Keith Hellawell, the embattled chairman of Sports Direct, has been rejected by independent shareholders for the second time in four months, as outside investors repeated calls for the former police chief constable to be ousted from the sportswear retailer’s board.
In a second poll, forced by independent investors under new City rules, 54% of the group’s outside shareholders voted against Hellawell’s re-election to the group’s board. They had defeated a similar company resolution to retain Hellawell at the annual meeting in September.
However, Hellawell will remain in position after winning the overall vote with 81% of the shares voted, because of the support of Sports Direct’s founder Mike Ashley, who owns 55% of the company.
In a statement issued to the stock exchange announcing the result, Ashley said: “Keith has my full backing and will be continuing in his role on the basis that he has the unanimous support of the board. I note that many of those who voted against Keith have acknowledged that we have made positive progress since the AGM.”
Ashley’s majority stake did not count towards an independent resolution on Hellawell’s re-election in the first ballot at the group’s annual meeting in September, when 53% of the votes cast by investors excluding Ashley opposed the chairman’s re-election on a marginally higher turnout. That result forced Thursday’s re-election, in which Ashley’s stake counted.
Among the City dissenters were Standard Life, Aberdeen Asset Management, Royal London and Hermes, which advises a string of investors.
A spokesman for Standard Life said: “Standard Life Investments has today voted against the re-election of Keith Hellawell as chairman of Sports Direct. This reflects our belief that limited progress has been made by the board since the company’s AGM in September 2016.
“In particular, we are disappointed to note the lack of progress in recruiting a chairperson for the independent governance review, an initiative that we see as being fundamental to Sports Direct fulfilling its long-term value creation potential.”
Leon Kamhi, head of responsibility at Hermes, added: “While we welcome a number of the steps taken by Sports Direct’s board on board composition, working conditions and corporate governance review at the time of and since the AGM in September, we believe that through an orderly succession process, Keith Hellawell should step down as chairman and recommended our clients vote against his re-election.”
Other shareholder advisory bodies, which assist shareholders in deciding how to vote, also weighed into the debate.
Pirc and Institutional Shareholder Services advised clients to vote against Hellawell, with the latter saying he had overseen a “catalogue of governance and operational failures” and also advised shareholders to vote against his re-election.
However, rival Glass Lewis, which supported Hellawell at last year’s AGM when it recommended a vote against Ashley’s reappointment, urged its clients to back the chairman again this time.
The crisis at Sports Direct was triggered by a Guardian investigation in 2015, which revealed that workers at the firm’s Derbyshire warehouse were paid less than the national minimum wage.
The scandal prompted a parliamentary inquiry last year, in which MPs likened the depot to a Victorian workhouse, reigniting long-held concerns about the level of control Ashley enjoys at the company.
The newspaper reports also encouraged some investors to react after years of backing the board, including 76% of independent shareholders voting for Hellawell’s reappointment at the 2015 annual meeting.
Aberdeen, which owns 0.3% of the Sports Direct, said it viewed the company as having made progress by implementing an independent review into working practices and appointing the investment banker David Brayshaw as a non-executive director.
It also views the departures of the chief executive, Dave Forsey, and acting chief financial officer, Matt Pearson, as positive moves. The company has not had a full-time, board-level finance director for more than three years.
Before the September vote, Hellawell attempted to appease disgruntled shareholders by saying he had offered to go, only for the board to refuse to accept his resignation. He said if shareholders voted against him again, at the group’s 2017 annual general meeting later this year, he would step down.
Despite that offer seeming to acknowledge that he and the board accepted responsibility for the group’s situation, last month Hellawell criticised MPs, trade unions and the media for waging a campaign against the business as it reported a 57% drop in first-half profits.
The results represented the latest disappointing financial statement after the company’s share price halved during 2016. The group was relegated from the FTSE 100 in March.
