Sports Direct investors call for new review into governance and working practices
Sports Direct shareholders have called for an independent review of governance and working practices at the company. Following a contentious annual general meeting on Wednesday, the Investor Forum, which represents institutional shareholders, informed the company’s board that a review being conducted by law firm RPC was insufficiently independent. The AGM also saw City investors vote for the removal of company Chairman, Keith Hellawell – a move that was blocked by founder Mike Ashley. Hellawell’s position will be subject to another vote in 120 days’ time.

Sports Direct shareholders have told founder Mike Ashley and chairman Keith Hellawell they still want a fully independent review of working practices and governance after City investors voted for Hellawell’s removal.

At a summit on Wednesday after Sports Direct’s fraught annual general meeting, the Investor Forum, which represents the company’s institutional shareholders, told the board a further review being carried out by a law firm linked to the company was not independent enough.

Phineas Glover, senior adviser at the Investor Forum, said the meeting was the most constructive shareholders had held with Hellawell and Ashley. He added that Hellawell appeared to understand the gravity of the situation, but he said independent shareholders, who voted on Wednesday against Hellawell’s reappointment, wanted results and that an independent review of the company was needed.

Referring to the likelihood that a further vote on Hellawell will be held once a three-month embargo expires, in which Ashley can use his 55% stake to overrule independent investors, he said: “The next three months are very crucial, not least for the business but for Keith as well. We have committed to work with Keith and he has committed to work with us and we have expectations from that and we will see where we get to. If you have received [more than] 50% opposition from your independent shareholders it’s a very clear message and we expect it to be heeded.”

Legal & General, one of the UK’s most powerful investment firms, had called for Hellawell’s immediate resignation after Wednesday’s vote but Ashley asked for 12 months to turn the business around.

The Investor Forum was set up in 2014 to represent investors with £850bn invested in UK shares to push for change at companies. It usually operates behind the scenes but it broke cover last month by publicly criticising Sports Direct and calling for an independent report into the company.

Glover said Ashley, who controls Sports Direct from his position as executive deputy chairman, attended the Investor Forum meeting and that he also seemed to understand the need for reform after revelations about the company battered its reputation and share price.

“There was a very open exchange of views and it was very helpful. There is a much better understanding having that direct dialogue with the whole board.”

Sports Direct published a report of working practices on Tuesday in which the company accepted it had not treated employees properly. It followed months of pressure after the Guardian revealed a climate of fear at Sports Direct’s giant warehouse in Derbyshire, which MPs likened to a Victorian workhouse.



The report was compiled by RPC, a law firm that has worked extensively for Sports Direct and Ashley in the past. In an effort to assuage shareholders, Sports Direct said RPC would conduct a further review, taking in corporate governance, that would report in the next year.

At the meeting on Wednesday, shareholders told the board RPC was not independent enough to carry out the review alone and that they wanted a report much earlier. A trade union resolution at the AGM calling for an independent review received strong backing from independent shareholders.

Glover said options for an independent review included using a different law firm or having RPC’s report overseen by an expert acceptable to shareholders. The Investor Forum did not disclose which shareholders were at the meeting with the board but Standard Life, Legal & General and Aviva Investors, three of the biggest owners of UK shares, were in attendance.

Hellawell, the former chief constable of West Yorkshire police, said on the day of the AGM he would prove to his opponents that he had a contribution to make to Sports Direct. He said he would leave in a year if independent shareholders still wanted him to go.

Shareholders have been pressing for better corporate governance at Sports Direct for the past few years as suspicions increased that Hellawell and other non-executive directors did not keep a check on Ashley’s dominance. The Investor Forum said shareholders had jointly held eight meetings with Sports Direct since March 2014.

Glover said: “Over the last three or four years there has been a sense that we are making progress but … the changes, we found, were not enough or nowhere near what was expected to improve the overall corporate governance framework of the company.”