Sports Direct has commissioned an external evaluation of its board of directors, following criticism of the retailer’s corporate governance.
In a stock market statement on Thursday, the company also said it would publish a report into how it treats its workers before the annual shareholder meeting next month.
Mike Ashley’s retail group, which is facing a shareholder revolt over the re-appointment of its chairman, Keith Hellawell, at the meeting on 7 September, said it was planning an external evaluation of its board of directors by next April.
More than 28% of independent shareholders did not back Hellawell at last year’s annual meeting, including the well-respected Standard Life. New rules mean he must now win their support, rather than relying on the vote of Ashley, the company’s founder who owns a 55% stake.
The promise of more boardroom scrutiny comes after several large shareholders told the Guardian they planned to vote against Hellawell’s reappointment. Ahead of this year’s vote, shareholder representative group Manifest flagged that Sports Direct had not disclosed the outcome or the process of its last external evaluation, carried out in 2014. The UK corporate governance code recommends that all listed companies have such an external valuation every three years.
In a long list of issues with Sports Direct’s corporate governance, Manifest also noted that Sports Direct’s board was not consistent with the code, which recommends at least half of non-executives are independent.
Oliver Parry, head of corporate governance at the Institute of Directors, said: “Sports Direct has a mountain to climb in rebuilding its reputation. Conducting an external board evaluation, and publishing the results, would be a welcome first step. This can’t be just be a cosmetic exercise – the board must act upon the recommendations of the review.
“Mike Ashley admitted to a committee of MPs that the company had perhaps grown too big for him to manage, and there is clearly a need to make sure the governance structure is providing independent challenge to management decisions.”
Sports Direct has come under increasing pressure to reform its working practices and corporate governance as its sales performance and share price have suffered following damning revelations about its treatment of store and warehouse workers.
The company said it would be publishing an independent report on working practices put together by its lawyers, RPC. It said the report would review and report on an internal investigation announced by Sports Direct last December after the Guardian’s revelations about treatment of staff at its warehouse in Shirebrook, Derbyshire.
On 7 September, shareholders are set to vote on a resolution put forward by the Unite union, calling for an independent review of “human capital management” including the living wage, safe and secure working, guaranteed hours and trade union representation.
Sports Direct’s board has recommended that shareholders vote against the resolution as it was “duplicative of current and ongoing efforts of a similar nature”.
But earlier this week, Sports Direct’s warehouse workers were awarded £1m in back pay after the retailer admitted it had broken the law in not paying the legal minimum wage.
The sportswear chain and its employment agencies are also facing fines of up to £2m imposed by the Department for Business, Energy and Industrial Strategy after they were found to have been underpaying some of the UK’s lowest-paid workers for four years.
The payment was agreed between the Unite union, the retailer and HM Revenue & Customs, and includes about 200 workers directly employed by Sports Direct and about 3,000 staff hired through temporary employment agencies.
In June, Ashley admitted his company had broken the law by failing to pay staff the national minimum wage.
The admission, made when he appeared before MPs investigating his company’s treatment of its workers, confirmed the findings of the Guardian’s investigation, which revealed that Shirebrook warehouse staff were required to go through searches at the end of each shift, during which their time was unpaid. They also suffered deductions from their wage packets for clocking in for a shift a minute late.
HMRC is also investigating whether Sports Direct has been paying the minimum wage to the 13,000 workers at its stores.
Ashley claimed he was struggling to cope with the scale of Sports Direct when he appeared before MPs, and his board had been criticised for lacking independent directors. The company is also lacking a permanent finance director having appointed Matt Pearson as acting finance officer last summer.
Pressure for change has increased after the Financial Conduct Authority, the financial watchdog, required minority investors to approve non-executive directors at companies where a single shareholder owns 30% or more.
The rules came into force in May 2014 but did not affect Sports Direct’s last annual shareholder meeting because companies were given six months to comply.
