Sports Direct: advisers recommend Board to vote against re-electing founders

External advisers reviewing Sports Direct current managerial and executive issues, have strongly advised the members of the Board of Directors to vote against the re-election of the company’s chairman, Keith Hellawell, and founder, Mike Ashley.

In a note to clients, Pensions and Investment Research Consultants (Pirc) said under Hellawell’s leadership Sports Direct’s board had “consistently failed to address the employment practices issues raised by some shareholders and trade unions that have also been criticised by a parliamentary select committee report”.

It´s worth recalling that the athletic apparel company will hold its annual general meeting on 7 September at its headquarters at Shirebrook in Derbyshire. The complex also includes the giant warehouse where the Guardian exposed treatment of employees that MPs on the business, innovation and skills committee compared to conditions at a Victorian workhouse.

Reportedly, leading shareholders would be considering voting against board members in an attempt to force change after long-running concerns about how the company is run. Under rules introduced last year, companies with a dominant shareholder such as Ashley, who owns 55% of Sports Direct, need the approval of independent shareholders in a separate vote at annual meetings, publishes the ‘Guardian’.

Lack of leadership skills, a reason for the ‘no’ vote according to Pirc

“It is important for the shareholders to be confident about the board’s ability to represent its best interests. This is no longer the case with the existing chairman and an oppose vote is therefore recommended,” Pirc said, highlighting that, to date, Hellawell had not shown leadership and that the board did not appear to function effectively.

If independent shareholders vote to oust Hellawell, Sports Direct can hold another vote of all shareholders between 90 and 120 days after the AGM.

In the same vein, Pirc advised shareholders to vote against Ashley, who is executive deputy chairman, because of concerns about his influence on the board, putting the stress on recent polemic around working practices at Sports Direct. In this regard, Pirc recommended support for the Unite union’s resolution calling for an independent review of working practices, which is opposed by Sports Direct’s board.

Furthermore, external advisers state that shareholders should also oppose the company’s annual report because of “significant and recurrent employment and governance concerns”. The ‘Telegraph’ reminds that the consultancy firm recommended voting for the pay report after Dave Forsey, the chief executive, waived a bonus worth up to 4 million pounds.

A shareholder in Sports Direct quoted by the ‘Guardian’ said the statement was unlikely to change the minds of unhappy investors. “They were clearly putting quite a lot of store by the announcement but I think it’s landed quite flat with shareholders.”

Pirc recommended shareholders support the review - but said the law firm set to conduct the review, RPC, is "not considered independent". "The fact that RPC is conducting the review is a major concern," Pirc said, reports ‘City A.M.’.

Image:AFC Shirts by Puma, Sports Direct Web

 

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