Following rumours yesterday evening a statement was on its way, the group – which represents 12 per cent of share capital and 27 per cent of independent shareholders – took what it admitted was a "highly unusual" step of engaging directly with the Sports Direct board.
"In prior situations we have always managed to work privately with companies to create effective long term solutions.
"We do not take this step lightly and ... we still have not received an appropriate level of commitment to respond to investor concerns and, as a result, the usual options have been exhausted," said Andy Griffiths, Investor Forum's executive director.
Griffiths called on the company to "reconsider its proposed actions and acknowledge the need for fundamental reform".
"If they are unable to do so, then members of the board will have to ask themselves whether they are able to effectively represent the interests of all shareholders,” he said.
Investor Forum's letter in full
The Investor Forum (“the Forum”) has been facilitating an extensive process of collective shareholder engagement between a number of its Members and the board of Sports Direct International (SDI) over an extended period of time and today calls for the company to undertake a wide-reaching independent review of the entire governance practices at the company.
Following Mike Ashley’s appearance at the BIS Select Committee, shareholders requested that the board commit to an independent and comprehensive review. The Forum was clear that the review would have to be independent, comprehensive and, as recommended by the BIS Committee report, cover all aspects of corporate governance across the business, not only employment practices.
Recent developments demonstrate continued reluctance on the part of the board to act in line with the views of independent shareholders. The narrow benchmarking exercise of employment practices is being carried out by RPC solicitors, who SDI has a pre-existing relationship with, and therefore will not be independent. The recently announced external board evaluation, (which is already a minimum requirement under the UK Corporate Governance Code), fails to reflect the breadth and magnitude of reform that is required.
Governance failings are clearly resulting in declines in operating performance and long term shareholder value and, given the lack of progress and the broader impact on all stakeholders, the Forum now considers it important to make public its recommendations to the SDI board.
A clear plan of action is urgently required to begin rebuilding the confidence of shareholders and that of wider stakeholders. The Forum calls on the board and Mike Ashley to launch an independent review of the company’s entire corporate governance framework at the AGM on 7 September and commit to implement the recommendations of that review.
This would go substantially beyond the currently proposed board effectiveness evaluation, and the terms of reference should address fully the previously raised investor concerns including:
Conducting this wide-reaching review is now a necessary step for rebuilding the company’s reputation and the Forum has already offered its full support in defining its scope. Should the non-executive Directors be unwilling to implement this review, serious questions will be raised as to whether they truly represent the interests of all shareholders and, therefore, whether they are meeting their statutory Director duties. Shareholders will have to consider their voting at the AGM with great care given recent events at the company.