Sports Direct chair Keith Hellawell faces renewed pressure to resign

Sports Direct’s embattled chairman, Keith Hellawell, has come under renewed pressure to step down as a series of City investment groups said shareholders should oppose his re-election to the retailer’s board this week.

The poll comes after the former chief constable lost a vote of independent shareholders in September. He faces a second ballot on Thursday to continue in his post.

Paul Lee, the head of corporate governance at the Sports Direct shareholder Aberdeen Asset Management, said: “Though we welcome the positive progress the company has made over the last three months we remain deeply concerned about its governance. We are therefore again opposing the election of Mr Hellawell.”

The second vote has been triggered under new rules whereby independent shareholders are ostensibly given an increased say in the running of companies in which there is a dominant shareholder.

Sports Direct’s founder, Mike Ashley, owns 55% of the company, but was not allowed to vote on Hellawell’s role in the first ballot at the group’s annual meeting in September, when 53% of the votes cast by investors excluding Ashley opposed the chairman’s re-election.

That result forced a second poll in which Ashley can vote. Dissenters may repeat their protest on Thursday, but company watchers believe Hellawell is likely to prevail because of the billionaire founder’s support.

Apart from Aberdeen, investors including Legal & General, Standard Life, Royal London and Hermes opposed Hellawell last time.

Shareholder advisory bodies, which assist shareholders in deciding how to vote, also weighed into the debate.

One of them, Pirc, told its clients: “It is important for the shareholders to be confident about the board’s ability to represent their best interests and not those of the controlling shareholder. This is no longer the case with the existing chairman and an oppose vote is therefore recommended.”

Institutional Shareholder Services said Hellawell had overseen a “catalogue of governance and operational failures” and also advised shareholders to vote against his re-election.

Rival Glass Lewis, which supported Hellawell last year but voted against Ashley’s reappointment, said: “While we acknowledge that many shareholders may choose not to support Hellawell’s re-election ... we are cognisant of the need for continuity in the leadership of the board, particularly in this period of flux.”

The crisis at Sports Direct was triggered by a Guardian investigation in 2015, which revealed that workers at its giant Derbyshire warehouse were paid less than the national minimum wage.

The scandal prompted a parliamentary inquiry last year, in which MPs likened the depot to a Victorian workhouse, reigniting long-held concerns about the level of control Ashley enjoys at the company.

The newspaper reports also encouraged some investors to react after years of backing the board, including 76% of independent shareholders voting for Hellawell’s reappointment at the 2015 annual meeting.

Aberdeen, which owns just 0.3% of the Sports Direct, said it viewed the company as having made progress by implementing an independent review into working practices and appointing the investment banker David Brayshaw as a new non-executive director.

It also sees the departures of chief executive Dave Forsey and acting chief financial officer Matt Pearson as positive moves.

Before the September vote, Hellawell attempted to appease disgruntled shareholders by saying he had offered to go, only for the board to refuse to accept his resignation. He said that if shareholders voted against him at the group’s 2017 annual general meeting, he would step down.

Despite that offer seeming to acknowledge that he and the board accepted responsibility for the group’s situation, last month Hellawell criticised MPs, trade unions and the media for waging a campaign against the business as it reported a 57% drop in first-half profits.

The results represented the latest disappointing financial statement after the company’s share price halved during 2016. The group was relegated from the FTSE 100 in March.

Powered by Guardian.co.ukThis article was written by Simon Goodley, for The Guardian on Tuesday 3rd January 2017 17.38 Europe/London

guardian.co.uk © Guardian News and Media Limited 2010

 

JefferiesAnd the Best Place to Work in the global financial markets 2018 is...

Register for HITC Business News