If you have ever wondered why those of us who cover the City are sometimes driven to despair, I give you Sports Direct.
You may remember earlier this week I noted that finally – and after a litany of governance failings and pay outrages that the company would struggle to list on one of its ubiquitous flash sale e-mails – it looked as if the City was preparing to send the message that the sportswear and equipment retailer should play nice.
In addition to the unions and people like the governance watchdog Pirc – which is renowned for ploughing a lonely furrow of dissent when it comes to corporate governance failings – this time around a sizeable fund manager with real clout had broken cover to say some fairly unflattering things about the company. Royal London Asset Management also pledged to vote against the re-election of chairman Keith Hellawell and his fellow non-executive directors for the second year in a row.
It got better. Analysts working for investment banks serving as corporate brokers rarely do anything to rock the boat, chiefly because they put their employment prospects in real danger if they do.
But after Sports Direct had the gall to issue a virtually fact-free trading update that basically said, “We’re doing fine, and we’re not going to tell you anything else until we’re good and ready, so run along and shut the door on your way out”, BESI’s Tony Shiret felt moved to issue a gentle rebuke.
“Overall we expect that investors may react adversely to the lack of detail here,” he opined in a note published on the morning of the annual meeting. For which read: “Really guys? You know they’re going to be seriously annoyed about this, don’t you? Couldn’t you have thrown them a banana or two to keep the peace?”
Sports Direct, which had banned the media from its AGM, and by so doing put itself in the company of dodgy little mining companies with nasty histories, was unmoved. Its message can by summed up thusly: “Get knotted. We’re in charge here, and if you don’t like it, there’s the door.”
In response, the majority of its investors duly assumed the position and said: “Yes sir, please may I have another”. RLAM, Legal & General and one or two others did vote against Mr Hellawell’s re-election and those of some of the others, as promised. But when the final results were published it emerged that they needn’t have worried too much. Less than a quarter of the group’s independent shareholders (in other words those not connected to founder and controlling shareholder Mike Ashley) voted against Mr Hellawell, who prompted the biggest protest. Even after abstentions he still had the backing of more than 70 per cent of them. The advisory vote on the remuneration report attracted rather more dissent, but the key word there is “advisory”.
For what it’s worth, here’s some advisory comment: Sports Direct will continue thumbing its nose at its investors as a result of this, because the company, its board and, especially, Mr Ashley now know that they can. What should be deeply disturbing to anyone with investments or pension funds linked to the London Stock Exchange is that the message will have been heard and taken note of across corporate Britain.
