Mike Ashley is not Father Christmas, nor an accountant, nor an employment specialist. On these points the founder and majority shareholder of Sports Direct was adamant during the advertised “grilling” by MPs that turned out to be a light toasting.
In other regards, Ashley was vagueness itself. The way he tells it, he’s just a put-upon retailer struggling to cope with this new-fangled invention called the internet that irritatingly allows punters to order a single pair of socks. Multipack dispatches to shops were in his mind when the Shirebrook centre was designed, thus he couldn’t possibly be expected to know everything that happens in the warehouse.
He’s as appalled as anyone to discover that workers have been docked pay for clocking on a minute late, and have been underpaid. He’d hate his children to suffer the same “unacceptable” experience, as he put it. He’ll do what he can to the fix the problems but, hey, “my best might not be good enough” and the business “probably” outgrew his talent for control “a long time ago”.
As a way to disarm MPs, pleading ignorance and fallibility was a successful tactic. By the end, they seemed to think they’d won important concessions and were falling over themselves to thank their witness for being generous with his time. If they replay the tape, the MPs should be embarrassed: they will discover Ashley committed himself to virtually nothing.
The company, now under investigation by HMRC, is in talks to pay compensation to some workers who received less than the minimum wage when they were held back to be searched by security staff. But such payments will cover no more than a couple of hundred directly employed staff. Will Sports Direct cough up to the thousands of agency workers? None of the MPs asked.
Nor did Ashley budge from his apparent addiction to temporary contracts, despite his long-winded musing about how it would be nice if more staff could be made permanent. This was despite the impressive testimony from the Unite union that the over-use of temporary contracts, administered by outside agencies, lies at the heart of a growing culture of employment insecurity in the UK. Ashley seemed to think the union is engaged in a wild plot to embarrass him in a “media circus”. In practice, Unite demonstrated that it knows more about what goes on inside Sports Direct than Ashley.
In most FTSE 350 companies, a boss could expect to be fired for displaying a similar lack of knowledge about the company he runs, or confessing that it’s “too big” to monitor properly. That’s plainly not going to happen at Sports Direct. Ashley owns 55% of the shares and has shown no interest in reforming boardroom governance.
Until the latter happens, one suspects real reform of working practices at Sports Direct – as opposed to the simple taks of clearing bottlenecks at security points – will dissolve in Ashley’s self-serving plea that perfection is impossible. After the dramatic buildup to the session, the MPs flunked their big moment.
No business like slow business
RIT Capital Partners’ dalliance with the idea of merging with Alliance Trust, and thereby creating a giant £5bn investment trust in the UK, is over almost before it began. Brief talks have been abandoned, with Lord Rothschild’s crew saying merely that “it would not be in the best interests of its shareholders to make an offer for Alliance Trust”.
That’s less than illuminating but it’s not hard to guess the relevant details. The two trusts have very different approaches on investment and fees. A watertight financial structure would be tricky to compose since Alliance Trust investors would surely not wish to accept a discount to asset value. Any potential cost savings might leak away in the inevitable organisational reshuffle. Thus Alliance Trust’s long-term investors shouldn’t waste too much energy fretting about a lost opportunity.
Elliott Advisors, the American activist investor with a 16% shareholding, might be more concerned, however. The easy part, given Alliance Trust’s unspectacular performance over many years, was shaking up the boardroom last year. It will be rather harder to find an escape route, which is widely assumed to be Elliott’s aim. That’s the thing about investment trusts: the action tends to happen very slowly. Elliott may have to settle in for the long-haul.
Selling up, are you esure?
Here’s another potential deal when the logic looks less than robust: insurer esure is contemplating demerging Gocompare.com, its price comparison website.
It is only a year since esure took its ownership from 50% to 100%. That hardly seems sufficient time to learn whether the attempted reinvigoration of the business – by giving the opera singer in the ads another run-out – will work. An outright sale, assuming the price was high, would allow esure to show a nice turn on last year’s £95m buy-in of the stake. But a demerger would merely add head office overheads. Why bother?
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