Nearly one-third of autonomous shareholders voted against Mike Ashley continuing to be Sports Direct’s chief executive, criticizing the bad corporate governance of the company.
Ashley controls 62% of the business, but 31% of the other shareholders who voted against him at Wednesday’s annual meeting of the business cast their votes. The vote came as Sports Direct admitted that after the incumbent, Grant Thornton, resigned at the sparsely attended shareholder conference of the retailer in London, he no longer had an auditor. So far, the retailer has been unable to convince any other auditing company to take on the task.
Grant Thornton stepped down following the announcement in July of the messy annual outcomes of the retailer. The company said it could not issue profit guidance for the year ahead after more than 10 hours of delays as it had received an unexpected Belgian € 674 m (£ 605 m) tax bill. The financial director of the company also quit.
Guardian Today: the headlines, the analysis, the discussion-directly sent to you Read more The new finance director of the retailer, Chris Wootton, said on Wednesday that Sports Direct was “going through a process” to appoint a fresh auditor but did not say how long it would take.
Sports Direct must now officially notify business secretary Andrea Leadsom within a week of failing to appoint an auditor under the Companies Act. If it doesn’t, it’s going to face a fine.
If and when all other attempts to do so have been exhausted, Leadsom has the authority to appoint an auditor. Whether she will step in is not evident, but as a listed company, Sports Direct must have an auditor in place by the moment its provisional findings are announced on December 12. If it did not submit audited accounts, its shares could be suspended by the end of January.
Audit specialists said that usually a fresh auditor would have been lined up by Sports Direct months earlier. They said a company would usually have to begin working on the provisional statistics just before the half-year end of Sports Direct at the end of October.
Ashley said he was paying close attention to the accounts to make sure they were “easy and conservative” because most of his private property was bound up in the business.
“If I don’t execute[ stocks] I’m in trouble. I’ve only got a distinct view. It’s going to be a bumpy ride, but we’re going to get there, “he said.
Ashley said that for years to come, the business was unlikely to pay a dividend while investing in enhancing Fraser House and Sports Direct shops. It paid £ 90 m to purchase Fraser’s House out of administration in August 2018 and described the business as “terminal” in its final year results, adding that it probably shouldn’t have purchased the department store chain with the advantage of hindsight.
Shares of the retailer were mainly flat at 264p, but they dropped from 350p a year ago. They changed hands at more than 800p four years ago.
Ashley said Sports Direct’s future depended on moving away from its long-standing business model of “piling it high, selling it cheap,” and towards more upmarket products. He said “elevation is our golden ticket” and he wanted to open more stores like a converted BHS in Leicester, which contains a Sports Direct as well as the upmarket Flannels fashion shop and streetwear outlet USC for the group.
“It’s going on, it’s coming, it’s just not as quick as I want it,” said Ashley. “I want to click my fingers, and tomorrow I’ll have 100 Leicesters… God they’re taking some cash,” he said.
In an excentric blast, however, Ashley then informed shareholders not to purchase anything from the annual conference on Oxford Street in central London in the Flannels shop downstairs. “For a couple of shoes or a cap, it’s eye-watering what some of the rates are,” he said.
Richard Bottomley, a non-executive director, said Sports Direct required to improve its corporate governance and insisted that changes were being made by the business. “For us as an organization, corporate governance is essential and[ something] that we are well conscious of and discuss,” he said.
Ashley, however, said he had no intention of conducting a review of corporate governance norms as he had promised once. He insisted that he was not a “pantomime villain” and that distributing £ 50 m bonuses to full-time employees placed him “roads ahead of others.”
John Gray from the Local Authority Pension Fund Forum, which represents about £ 100 m of Sports Direct stocks, criticized the business for dismissing its call for an autonomous corporate governance assessment and ignoring demands for a conference.
Gray asked: “Can you clarify why you found it hard to have appropriate experience in getting an auditor and non-executive directors?”About 15 shareholders attending the conference, Bottomley said that there was” no argument “with Grant Thornton, but Sports Direct was disappointed by the delay with its outcomes.
Grant Thornton is under close scrutiny by the accounting regulator and the retailer’s inability to disclose a transaction with a business owned by Ashley’s brother was under inquiry at the moment of the Sports Direct outcomes.
Wootton said that Sports Direct had “complete trust in our figures.”
“Media loves to make this kind of thing sensational. We’re undergoing a process. We have a conservative, consistent and simple account for things, “he said.
He added that Sports Direct had met with the Belgian tax officials more than once to discuss his heavy bill and continued to think that it was “less than likely to be a material liability.”
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