Royal London Asset Management and Hermes Investment Management have joined other asset managers in the revolt against poor corporate governance at UK-listed retailer Sports Direct.
Both asset managers will vote against several board appointments, including chairman Keith Hellawell, when the company, which is majority owned by Mike Ashley, holds its AGM this week, City AM reports.
Hermes has confirmed it will also vote against the chief executive and CFO.
Since its AGM last year Sports Direct’s share price has fallen 60 per cent, despite slight increases in revenues and gross profits.
Last month, The Investor Forum, a group of asset managers with combined assets of £14.5trn, said Sports Direct had failed to address investor concerns and that it would also urge shareholders to vote against the reappointment of key board members.
In June, MPs described working conditions at Sports Direct’s factories as akin to Victorian workhouses. Earlier in the year, it was revealed that the 26-year-old boyfriend of Ashley’s daughter had been placed in charge of the company’s property portfolio.
Hermes Investment Management head of responsibility Leon Kamhi says: “The chairman, Keith Hellawell, together with independent directors Simon Bentley and David Singleton, have lost the confidence of many of Sports Direct’s minority shareholders and should step down from the board.
“An external, independent successor to the chair role should be appointed as soon as possible, followed by additional independent directors. Moreover, it is our view that a CEO and permanent CFO with robust credentials who can build the trust of shareholders are appointed.”
RLAM corporate governance manager Ashley Hamilton Claxton says anew chairman needs to be appointed within the next six months.
“Sports Direct continues to be reckless with shareholders’ money and we are glad to see other investors join us in speaking out about poor governance within the company and across the industry,” Hamilton Claxton says.
“At the risk of sounding like a broken record, we are astonished at the lack of improvement in corporate governance matters at Sports Direct, despite repeated attempts by ourselves and other investors to push for positive changes at the firm.
“Since the 2015 AGM, despite slight increases in revenues and gross profits, the company’s share price has fallen 60 per cent following scandal after scandal, a clear sign of the impact which severe corporate governance issues can have on investors’ long term outlook for a company.
“Even some sell-side firms have lost some of their optimism, with research recommendations of two of Sports Direct’s corporate brokers downgrading their rating from Buy to Neutral during the past year.”
She added that it is “unacceptable” for a FTSE-listed company to operate for nearly three years without a finance director.
The Investors Forum, which represents asset managers such as BlackRock and Allianz Global Investors, criticised Sports Direct for failing to undertake an “independent and comprehensive” review as requested by investors.
Instead it tasked RPC Solicitors, which it already had an existing relationship with, to undertake a “narrow benchmarking exercise”, which the group said failed to address the “breadth and magnitude” of reform required.
Executive director Andy Griffiths said The Investor Forum had previously been able to address corporate governance concerns in private with companies, but the lack of action from Sports Direct had required it to go public.
The Investor Forum represents approximately 27 per cent of independent shareholders in Sports Direct.