officer, said: “Low paid agency workers on zero-hours contracts are being subjected to working conditions that are more akin to a Dickensian workhouse than a FTSE 100 company’s warehouse.”

The union, which filed a pay claim last month asking Sports Direct to move thousands of zero-hours workers on to permanent contracts, launched an online petition on Monday urging Ashley to improve conditions for workers. The retailer has been widely criticised for employing the vast majority of its workers on zero hours contracts, with no guarantee of regular work.

Campaigners from ShareAction have teamed up with Unite in order to ask Sports Direct’s board questions about poor working practices, excessive use of agency workers and governance concerns.

Catherine Howarth, chief executive of ShareAction, said: “Sports Direct’s pattern of relying upon precarious work is alarming to the public and investment community alike.”

Sports Direct is potentially facing a tricky annual meeting after the Trade Union Share Owners (TUSO) group, a coalition of pension funds for trade unions including the TUC, Unite and Unison, wrote to Sports Direct’s top 20 investors urging them to vote out chairman Keith Hellawell.

PIRC, the shareholder advisory group, is also advising investors to vote against the re-election of Hellawell. It says a lack of communication among members of Sports Direct’s board “puts into question the competency of the board as whole”.

One of the City’s most influential shareholder groups, the Investment Association, has also issued its strongest warning signal – a “red top” alert after shareholders were asked to approve lower profit targets for Sports Direct’s long-term share bonus scheme.

Under the scheme, Sports Direct’s chief executive, Dave Forsey, is in line to be awarded up to 1m shares – worth nearly £8m at Monday’s price – while the finance director, Matt Pearson, is in line for up to 30,000 shares worth £234,000.

New guidance from the Financial Conduct Authority means that for the first time Ashley – who owns a 55% stake in the company – can be challenged by other investors.

The rules, which govern companies that have a controlling shareholder with a stake of 30% or more, mean the election of non-executive directors must be approved separately by minority shareholders. Companies are able to call another meeting at which all votes are counted together if they want to overrule minority shareholder’s views, but the rules make the process much more transparent.

Powered by article was written by Sarah Butler, for on Monday 7th September 2015 18.48 Europe/ © Guardian News and Media Limited 2010


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