Got a spare 50 quid, Mike Ashley? Do you fancy a bet on your prediction that Keith Hellawell will defy the doubters and regain the support of Sports Direct’s outside shareholders at next year’s annual meeting? This column says it won’t happen.
Fund managers are timid creatures by nature but, once roused, tend not to back down. Legal & General’s Sacha Sadan, speaking after outsiders’ 53% vote against Hellawell, said the chairman should go immediately “at absolute minimum”. L&G is unlikely to be swayed by the plea that the chairman should be judged with fresh eyes in 12 months’ time.
Nobody would pretend it is easy to stand up to a forceful character like Ashley, but Hellawell has been chairman since 2009 and has never demonstrated he is even remotely up to the task. The scandal over working conditions had bubbled away for years, ignored or disregarded by the board. An effective chairman would have seen that Ashley’s siege mentality (bizarrely, he was still trying to blame the Unite union for the warehouse scandal on Wednesday) was leading to crisis and would have ensured caution. Instead, Hellawell chose to go to war with outside shareholders over the board’s right to give the billionaire boss a £70m bonus scheme.
Similarly, Standard Life probably was not impressed by Hellawell’s claim to have engaged regularly with shareholders. Its representative, Euan Stirling, had just told the annual meeting that Standard Life voted its 5.8% stake against the re-election of all the non-executive directors. One reason was the “unconvincing or non-existent” replies by the board to its inquiries over many years. Standard Life does not sound like a floating voter.
Even now, at the moment of supposed reform, Hellawell stood squarely behind the arrangement whereby Ashley’s daughter’s 26-year-old boyfriend, Mike Murray, runs the property team on a contract that could be worth millions and where remuneration for overseeing a £300m budget is “at the board’s discretion”. Hellawell conceded that “with the benefit of hindsight” a distribution deal involving Ashley’s brother’s company could have been disclosed in financial reports, but that hardly amounts to an apology, let alone an explanation.
Hellawell now cuts a feeble figure. He offered to resign at the weekend, but Ashley would not let him. On Wednesday a majority of outside shareholders said they want him out, but again Ashley blocked the exit. Hellawell can limp on for a year with the founder’s backing, but the reinvention of Sports Direct will be unbelievable until a capable and independent chairman is in place.
The Bank can do no more
Mark Carney is feeling comfortable and serene. Judgments made by the Bank of England before the referendum were accurate, says the governor; and the Bank’s actions after the vote for Brexit, including the cut in interest rates last month, have helped the economy to adjust. Fair comment?
Broadly, yes. Carney’s critics were wrong to accuse him of participating in Project Fear. The Bank is charged with policing financial stability and thus was obliged to make a few judgments about what might happen if the leave campaign won. In another age, silence from Threadneedle Street might have been an option, but not in an era of transparency and scrutiny by the Treasury select committee.
Carney was careful to stay neutral in the debate. The contentious remarks were the ones about Brexit being the biggest domestic risk to financial stability, bringing the danger of a “material slowdown in growth”. But that was true at the time, and remains so.
Yes, some of the latest data say the economy has rebounded since the vote, but these are early days. On a two-year view, which tends to be the Bank’s horizon, the fallout from Brexit remains almost impossible to assess meaningfully. Leaving the EU may be an opportunity for the UK and our exporters (let’s hope so), but if, like the Bank, you’re in the business of identifying risks to stability, you can’t assume fair weather.
The current ray of economic sunshine has brought the charge that the Bank was too hasty in cutting rates. On that score, Carney probably overstated matters in taking credit for stabilising markets. A quarter-point cut in rates is a tweak, after all. But a cut was still the right thing to do. It signalled to investors, businesses and consumers that the UK is not powerless in the face of change.
That message will be only be useful, however, if it is also heard by politicians. With interest rates at 0.25%, the Bank has almost exhausted its tool kit. It is up to the government to take advantage of cheap money, by issuing infrastructure bonds or whatever. Carney has made that point, too.
