Sports Direct is facing criticism from unions and investors over a proposed £11m payout to the brother of Mike Ashley, the company’s founder and majority shareholder.
Last year, Sports Direct was heavily criticised by its own shareholders and corporate governance experts after it emerged the sportswear retailer was paying a company owned by John Ashley to deliver online orders outside the UK. The arrangement with Barlin Delivery Ltd, which was unwound earlier this year, had not been disclosed in Sports Direct’s annual report.
In a statement to the Stock Exchange , Sports Direct said it wanted to pay John Ashley £11m because he had been underpaid for previous work.
It will hold a special shareholder meeting on 13 December at which independent shareholders will be given the chance to approve the payout. Mike Ashley, the Newcastle United boss who owns nearly 61% of Sports Direct, will abstain from the vote but made clear that he, and the rest of the retailer’s board, were supportive of the payout.
Sports Direct said it wanted to make the payment after asking its law firm, RPC, to review John Ashley’s history with the company and the total “paid in money and in kind to John Ashley, which had been called into question given his position as brother of Mike Ashley”.
John Ashley, a computer science graduate, built Sports Direct’s IT systems from scratch after joining his brother’s business in 1989.
Some independent shareholders said they would vote against the deal while unions criticised the planned payout in the face of ongoing disquiet over pay and conditions for Sports Direct’s warehouse and store staff.
Sports Direct said RPC’s review, conducted with accountants Smith & Williamson, had concluded that if John Ashley had been treated equally with other senior executives who had helped develop Sports Direct he would have received additional payments totalling about £11m. It said he had been denied this “because of concerns at the time about public relations”.
The money deemed owed to John Ashley reportedly relates to a £5m bonus linked to Sports Direct’s 2007 flotation and a later performance-related share award worth £6.8m.
Mike Ashley said in the statement: “I fully expect that independent shareholders will vote against this proposal due to the passage of time involved, although in my opinion, technically the money is owed and therefore should be paid.
“It’s important for me to say that if John had owed £1 to Sports Direct, I would have ensured any sum was repaid in full. I hope shareholders will therefore be reassured that everything is in order and that any concerns are laid to rest.”
When news of the contract with Barlin emerged, it spurred shareholder unease about corporate governance of Sports Direct that had already been fuelled by Mike Ashley’s decision to put his daughter’s boyfriend in charge of the firm’s property team.
The company has also faced criticism over the treatment of workers. Thousands of Sports Direct warehouse workers were awarded about £1m in back pay after a Guardian investigation revealed the company was effectivelybelow the minimum wage.
Steve Turner, of the Unite union, which has campaigned for better pay and conditions for Sports Direct workers, said some were still waiting for their share of back pay from the employment agency they were hired through.
He said: “If Mike Ashley is so concerned about ensuring his brother gets the back pay he says he is entitled to, why not the agency workers at Sport Direct’s Shirebrook warehouse?
The company also said on Friday it wanted to approve a £3-a-share minimum payout to executives Karen Byers and Sean Nevitt – the only remaining participants in the Sports Direct executive bonus share scheme – if they elect to exercise their shares before September 2018, or £4 a share after that month.
Sports Direct shareholder Royal London said it would not support the share deal for executives or the payout to John Ashley.
Ashley Hamilton Claxton, the head of responsible investment at Royal London Asset Management, said: “If appropriate governance measures were in place at Sports Direct in the first place, there would have been a clear and transparent process for paying John Ashley what he was due and there would be no need to review his compensation after the fact.”
It said Sports Direct had not provided evidence or detail explaining why the £11m was owed.
Aberdeen Standard Investments said it would find it “really hard to support” the payout as it was a “significant amount of money for services already rendered”. Paul Lee, its head of corporate governance, said: “It doesn’t really make any sense.”
The battle over the payout to John Ashley is the latest in a series of tussles with shareholders and unions over corporate governance.
In the wake of the revelations about Barlin, independent shareholders last year voted out Sports Direct’s chairman, Keith Hellawell, but he stayed in his job with the backing of Mike Ashley.
