This week, the revelation of the distribution arrangement with Mr Ashley’s brother has drawn the attention of City regulator the Financial Reporting Council, which is said to be looking into the agreement and why it was not disclosed in Sport Direct’s annual report.
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A leading United Kingdom shareholder group publicly criticized Sports Direct International Plc over its corporate governance practices after running out of patience with the embattled British sporting-goods retailer and its billionaire founder Mike Ashley.
The Investor Forum said its members represent about 27 percent of independent shareholders and include Legal & General, Aviva, Fidelity International and Standard Life. “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”.
Governance failings are “clearly resulting in declines in operating performance and long-term shareholder value”, the forum said.
He said: ‘We believe that all shareholders should send a strong signal to Sports Direct calling for change’.
Sports Direct, a mainstay of Britain’s shopping streets offering low-cost sports goods through 450 stores, has had a torrid year, issuing three profit warnings and losing its place in Britain’s FTSE 100 index of leading shares.
The investor group’s public rebuke ratchets up the pressure on Sports Direct ahead of its annual general meeting on September 7, when the retailer has said it will also host an open day in an effort to stave off criticism over its working practices. “Today it is trading at around £3.08”, he said.
However, even if Sports Direct did see non-executive directors opposed by minority shareholders, the company could hold another meeting three months later at which Mr Ashley could vote his shares in favour of their re-election.
The consultancy has also called for the removal of Mr Ashley citing concerns about his influence over other board members.
There have been no new non-executive board appointments at Sports Direct, LGIM said, which was a cause for concern.
He told them that the staff at its Shirebrook warehouse were held up at the end of their shift to undergo security searches but were not paid for this extra time, meaning they were receiving less than the amount required by law.
The Local Authority Pension Fund Forum (LAPFF) said this week it would support trade union plans to begin an investigation into Sports Direct’s working conditions.
The Fourm added: “Following Mike Ashley’s appearance at the BIS Select Committee, shareholders requested that the board commit to an independent and comprehensive review”.
They want a review of corporate governance and board oversight, related party transactions and potential conflicts of interest, employment practices, acquisition strategy, oversight of supplier relationships and the management of stores.
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Shareholders will be able to voice their feelings about the company at the annual shareholders meeting on 7 September, which it said on Wednesday would be open to all interested parties – an unusual move for any company, whose AGM is generally restricted to those who own a stake in the business.
