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Sports Direct governance changes - too little or too early to tell?

Retailer Sports Direct chief executive Dave Forsey has resigned to be replaced by Mike Ashley, founder of the company, its major shareholder and previously executive deputy chairman. No reason for his departure has been given but the resignation follows months of criticism of the company because of its working practices and poor corporate governance.

 Dave Forsey said, “I have given my entire working life to the company and in return the company has given me amazing opportunities and experiences.  I wish everyone at Sports Direct well in the future.”

Mike Fox, head of Sustainable Investments and fund manager at Royal London Asset Management, one of the most publicly critical SD shareholders expressed his concern that the changes did not go far enough, hinting that the 53% vote against chairman Keith Hellawell was the clearest pointer to the changes that are needed to restore trust and confidence in the retailer.  Speaking to BBC Radio 5 Live after Friday morning’s announcement, Manifest CEO, Sarah Wilson raised concerns about Ashley’s multiple roles and lack of independent advice.

Following the success of the shareholder resolution tabled by the Trade Union Share Owners (TUSO) which was backed by the majority of independent shareholders at the AGM, the company’s board met with 14 major shareholders, chaired by the Investor Forum, which facilitates collaborative engagement. During the meeting the investors repeated the for an independent inquiry. Sports Direct’s legal advisors RPC had published an initial report focusing on working practices before the AGM which found a number of instances of poor practice at its Shirebrook facility which the company has said it will address. However, as Manifest revealed in August, RPC staff have been routinely seconded to Sports Direct thereby raising immediate conflict of interest problems.

Sports Direct’s board said it would continue constructive dialogue with the company’s independent shareholders in order to reach agreement regarding the specific nature and timing of the review.

The company also announced that the selection process for the workers’ representative on the board of Sports Direct will be via democratic staff elections, in which it is anticipated that all staff directly engaged or employed by Sports Direct may vote. Further details of this will be announced at a later date, the company said.

Trade union, Unite, which had been leading a campaign to improve working practices across the company welcomed the company’s announcement. Calling on the Sports Direct board to work with Unite to repair confidence and restore dignity in the workplace, Unite assistant general secretary Steve Turner said: “At last Mike Ashley and his board have grasped that they need to take some very serious steps to restore shareholder, consumer and worker confidence in their employment practices.

 “We have always urged, as we did at this year’s AGM with the backing of investors, that an independent review is a vital component of this company truly getting to grips with its many and serious employment problems, so we are pleased that the company has now seen sense.”

TUSO chair Janet Williamson said, “This is good news for Sports Direct workers, especially young workers who make up a large part of their staff but too often get a poor deal at work.

“The board should now consult both shareholders and trade unions in finalising the plans for the independent review. Trade unions representing workers at Sports Direct stand ready to work with the company to ensure a successful future that is fair for its staff.”

What do you think?