When Sports Direct announced the voting results at its General Meeting on 5 January this year, it looked at first as if its Chairman Keith Hellawell had been re-elected, with 81 percent of the vote. Helpfully, however, and in line with its new shareholder-friendly spirit, the company “for full transparency” also showed the votes of just the independent shareholders, excluding the majority shareholding of CEO and founder Mike Ashley. Under this calculation, Hellawell was not re-elected, as 54 percent of independent shareholders voted against him.

According to the filing announcing these results, Ashley responded to this saying: “Keith has my full backing and will be continuing in his role on the basis that he has the unanimous support of the board. I note that many of those who voted against Keith have acknowledged that we have made positive progress since the AGM.”

The cause of the general meeting were the results of a September annual general meeting (AGM) where independent shareholders previously voted against Hellawell’s election. Under English corporate law, where this happens, the company must hold another meeting and another vote, which it did, but with the same result. Hellawell has said that if he fails to receive the full support of the independent shareholders at the 2017 AGM he would resign with immediate effect.

Sarah Wilson, CEO of proxy voting service Manifest, indicating that this was an “oops, they did it again” moment, commented on the results, saying: “It seems truth is stranger than fiction. Of course we expect Sports Direct to comply with the law, but corporate reputation goes beyond the letter, clearly there are cultural challenges that need to be addressed.” On the news that Hellawell did not resign, she added: “I am sure that many investors, whilst on the one hand relieved that something is being done, are very disappointed that Sports Direct appears to have broken faith with investors, and not for the first time.”

“Of course we expect Sports Direct to comply with the law, but corporate reputation goes beyond the letter, clearly there are cultural challenges that need to be addressed.”
Sarah Wilson, CEO, Manifest

Hellawell had been fighting back. During an earnings call in December, when the company announced a drop in profits, he said: “I have no doubt that the extreme political, union, and media campaign waged against this company has not only damaged its reputation and influenced our customers, it has impacted negatively on the morale of our people. I begin to question whether this intense scrutiny is all ethically motivated. One of the most damaging consequences has been for the very people our critics supposedly support.”

Hellawell had offered to step down after the damaging working practices report on the company came out in September from the “not particularly independent” law firm Reynolds Porter Chamberlain. However, he was “persuaded” by the board, Ashley, and other senior managers to remain.

On the same earnings call, the appointment of a new non-executive director was announced, ex-investment banker David Brayshaw. Brayshaw has 30 years’ experience in investment and commercial banking with organisations such as Barclays Capital, HSBC, Citigroup, and Pilkington. Clearly, this is not the worker representative to the board that Sports Direct has promised, who is likely to be put up for election at the September 2017 AGM, but it is an improvement to the board.

Just after the AGM, Andy Griffiths, executive director of the Investor Forum, said on 8 September 2016: “Independent shareholders have sent a clear message to the Board of Sports Direct through their votes at the AGM and in their public statements. We are encouraged by Sports Direct’s recent open approach, publishing the working practices report and hosting an open day. These, however, are only the first steps in a long journey toward rebuilding trust and shareholder value. Our focus in the coming weeks will be on identifying key milestones to achieve this goal and, in particular, reaching agreement regarding the specific nature, remit, and timing of the 360 and governance reviews.”

Using the Investor Forum’s shareholder engagement framework, Sports Direct has been engaging with investors to get a full corporate governance review under way. This review is expected to be published some time in the next few months. Investors will be hoping that it includes some recommendations to act on their wishes.