How Mike Ashley can fix Sports Direct's reputation

His company's name has been well and truly sullied, but Mike Ashley still has the chance to reform it, through transparency.

by Adam Gale
Last Updated: 22 Jul 2016

Mike Ashley has a love-hate relationship with the media. Mostly hate on his part, one imagines, but the press certainly love him. An unpredictable, enigmatic, maverick tycoon whose workers were allegedly subjected to ‘Victorian workhouse’ conditions? That’ll sell papers.

When stories of poor working conditions in Sports Direct’s Shirebrook warehouse finally started getting serious inches and air time late last year, the company bit back, denying ‘unfounded’ allegations that the tannoy was used to name and shame tardy staff, or that workers were penalised for being sick.

That changed when Ashley gave evidence before a committee of MPs last month. He was all mea culpa then.

And now that the Department for Business, Innovation and Skills (as was – BIS is now BEIS, thank you very much Theresa May) has published its report into Sports Direct, it’s telling that the firm was much less combative in its response:

‘We will study the contents of the committee’s report very carefully. It is our policy to treat all people with dignity and respect. We are pleased to see that the committee has recognised Mike Ashley’s commitment to engage in addressing any shortcomings in the working practices at Sports Direct.’

It’s a positive shift in the company’s strategy, but it doesn’t address the main problem. Sports Direct – and by extension Ashley – is now deeply associated with such things like:

‘Extremely disturbing’ working practices... workers ‘not being paid the minimum wage’... 'permanent contracts in exchange for sexual favours’... ‘serious health and safety breaches’... the management having ‘unreasonable and excessive powers to discipline or dismiss at will’ and ‘treating workers as commodities’.

How is Sport's Direct run?

Not only has this hit Sports Direct’s share price (it’s lost 65% of its value since December) and possibly its high street performance, but it also seems to have genuinely upset Ashley. The company is his baby, as it were, and he doesn’t want to see it hurt.

But what can he do to rescue its reputation?

In their report, the MPs suggested such things as getting rid of Sports Direct’s ‘six strikes and you’re out’ policy, involving the local authority more in health and safety matters, reviewing its relationship with the workers’ agencies and rounding late times down instead of up (eg if you’re seven minutes late, you get docked for five minutes’ pay, not ten).

Ashley is looking into much of this in his internal review of working practices. MPs applauded that and said they were looking forward to reading it. But they also called for Ashley to review Sports Direct’s corporate governance at the same time.

Despite admitting to the committee that the company may have outgrown his ability to manage it, Ashley’s refused, saying corporate governance is a matter for ongoing review and not connected to the working conditions issue.

This, however, is his great opportunity.

Sports Direct is a byword for inadequate corporate governance. It went 18 months without a finance director. Its chairman didn’t know it was going to put one of its subsidiaries into administration until days before it actually happened. Its ‘deputy executive chairman’ (Ashley) and CEO Dave Forsey rule the roost, with apparently little oversight by a powerless board.

Investors have long grumbled about this, but tolerated it because Ashley got results. But now it’s a problem. If Ashley is serious about reforming the business’s reputation, he will start doing things by the book – bring in some seasoned NEDs and perhaps a new chairman, delegate more and above all make all this transparent.   

Without transparency, there cannot be accountability; with it, it’s easy to demonstrate that meaningful changes have actually been made.

Here that media infatuation with Ashley can really work to his advantage. If he makes a very public, very transparent effort to fix Sports Direct, it will get air time.

Not everyone will believe it, perhaps, and some will only be happy once he’s sold the company, but he is able to get his message out in a way most bosses could only dream of.

Ashley may or may not heed the MPs’ call. It’s his business after all, and this would necessarily require taking a big step away from it. He may just prefer to take it private instead. But Sports Direct’s reputation will struggle to recover until it lays its faults and its reforms bare for all to see. 

Picture credit: Elliott Brown/Flickr


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