The IoD (Institute of Directors) have said that the Sports Direct’s board doesn’t provide a sufficient check on the powers of majority shareholder Mike Ashley.
Oliver Parry who is senior adviser on corporate governance at the IoD has made his comments after the admission by Keith Hellawell, Sports Direct’s chairman, that non-executive directors were unaware of a plan to put part of the retail group into administration until the day before it happened.
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When Hellawell appeared in front of the parliamentary committee last week, it was discovered that chief executive Dave Forsey had been talking to the eventual administrator, Duff & Phelps, for nearly three months before about 200 workers at a Scottish warehouse lost their jobs in January.
Workers at the USC warehouse in Ayrshire lost their jobs when administrators were called into West Coast Capital (USC), a Sports Direct-controlled entity that owned 28 USC stores. The shops were immediately bought out of administration by Sports Direct’s Republic division, which already owned 32 USC stores.
Hellawell admitted that Ashley and a handful of senior executives took key decisions without any discussion at board level.
“This is a further indication of how dysfunctional the Sports Direct board is. Last year we saw the board trying to push through a huge pay plan for Mike Ashley and you don’t need to be a forensic lawyer to figure out that there isn’t a sufficient check on Ashley’s powers.”
“This is not just reputational damage, but there are moral and ethical issues here. About 200 workers were laid off and the board was not aware until the day before. For a FTSE 100 firm that’s not acceptable. Boards need to hold management to account.”
What the underlying theme clearly appears to be is that Mike Ashley is attempting to run Sports Direct as a wholly owned private company, rather than simply being the biggest shareholder in a PLC.
With Ashley’s ownership of Newcastle United being so closely tied to Sports Direct and all the free benefits his retail group get from the association with the football club, Newcastle fans simply find themselves entangled in a much bigger web of the multi-billionaire’s making.
The basic potential sale value of Newcastle United may not be the most significant part of Ashley’s fortune but I have no doubt that the club forms a key part of his business empire moving forward.
Suggestions that he may sell NUFC in the near future must be very much more hope than expectation.