Our financial editor Nils Pratley has spoken - today’s report is simply ‘too tame’, and lets Mike Ashley off too easily.

Nils writes:

Welcome news: Sports Direct and Mike Ashley have decided they will no longer defend the indefensible. The company acknowledges “serious shortcomings” in working practices at its Shirebrook warehouse that it “deeply regrets and apologises for”. The notorious six strikes and you’re out policy has been abandoned. Past payments below the minimum wage are described as “unacceptable but unintentional”.

In stores, staff will be offered the chance to switch from zero-hours contracts to ones that guarantee 12 hours of employment a week. And Sports Direct is not saying the matter is closed: a fuller review of working practices and corporate governance will follow.

Jolly good, but let’s not pretend that this report is independent. It was written by one of the company’s legal advisers Reynolds Porter Chamberlain, and sections and phrases read almost as if they were dictated by Ashley....

More here:

Sky News’s Mark Kleinman has an interesting story -- one of Sports Direct’s landlords has insisted that the retailer commits to obey Britain’s anti-slavery laws!

Here’s the details:

One of the UK’s biggest commercial property landlords has begun inserting anti-slavery clauses in tenancy contracts amid growing scrutiny of working practices at retailers including Sports Direct International.

Sky News has learnt that Hermes Real Estate, an £8.2bn property group which is part of Hermes Investment Management, recently told Sports Direct of its anger at working conditions for the chain’s warehouse and shop-floor staff.

Hermes Real Estate has also asked lawyers to include anti-slavery clauses in all new lease management contracts - although the provisions do not apply to existing tenancy agreements, according to people close to the situation.

More here:

Although CEO Dave Forsey gets plenty of criticism in today’s Sports Direct report [as explained earlier] Mike Ashley avoids the blame bucket.

Instead, the inquiry restricts itself to rather bland reminders that the company’s founder (and driving force) can’t be expected to know everything that’s going on.

For example, this section paints Ashley as a man with a commitment to excellence:

Where there is rapid growth in lean structures and fast moving markets there is a greater strain placed on the business when it is trying to comply with its moral and legal obligations to its staff and the community. Growth businesses need to work harder to ensure that their working environment is and remains a healthy and productive one and even more so if it aspires to be one of the best places to work in retail, as stated by Mr Ashley.

A fine aspiration, of course. But can you imagine John Lewis, Marks & Spencer or Selfridges penalising staff for being ill or having to queue up and flash their underwear so guards can check they’ve not nicked anything?

Legal firm Leigh Day is worried that the thousands of agency workers up in Shirebrook may still suffer unacceptable working practices, despite today’s pledges.

Partner Emma Satyamurti says:

“Having raised issues arising from the use of Zero Hours contracts in previous litigation against Sports Direct, we are pleased that today’s report suggests the company has finally realised that its use of these types of contracts is problematic. However it remains to be seen when and how this new commitment will be implemented, and whether historic injustices will be addressed.

“We remain concerned about the agency workers at Sports Direct’s Shirebrook warehouse, as this group do not appear to benefit from the guaranteed hours commitment made in Sport Direct’s media campaign launched ahead of tomorrow’s AGM – this pledge appears to be limited to staff directly employed by Sports Direct.

Leigh Day is already fighting a court case for Sports Direct workers who were excluded from its staff bonus scheme as they didn’t hold permanent contracts, as Satyamurti explains:

“We continue to represent 188 Sports Direct staff and ex-employees who missed out on bonuses because they were on zero hours contracts. Our clients, many of whom are long serving, worked hard to generate the large profits from which Sports Direct has benefited, yet were excluded from the bonus scheme run by the multi-billion pound company.”

Pressure continues to mount on Sports Direct’s top brass.

Leon Kamhi, head of responsibility at Hermes Investment Management (a SPD investor) has told Radio 4’s The World at One that a new chairman is needed.

Kamhi says Keith Hellawell should be replaced by a “strong, credible individual with experience of chairing a FTSE company”.

Sports Direct’s chief executive, Dave Forsey, cops plenty of flak in today’s report.

For example, Forsey is criticised for not ensuring that the company actually has a proper contract with the agencies supplying thousands of workers....

During the oral evidence of Mr Ashley before the [BIS] Committee [ he was asked about whether he should know more about the contracts between Sports Direct and the Agencies.

He observed that he couldn’t know everything about every contract. These agreements were ultimately the responsibility of Dave Forsey (“Mr Forsey”) as Chief Executive and others in the Retail Team who dealt with the Agencies on a day to day basis. In fact on investigation there appears to be no formal signed contract in place for either Agency. Effectively the terms and conditions are based on custom and practice and/or unsigned terms.

Forsey is also blasted for allowing workers to be paid less than the national minimum wage (as they hang around to be searched at the end of their shift):

At the management level Mr Forsey had failed to inform the Board (or Mr Ashley) of some of the issues namely the progress of the NMW issue in a timely or effective manner over the course of a year or so. Warning signs that had been given off by the media and to a lesser extent the Unions regarding NMW issues had not been heeded properly or adequately and so some points were not escalated.

These sound like career-limiting mistakes for a CEO. But not, apparently, at Sports Direct -- Forsey is still in his role, but has been ordered to give up his £3.6m bonus.

Let’s hope this is right....

It certainly makes a change from seeing a company’s share price rise when it announces job cuts.

But as flagged earlier, investors are also cheered by the prospect that SPD’s corporate governance problems might be addressed....

The Breaking Views team at Reuters reckon today’s changes won’t satisfy City critics -- meaning tomorrow’s Sports Direct AGM will be unmissable...

My colleague Simon Goodley is concerned that today’s report neglects some serious issues.

And he should know, having worked undercover at Sports Direct’s warehouse last year.

One key blindspot is that the report doesn’t really question why SPD employs so many agency workers at all (rather than putting them on staff -- and guaranteeing them more rights).

Simon writes:

Sports Direct has never given a proper justification as to why it needs to employ the vast majority of warehouse staff on temporary contracts all year round. Some workers have been there for years on these “temporary” arrangements, which even the report acknowledges are “arguably a form of “zero-hours contracts”.

Here’s his full verdict:

Every silver lining has a cloud.....

The jump in Sports Direct’s shares also shows the City welcomes its new review of corporate governance issues.

That’s been prompted by the build-up of criticism of chairman Keith Hellawell, who will face calls to resign at tomorrow’s AGM.

Bloomberg has a good take:

The company is trying to assuage concerns of investors, who are running out of patience with the embattled company and its billionaire founder Mike Ashley.

On Monday, Royal London Asset Management called for Hellawell to resign, saying that it will again oppose the reappointment of the company’s non-executive directors.

That followed public criticism by a group speaking for more than a quarter of independent shareholders.

Hellawell has already enjoyed a dramatic career -- he’s the former chief constable of West Yorkshire police, and also served as “drugs czar” for the last Labour government.

It’s important to remember that Sports Direct isn’t abolishing zero hours contracts for agency workers at its Shirebrook warehouse [today’s offer of permanent contracts only applies to casual staff at its shops].

That’s significant, as most staff in Derbyshire are employed by agencies, not SPD itself.

The Resolution Foundation says we still need better protections for agency workers [who are often on the lowest wages with the least benefits].

Their policy analyst Conor D’Arcy says:

“Today’s report into working practices at Sports Direct highlights the pernicious effect of job insecurity on people’s lives.

“The move to offer guaranteed hours to staff on zero hours contracts is welcome and one that government should consider more widely, especially for those who have been on ZHCs for long periods of time.

“However, the fact that most staff at the Shirebrook warehouse are actually on agency books shows that there are many forms of employment contract at the bottom end of the British labour market that need closer scrutiny.”

Today’s report may not take the heat off Sports Direct’s chairman, Keith Hellawell.

He’s expected to face calls to resign tomorrow, when the company holds its annual shareholder meeting.

Sky News’s Charlotte Lomas predicts a ‘fiery’ encounter with investors.

BIS committee chair Iain Wright MP has now told the Today Programme that Sports Direct needs to go further to get its house fully in order:

Wright said:

“This isn’t a whitewash in terms of a report.

“There are questions over the independence of the people who have done it, because it is Mike Ashley’s lawyers who have published the report.

“It has gone a long way but not far enough.”

Hopefully Wright’s concerns will be addressed by the new review which SPD announced today.

Sports Direct’s board are promising to change the ‘workforce balance’ at its Shirebook warehouse, which is currently dominated by agency workers on contracts that only guarantee 336 hours work a year.

It will run a test scheme to offer contracts to 10 agency staff each month (up from 2-per-month today).

And it also wants its agencies to review those 336-hours-a-year contracts.

My colleague Sean Farrell is analysing the Sports Direct report, and says:

The report said Sports Direct’s chief executive, Dave Forsey, did not tell the board or Mike Ashley, the retailer’s founder, about the potential for Sports Direct to pay below the national minimum wage, which was also uncovered by the Guardian.

It said Ashley, who was hauled before MPs over conditions at the warehouse, “takes ultimate responsibility for any aspects of the working practices that were unsatisfactory”.

Here’s his news story: