Credit: Betty Longbottom/Geograph

Mike Ashley is facing a Sports Direct shareholder rebellion

Sports Direct's majority shareholder faces a challenge at today's AGM.

by Adam Gale
Last Updated: 05 Oct 2015

Sports Direct founder Mike Ashley has got a fight on his hands. The reputational troubles that have dogged the firm of late have come home to roost (if dogs roost, that is) at its AGM in Shirebrook today, where several shareholders plan to vote against the re-election of at least some of the current directors – including Ashley himself.

Leading the rebels is Royal London Asset Management (RLAM), one of the city’s largest investment firms, albeit a relatively small shareholder at Sports Direct with only an £8.3m, 0.018% stake.

‘We have lost confidence in the board and are very concerned about the long list of corporate governance failings that have not been addressed,’ said corporate governance manager Ashley Hamilton Claxton.

These failings include a decent (but now finished) run in the ‘how long can we go without appointing a finance director competition’ and chairman Keith Hellawell’s cringeworthy admission at a select committee meeting earlier in the year that he didn’t actually know about his own company’s decision to put its subsidiary USC into administration until just a few days before it happened.

Issues like these caused shareholder advisory group PIRC to counsel its members to vote against Hellawell’s re-election and the Investment Association to issue a ‘red top’ alert about the company.

They are joined by unlikely allies in the form of Trade Union Share Owners group, which wants to question Hellawell on working conditions and Sports Direct’s use of zero hour contracts. Just to make sure the point is driven home, members of the Unite union will simultaneously protest outside the company’s HQ and several of its stores, while dressed in Dickensian outfits.  

The problem for all the dissenters of course is that Ashley owns 55% of the business and can thus always override them. All they can really do is make a show of their disapproval and possibly force the company to hold a second vote on the election of directors – a privilege afforded minority shareholders by new FCA rules. Even then, though, Ashley could simply veto them later on.

That will turn heads in the City, but it’s hardly enough to force Ashley to quit. The fact is, most investors in Sports Direct knew what kind of business they were getting into when they bought the stock. It may not be a paragon of corporate governance, but it never has been – and it makes money.  

‘It is important to remember Sports Direct hasn’t broken any laws,’ a top ten Sports Direct institutional investor told the Telegraph on condition of anonymity, accusing the firm’s critics of having a ‘fundamental illiteracy of capitalism’.

‘If you look at those companies who have impeccable corporate governance and have ticked all the boxes, they are also those who are the most cumbersome,’ the investor said. ‘Mike Ashley is a ferociously effective entrepreneur who, as a major shareholder, is aligned with the success of the company.’

Sadly, the meeting is closed to journalists, possibly because the notoriously media-shy Ashley wants to say something to his fellow shareholders. To be a fly on the wall, eh?

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