The pressure on Mike Ashley to shake up corporate governance and address concerns over working practices at Sports Direct has been ramped up a notch after another shareholder group called for an independent review of how the business is run.
The Investor Forum, consisting of influential investors holding assets worth more than £14 trillion, has urged the retailer to “undertake a wide-reaching independent review of the entire governance practices at the company”.
The unprecedented criticism by the Forum comes amid growing shareholder unrest over the power wielded by Mr Ashley, who owns 55% of the group and is deputy executive chairman. And the intervention comes after it was revealed that Sports Direct’s accounts fail to disclose that international deliveries are run by Mr Ashley’s brother, John.
Forum director Andy Griffiths said: “It is highly unusual for the Investor Forum to consider it necessary to make public their concerns and recommendations in this way. In prior situations we have always managed to work privately with companies to create effective long-term solutions.
“We do not take this step lightly and, whilst we welcome Sport Direct’s move to hold an open day, 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.”
He added that the business requires “fundamental reform”.
Sports Direct is also facing calls from a growing list of investors asking for an independent review into working practices following Mr Ashley’s grilling by MPs in June.
Mr Ashley told MPs from the Business Select Committee that staff were not paid during security searches at the end of their shift, meaning they took home less than the minimum amount required by law.
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.
“The Forum was clear that the review would have to be independent, comprehensive and, as recommended by the BIS Committee report, cover all aspects of corporate governance across the business, not only employment practices.
“Governance failings are clearly resulting in declines in operating performance and long- term shareholder value and, given the lack of progress and the broader impact on all stakeholders, the Forum now considers it important to make public its recommendations to the Sports Direct board.”
For its part, Sports Direct has said the findings of a separate review carried out by RPC would be published in the week beginning September 5 and it would conduct a review of its board of directors by next April.
On Wednesday, Sports Direct announced that it will hold an open day for the public on the day of its AGM on September 7, when it is expected to face a barrage of criticism from unions and shareholders.
In another blow for Mr Ashley, Legal & General, the retailer’s 11th largest shareholder, has said it intends to vote against the re-election of chairman Keith Hellawell and all non-executive directors, while also supporting the “shareholder requisition resolution on an independent review of labour practices”.
In a statement issued on Thursday, the group said: “For the third consecutive year we will be voting against the re-election of the chairman at Sports Direct. We first voted against the chairman in 2014 when the share price performance was still strong, trading at around £7.00. Today it is trading at around £3.08.
“We will also be voting against the re-election of all non-executive directors as we believe that Sports Direct needs a stronger body of independent non-executive directors to ensure the business is run in the interest of all shareholders. We are disappointed that there have been no new non-executive board appointments in the last five years.”