Pensions

Major asset managers renew fight against Sports Direct governance

The sports retailer has been mired in governance criticism

A number of asset managers are to vote against the re-election of Sports Direct board members, including its chairman Keith Hellawell, at its annual general meeting (AGM) on 6 September.

The investors, which are backed by at least three shareholder advisory groups, are concerned that the firm has not done enough to improve its governance standards.

In particular, Pensions and Investment Research Consultants (PIRC) recommended voting against Hellawell’s re-election, pointing at a number of the firm’s financial decisions.

These included agreeing a make-up licensing agreement with a company owned by chief executive Mike Ashley’s daughter, purchasing a £40m corporate jet, and hiring Ashley’s other daughter’s partner Michael Murray to lead its property team.

PIRC has been joined by Institutional Shareholder Services (ISS), which criticised the firm for going back on its promise to conduct an independent review of its working practices and corporate governance, which a number of investors called for last year. The review is instead being conducted by Sports Direct’s legal firm RPC.

Now, a number of asset managers have also stated that they will vote against Hellawell’s re-election at the AGM, including Royal London Asset Management (RLAM) and Legal & General Investment Management (LGIM).

The votes will repeat those made last year, when asset managers and pension funds united to vote against the re-election of Hellawell, Ashley and members of the firm’s remuneration committee.

RLAM corporate governance manager Ashley Hamilton Claxton said the firm is lagging behind its competitors in improving its corporate governance. RLAM holds 0.19% of shareholdings through index-tracker funds.

“In a year where some companies have made meaningful progress towards improving their corporate governance, Sports Direct continues to show a serious disregard for shareholders’ views about the governance and management of the company,” he said. “We have no confidence in the ability of the firm’s chairman and non-executive directors to provide effective oversight and protect the interests of minority investors.”

He added RLAM would therefore vote against Ashley, Hellawell and lead independent director Simon Bentley.

“Pension savers like our clients, that are forced to own Sports Direct through passive holdings in index trackers, deserve better standards of governance than this,” he continued. “At the end of the day, it is their life savings that are at risk.”

Legal & General Investment Management (LGIM), which holds 0.8% of shareholdings, director of corporate governance Sacha Sadan added it would also vote against Hellawell’s re-election, stating changes over the last year did not amount to enough progress.

These include the company hiring a permanent finance boss, John Kempster, after four years with temporary hires, and two independent directors.

“LGIM has voted against the Sports Direct chairman re-election since 2014 due to concerns regarding the governance of the company,” Sadan said. “We escalated our concerns in 2016 by opposing the re-election of all of the non-executive directors.

“Although we are encouraged by some of the positive steps made over the past year, such as refreshing the board and labour relations, we believe progress is not sufficient to warrant supporting the chairman’s re-election this year. We believe that all shareholders should continue to send a strong signal to Sports Direct calling for change.”

Last year, over half (54%) of independent shareholders voted for Hellawell’s removal, but he was saved by Ashley, who used his majority shareholding to tip the balance.

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