Sports Direct has today sparked more ire over the state of its corporate governance, including calls for a rethink on how listed firms are overseen
The comments come after a second vote in less than half a year on whether to keep Keith Hellawell as chairman was waved through at the company's general meeting, as chief executive Mike Ashley used his 55 per cent stake to back his right-hand man, despite the majority of independent investors voting against his appointment.
Hellawell failed to garner favour with independent shareholders at the company's AGM last year, and investors had been advised to vote against him again today.
Pensions & Investment Research Consultants (Pirc) said Hellawell should be axed because he "failed to show leadership" while the embattled retailer has "failed to address the employment practices issues raised by some shareholders and trade unions" while under his stewardship.
“While no one doubts Ashley's entrepreneurial spirit, you simply can't run a listed company like this," said Oliver Parry, head of corporate governance at the Institute of Directors. "It is ironic that independent shareholders voted to remove the chairman in order to make the board more independent of the owner, only to be disregarded in yet another display of Ashley's dominance."
Peter Swabey, director of policy and research at the Institute of Chartered Secretaries and Administrators, suggested the company should potentially be moved out of its current index on the London Stock Exchange.
"Ejecting Sports Direct from the FTSE 250 index would send an appropriately strong message about the governance standards that society expects and give those fund managers currently 'stuck' with an investment in Sports Direct [through an index-tracking fund] the opportunity to vote with their feet," Swabey said.
However, Jonathan Hayward, director at Independent Audit, noted shareholders were aware of the state of the company's governance when they bought their shares, and added: "The FTSE 250 shouldn't consist of companies that investors think should be in the FTSE 250. That's a very thin end of the wedge."
Mark Goyder, chief executive of Tomorrow's Company, commented:
The battle between Ashley, the Sports Direct board and the minority shareholders is, in my view, an exceptional case and I would not seek to defend its governance track record [but] it is hardly logical to jump to the conclusion that the company should be ejected from the FTSE 250 or that rules for majority shareholders should be reviewed.
In a statement issued off the back of the meeting results, Ashley said: "I note that many of those who voted against Keith have acknowledged that we have made positive progress since the AGM."