Sports Direct shareholders criticise decision to approve £11M payment to founder's brother
Sports Direct shareholders have criticised the retailer’s decision to ask investors to approve an £11m payment to the brother of founder Mike Ashley.
Royal London Asset Management said the retailer had given “no evidence or detail explaining why” the sum was owed to John Ashley.
It would vote against the payment as it was a “consequence of poor governance”. The fund manager has a 0.18% stake in Sports Direct worth about £3.7m.
Ashley Hamilton Claxton, Royal London’s head of responsible investment, 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.
“Investors need to see a plausible reason as to why John Ashley is owed money, not how much he is owed.”
Paul Lee, head of corporate governance at Aberdeen Standard Investments, added: “It’s really difficult to see how it’s in our clients’ interest to support the proposal.
“This is a back payment from 10 years ago, for which our clients get no new benefit.”
John Ashley, Mike’s elder brother, departed as the retailer’s IT chief in 2015 to join a company that held a contract with Sports Direct.
An internal Sports Direct investigation was conducted this year by its legal advisors RPC and accountants Smith & Williamson.
It concluded that John Ashley had been underpaid for his work since the company listed on the stock market in 2007 and was owed £11m in bonuses and performance-related share awards.
The founder’s brother was denied the payments “because of concerns at the time about public relations”, the company said.
Mike Ashley, who is Sports Direct’s chief executive and owns a 60% stake in the company, will abstain from the vote – as will the retailer’s board.
However, the company said that directors supported the resolution. Mike Ashley said John Ashley would have been paid the sum “if he were not my brother”.
He added: “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.”
The internal review, examined “total amounts paid in money and in kind to John Ashley, which had been called into question given his position as brother of Mike Ashley”.
The vote will be held at a shareholder meeting on 13 December.
Sports Direct chairman Keith Hellawell came under further pressure when John Ashley left as it raised more questions about the retailer’s corporate governance standards. In September, Mr Hellawell narrowly survived an attempt to oust him.