Major Sports Direct shareholder Standard Life Investors has issued an open letter to the company outlining its “strong stance” against the board as it faces shareholder revolt at its AGM today.
“We have voted against the company’s remuneration report and against the reappointment of all of the non-executive directors,” head of stewardship and ESG investing Euan Stirling tells the chairman in an open letter.
The asset manager, which describes itself as a “longstanding shareholder”, holds 5.8 per cent of the troubled retailer’s 5.8 per cent stock.
It joins a number of asset managers that have called out the retailer on its poor corporate governance, with Royal London Asset Management and Hermes Investment Management this week announcing they would vote against key board appointments.
The Investor Forum, which represents £14.5trn worth of assets, has also taken the unprecedented step of going public with its concerns about the company.
“Tight cost control can be an attractive feature of a business. However, taken too far, and with a focus on the short-term, it can and does result in the starvation of investment in talent, facilities and infrastructure which can leave a business vulnerable to its competitors and its own weaknesses,” Stirling writes.
This year, the retailer was accused of having conditions like a Victorian workhouse when its billionaire majority owner Mike Ashley appeared before the select committee of the Department for Business, Innovation and Skills.
Despite Ashely’s controversial public persona, Stirling argued he should hold a “role, title and responsibilities that reflect his influence as majority shareholder and founder of the business”.
“And we would like to see that pivotal role supported, as well as challenged, by a group of talented and experienced executives. It is our opinion that even then, substantial strengthening of the non-executive members of the board will be required, particularly in the crucial role of Chairman.”
Stirling said SLI welcomed this week’s publication of a Working Practices Report, but said the ‘follow up’ section of the report was “insufficient” to realise the group’s potential.
“In order to arrive at the correct structural conclusions, we believe that a full and independent review of governance at the company is required, along with a commitment to publish and act on the review’s conclusions and recommendations in the next twelve months,” Stirling says.
The letter detailed how SLI appreciated the scale and market position of the business and its long-term value position, which was why it remained an engaged shareholder.
However, it added: “We increasingly believe that a structural change in the way that the company is governed is now required.”