News Column

Mike Ashley in the firing line

June 21, 2014

By Rupert Steiner, Daily Mail, London



June 21--Sports Direct's fourth attempt to reward billionaire founder Mike Ashley looks set to fail after some of its biggest shareholders took the extraordinary step of publicly attacking the retailer.

The Association of British Insurers acting on behalf of six of the firm's biggest investors believes it has enough support to vote down latest pay proposals, which could have seen Ashley (pictured) take up to pounds sterling 200m in shares.

The group, which represents more than 300 members who hold about 17pc of the FTSE100, went further claiming relations between the firm and the City had broken. It criticised Sports Direct's corporate governance, and says the latest pay proposal is 'completely inappropriate'.

Robert Hingley, director of investment at the ABI, went public last night about his concerns after private discussions with Sports Direct collapsed.

He said: 'It is not great for relations between investors and a firm to be confrontational or damaging. A premium listed company has obligations regarding its corporate governance and Sports Direct and its investors are not on the same page regarding this.

'The scale of the pay proposal is completely inappropriate. No one questions Ashley's talent as a retailer but the firm and investors need to find common ground in terms of how to reward him.'

A month ago the ABI was asked by key Sports Direct investors, including insurer Royal London, the Railway Pension Investments (Railpen) and the National Association of Pension Funds, to arrange a 'collective engagement' meeting with the firm.

This is where investors, who normally hold discussions individually, call a group meeting and in this case chairman Keith Hellawell, a former chief constable of West Yorkshire Police, attended with the senior independent director Simon Bentley, chairman of hair brand Umberto Giannini.

They sought to justify the scale of Ashley's reward by arguing he was so wealthy only a massive payout would register on his radar.

He had given assurances that after the three previous failed pay proposals investors would be consulted prior to a fourth being drawn up.

However, this did not appear to happen and a fourth plan was announced without any of the agreed consultation. It is feared that Hellawell and Bentley may have been railroaded by Ashley, sparking questions over the effectiveness of the board.

Investors may now vote against the re-election of some board members at the next annual meeting, preferring to see some fresh faces.

The latest problem occurred earlier this month with reward scheme version four. It lumped Ashley's bonus in with about 3,000 of his co-workers, and did not break-out the specific amount he'd personally receive if targets are met. The total amount was listed as 25m shares about 4.2pc of the company worth around pounds sterling 200m. The sum Ashley could receive could be a significant proportion of this at the discretion of the board. The ABI feels there needs to be clear criteria regarding what Ashley could take.

Sports Direct (down 7.5p to 752.5p) has failed with its three previous attempts because shareholders felt the targets were not stretching enough. Ashley, who owns 62pc of Sports Direct, is not allowed to vote and needs the support of half the institutions which own the remaining 38pc stake. The ABI issued its strongest warning, a red top alert, recommending investors vote against the plan.

Ashley, who also owns Newcastle United football club, has had a tempestuous relationship with the City, having accused some of 'behaving like cry babies' after Sports Direct's shares tanked post-float in 2007. A spokesman declined to comment.

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Department store Debenhams, in which Ashley indirectly owns a 4.6pc stake, said stores open over a year rose 0.7pc in the 14 weeks to June 7. Debenhams (down 1.3p to 70.8p) is also to trial Sports Direct and Costa coffee concessions in stores.

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Source: Daily Mail (London, England)