Sports Direct has bowed to shareholder pressure by agreeing to an independent review of its working practices and corporate governance.
Mike Ashley, the company’s founder and majority owner, admitted in a rare TV interview that he had taken his eye off the ball but claimed the problems at the company’s warehouse were caused by “the odd rotten apple”.
The company had said the law firm Reynolds Porter Chamberlain (RPC), which carried out a preliminary review published this month, would conduct a further investigation. However, after strong shareholder backing for an independent review at the Sports Direct AGM this month, the company has now said that “an independent party other than RPC” would conduct the review.
Sports Direct’s share price, which has taken a battering over the past 12 months, rose about 3% after the announcement and Ashley’s BBC Breakfast interview, to 290p.
Ashley was forced to look into his company’s working practices after a Guardian investigation exposed a climate of fear at its warehouse in Shirebrook, Derbyshire. MPs later compared it to a Victorian workhouse.
RPC has worked extensively for Ashley and Sports Direct, which is one of its biggest clients. Its report, published the day before Sports Direct’s AGM, criticised the company and prompted Ashley to apologise to staff for practices that were “potentially oppressive” at its warehouse.
The company also said a worker representative would be elected to the board by all staff “directly engaged or employed by Sports Direct”. Ashley announced plans to put an employee on the board to show his willingness to listen to staff after the Guardian’s revelations and a campaign by the Unite union battered his company’s reputation.
Ashley said he had not known about the poor treatment of employees but claimed there was little wrong at Sports Direct and that its reputation had been brought low by a few mistakes.
He told BBC Breakfast on Tuesday: “It is odd, isolated instances. It’s the odd rotten apple in the barrel and then you say: ‘OK, I’ve got to go and find the rotten apple in the barrel’ … I’m now coming in to work very closely with HR, the warehouse and the [employment] agencies.”
Ashley said Sports Direct had paid out more than £200m in staff bonuses in the past five years and that one cleaner had received £80,000 in addition to her standard pay. He said his job was to fix the few things the company had done wrong to bring them up to the standard of what it had done right.
“I’ve taken my eye off the ball. I’ve said I’m going to fix it and I will.”
A union resolution at Sports Direct’s AGM calling for a fully independent review was supported by a majority of independent shareholders. After the AGM on 7 September, large shareholders told the board they wanted the review carried out by an independent party.
The company did not say who would conduct the review but said it would consult shareholders about its terms and timing. Sports Direct had said the review would take up to a year but shareholders, coordinated by the Investor Forum, want it completed more quickly.
Paul Lee, head of corporate governance at Aberdeen Asset Management, one of the UK’s biggest fund managers, said: “This is a welcome and much-needed sign that the board and Sports Direct’s management are listening to independent shareholders. I am sure all shareholders will welcome the opportunity to offer constructive thoughts on the remit of the review.”
An unprecedented 57% of independent shareholders failed to support the Sports Direct chairman, Keith Hellawell at the AGM, but Ashley insisted he was staying in the role for at least another year and that they would work together to improve the way the sports chain was managed.
At the sometimes bad-tempered AGM, Ashley at one point said the retailer’s problems had been caused by Unite and hinted that he might walk away from the company he founded in 1982 if he was unable to improve the way it was run.
Unite’s assistant general secretary, Steve Turner, said: “We will continue to make the case that only with decent, direct employment right across the business can this company truly convince its stakeholders and the watching world that it is genuine about making the much-needed changes to practices that have shocked people everywhere.”
Ashley told the BBC it would take longer than a year for him to make the necessary changes but that he was listening to shareholders, who called for the independent review as a condition for Hellawell staying on.
“I had to support Keith Hellawell at the AGM to give him an opportunity for another year and he said if he doesn’t get the support of independent shareholders he will go. Dave Forsey [the chief executive] lost his bonus, which was £3m or £4m. We take this a lot more personally than anyone can possibly imagine.”
There was also a protest vote against Sports Direct’s three other non-executive directors. More than 30% of independent shareholders failed to back their reappointment amid widespread concern that they had not held Ashley to account.
Ashley defended his use of a helicopter and private plane when Sports Direct workers were on low pay and zero-hours contracts.
“I do like to go by plane and by private plane. People will say: ‘How can you have a plane when your workers are on the minimum wage?’ I say: ‘I don’t set the minimum wage.’ If the minimum wage should be the the living wage then the government, who set the rules, should set it at the living wage.”
