Bargain clothing chain Sports Direct just got slammed by the Institute of Directors for failing to curb British billionaire Mike Ashley’s control over the group. The IoD is an influential organisation made up of 34,500 British businesses.
A senior executive at the IoD said in a statement to the Guardian newspaper that the latest revelations by Sports Direct’s chairman Keith Hellawell to the Scottish affairs select committee last week showed how the group was “dysfunctional.”
Hellawell told politicians last week that the £4 billion clothing chain’s non-executive directors didn’t know that its “premium lifestyle arm” USC was being put into
administration until the day before it happened.
IoD’s Parry also slammed Sports Direct for the “moral and ethical issues” surrounding the level of power the elusive billionaire Ashley, worth £3 billion personally, has over the company.
“This is a further indication of how dysfunctional the Sports Direct board is. Last year we saw the board trying to push through a huge pay plan for Mike Ashley and you don’t need to be a forensic lawyer to figure out that there isn’t a sufficient check on Ashley’s powers,” said Oliver Parry, senior adviser on corporate governance at the IOD in a statement.
“This is not just reputation al damage, but there are moral and ethical issues here. About 200 workers were laid off and the board was not aware until the day before. For a FTSE 100 firm that’s not acceptable. Boards need to hold management to account.”
Sports Direct was not immediately available for comment at the time of publication.
Sports Direct’s parliamentary grilling
On March 25, 2015, Sports Direct’s Hellawell gave evidence in front of a panel of MPs, to answer questions over the complex deal involving USC earlier this year. Ashley claimed he was “too busy” to attend.
Ashley’s Sports Direct bought a majority stake in USC and its 90 stores in 2011, through two holding companies.
However, USC went into administration after a debt dispute with one of its long-term suppliers, Diesel. It led to the loss of 200 jobs in Scotland and the closure of 28 stores.
But Ashley’s Republic clothing chain, known as the “premium lifestyle arm” of Ashley’s empire, bought USC out of administration almost immediately.
Politicians hoped to grill Ashley over his overall treatment of workers as Sports Direct is a prolific user of zero-hours contracts. The controversial terms of employment don’t guarantee work and or provide sick, holiday and maternity pay.
Around 90% of Sports Direct staff are on zero-hours contracts. Meanwhile, according to options trading firm Banc De Binary, Sports Direct makes one of the lowest contributions to staff pensions out of all the firms in the FTSE 100. On average, Sports Direct only contributes £82 per employee annually. This is dramatically lower than the £2,920 per staff member, on average, for the FTSE 100 as a whole.
However, after Hellawell gave evidence, politicians branded Sports Direct as a “backstreet outfit” for refusing to pay its debts to suppliers. The MPs also said the clothing chain “shafted” taxpayers, suppliers and workers and “walk[ed] away with the assets” in a move that “might be legal but it is certainly not moral.”