IoD warns there is no ‘effective check on Ashley’s power’ at Sports Direct

The Institute of Directors has expressed significant concerns about Newcastle United owner Mike Ashley’s power over Sports Direct.

Mike Ashley, holds a 58 per cent stake in the firm and also serves as Deputy Executive Chairman.

Sports Direct is seeking to push through a generous bonus scheme for Ashley. The IoD is concerned that this is suggestive of weak underlying governance at the company.

At the shareholder meeting taking place on 2 July, the board is expected to seek shareholder approval for the potential award of shares worth £200m to Mr Ashley and an undisclosed number of employees.

According to the IoD, this is the third attempt in two years by the company to pay its founder a high share-based bonus. All previous proposals have been rejected by shareholders.

Commenting ahead of tomorrow’s vote, Dr Roger Barker, Director of Corporate Governance at the Institute of Directors said:

“The fact that the board of Sports Direct is attempting once again to push through a hugely generous pay award for Mike Ashley – in the face of shareholder opposition – suggests weak governance at the company.

“This type of pay package would be unthinkable for a senior executive who was not also the company’s major shareholder. It raises doubts about whether the board is acting as an effective independent check on Ashley’s power.

“The IoD believes that, in a public company involving other people’s money, an independently minded board is essential in order to balance the interests of controlling shareholders, minority shareholders and other stakeholders.”

In a release from the IoD, it is stated that Mike Ashley’s interests as a senior executive are “already fully aligned with the interests of shareholders due to his substantial equity stake. His pay as a senior executive should not be influenced by the fact that he is also a controlling shareholder.”

The statement continues: “The UK Corporate Governance Code requires that levels of remuneration should be sufficient to motivate directors of the quality required to successfully run the company, but a company should avoid paying more than is necessary for this purpose. Even though it is conditional on achieving performance targets, Mike Ashley’s proposed pay package appears to go well beyond this.”