Fresh voices are adding to calls for a shake up at Sports Direct, with investors demanding a review of corporate governance and some shareholders even urging the retailer's founder Mike Ashley to step down from the board.
Ashley has faced a volley of criticism after admitting to the Business, Innovation and Skills (BIS) select committee in June that he could not control his company. The MPs then likened working practices at the retailer's warehouse in Shirebrook, Derbyshire to a “Victorian workhouse”.
In a report seen exclusively by City AM, shareholder advisory group Glass Lewis told shareholders to vote against Mike Ashley’s re-election to the board at the company's annual general meeting (AGM) on 7 September. Ashley owns a 55 per cent stake in the company, and sits on the board as executive deputy chairman.
Ashley, who also owns Newcastle United, was “inextricably linked” to Sports Direct’s “poor public perception and associated halving of its share price over the past year”, Glass Lewis said.
“In our view, the outcome of the BIS inquiry is a damning indictment of Mr Ashley’s complicity in poor employment practices at the company and calls into question the governance practices of a board which maintains that its executives had no knowledge,” the report said.
A second leading shareholder advisory group, ShareSoc, yesterday told City A.M. it had advised its members to support proposals for an independent review of corporate governance at the retailer.
Roger Lawson, ShareSoc's deputy chairman, said all-powerful figures like Ashley are “used to running the business in the way they want to run it and if a board member challenges them, they won’t be on the board for very long”.
The influential Pensions and Investment Research Consultants (Pirc) started the ball rolling against Ashley earlier this week when it told shareholders to block his re-election. Pirc said Ashley has too much power, raising concerns about "whether the other directors can objectively challenge and influence the board's decision making process".
Yesterday, the Investor Forum, a group representing 27 per cent of Sports Direct’s independent shareholders, took the “highly unusual” step of publicly airing its concerns about the retailer, telling shareholders to vote for a review of the company's governance, and listing what it wants from that review.
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"Governance failings are clearly resulting in declines in operating performance and long-term shareholder value," the Investor Forum said.
The group demanded that Sports Direct's review must address the oversight and effectiveness of the board, potential conflicts of interest, employment practices and the management of the store portfolio.
Andy Griffiths, executive director of the Investor Forum, said: “We still have not received an appropriate level of commitment to respond to investor concerns.”
The group represents institutional investors with a combined £850bn invested in UK equities. Members include Standard Life, Fidelity, Legal & General and Aviva - but the group has never used its influence publicly before now.
However, in the case of Sports Direct "the usual options have been exhausted", Griffiths said.
Legal & General Investment Management (LGIM) followed the Investor Forum's lead yesterday, saying it would vote against the re-election of Sports Direct’s chairman, Keith Hellawell, who has presided over the company’s share price slide. The firm also supported proposals to shake up Sports Direct’s corporate governance and labour practices.
A spokesperson for Ashley said: "Mike Ashley acknowledges the appreciation of his efforts in terms of hosting an open day. He looks forward to meeting everyone and answering all your questions."