A respected business group has branded the Sports Direct board "dysfunctional" and warned there aren't sufficient checks on the powers of founder and majority owner Mike Ashley.
The criticism, from the Institute of Directors, comes after Sports Direct chairman Keith Hellawell endured a tough grilling by MPs on the Scottish Affairs Committee last week, during which he revealed non-executive directors weren't informed that part of retail group USC was being put into administration until a day before it happened.
USC's administration resulted in around 200 redundancies at the chain's Ayrshire warehouse earlier this year, before the brand was bought out by sister company Republic.
Oliver Parry, senior adviser on corporate governance at the IoD, said:
This is a further indication of how dysfunctional the Sports Direct board is. Last year we saw the board trying to push through a huge pay plan for Mike Ashley and you don't need to be a forensic lawyer to figure out that there isn't a sufficient check on Ashley's powers.
This is not just reputational damage, but there are moral and ethical issues here. About 200 workers were laid off and the board was not aware until the day before. For a FTSE 100 firm that's not acceptable. Boards need to hold management to account.
Ian Davidson MP, who chaired the parliamentary committee, claimed management had no need to shut the Dundonald warehouse, saying they had “callously and deliberately developed a situation where employees got 15 minutes' notice”.
However, Hellawell insisted it was a last-minute decision, prompted by the landlord of the warehouse refusing access over unpaid rent.
“I wouldn't call it callous,” he said. “It was a business decision.”