Keith Hellawell. At Sports Direct’s AGM on 7 September, a majority of independent shareholders voted to oust him as chairman. Photograph: Darren Staples/Reuters
Sports Direct and its shareholders are struggling to agree on a heavyweight individual to conduct an independent review of the business before a second vote to re-elect its chairman that must take place by early January.
At the retailer’s annual general meeting on 7 September, a majority of independent shareholders voted to oust Keith Hellawell as chairman. At a tense meeting following the AGM, shareholders demanded an independent review of how the company is run as a minimum requirement for working with Hellawell.
The Investor Forum, which represented big shareholders in talks with Sports Direct, said at the time the review could be carried out by an experienced person or a law firm. Two weeks after the AGM, Sports Direct agreed to independent scrutiny of its treatment of employees and corporate governance.
Sports Direct had wanted the law firm Reynolds Porter Chamberlain (RPC) to carry out the review but shareholders said it was not independent because it had worked for the company and Ashley. But other firms could also have perceived conflicts of interest if they have worked for big investors or they might seek work from them in future.
An investor familiar with the talks said for that reason both sides were now looking for a credible individual rather than a professional services firm to conduct the review. But the number of qualified people is limited and potential candidates are likely to be busy or wary of putting their reputation on the line.
The investor said: “Finding someone acceptable to the board and investors is one thing and persuading them to do it is another. It’s going to be quite high profile and it has to be someone who is prepared to take it on and be ready for that sort of publicity.”
The law says Sports Direct has to hold a further meeting to vote on Hellawell’s appointment between 90 and 120 days after the AGM. At that meeting, founder Mike Ashley can use his majority stake in Sports Direct to push Hellawell’s appointment through but it would be embarrassing if independent shareholders continued to oppose him.
The investor said shareholders could be prepared to vote for Hellawell to reward the board for engaging with investors after ignoring protests in the past but that appointing a credible person to lead the review might be needed for them to believe the company was serious about reforming itself.
Hellawell, who tried to resign before the AGM, lost the vote after the Guardian’s revelations about working practices at Sports Direct confirmed to many shareholders that there were serious problems with the way the company was run. The revelations coincided with declining financial performance which galvanised some shareholders who had supported the board before.
RPC carried out a preliminary review of working practices that was more critical than some had expected. Sports Direct has pledged to end zero-hours contracts for shop staff and to start moving agency staff at its warehouse on to permanent contracts and to employ a welfare officer and a nurse at the site.