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Sports Direct Shenanigans Suggest The Need For A Closer Look

Posted on January 4, 2016 at 4:10 PM

Nothing like starting a New Year off on the right foot. Early this morning I tweeted a regulatory statement from Sports Direct, which calls itself 'The UK's No 1 Sports Retailer.'

It has also been in the news a great deal around its attitude to best working practices and the minimum wage. The sports retailer came to my mind as an interesting contrast in its approach to people (judging by the media coverage) , when I was writing just before Christmas on Forbes on the 'people factor' in business.

This statement 'clarifying the role of Michael Murray' clarifies absolutely nothing. It came following these revelations by The Telegraph on December 5, 2015.

"Mike Ashley, the billionaire owner of Newcastle United, has made his daughter’s 26-year-old boyfriend a key player in his sprawling retail and property empire, it can be revealed.

Michael Murray, who is registered as occupying a £5m residence in Chelsea with Mr Ashley’s 24-year-old daughter, Anna, has been made a director at four companies linked to the tycoon"(my emphasis)."

Good grief. It says a lot about the state of 'comply or explain' that it has taken a whole month of merriment before Sports Direct deigned to respond, and then did so in this manner.

So now we know that Michael Murray is a "consultant" who could receive millions of pounds for his role. He isn't paid a salary (because that would be awfully transparent? ) but will receive up to 25% of the “value” he creates for Sports Direct by opening new expanded stores. Who decides ? Why, the non-executive directors of course.

Let's hope none of them are his godparents.

Michael Murray is a consultant who appears to be acting as an executive director. It's all very confusing. As Sarah Wilson, CEO of Manifest, the proxy voting agency interested in the pursuit of sustainable corporate governance asks: " What benefit does all this complication bring and to whom?"

But I think we should thank Sports Direct. Because it has inadvertently brought to everyone's attention some interesting goings on in the FTSE 350 - the regular movement of people into interim 'consultancy' roles after occupying roles as directors or non-executive directors.

In 2014 and 2015 I spent far too much time starting my day by regular perusal of the regulatory announcements (as a private investor of course) via Investegate - as long-suffering Twitter followers might know.

I couldn't help noticing how often plcs adopted such arrangements - where someone steps off a board, but continues to 'consult' - and is therefore not burdened by the same level of transparency and accountability. I would have to go back and get evidence but you will have to trust me - It happens a lot.

Checking with the UK Corporate Governance Code, it is all very clear about the 'independence' of non-executive directors, but as far as I can see, there is nothing about consultants (unlkess they are remuneration or executive search consultants). It seems like asking for trouble not to directly state that there should not be movement in between the roles unless for a very specific stated purpose and period of time.

I give you B.1.1 (the emphasis is mine) of the UK Corporate Governance Code

The board should identify in the annual report each non-executive director it considers to be independent.

5 The board should determine whether the director is independent in character and judgement and whether there are relationships or circumstances which are likely to affect, or could appear to affect, the director’s judgement. The board should state its reasons if it determines that a director is independent notwithstanding the existence of relationships or circumstances which may appear relevant to its determination, including if the director:

 has been an employee of the company or group within the last five years;

 has, or has had within the last three years, a material business relationship with the company either directly, or as a partner, shareholder, director or senior employee of a body that has such a relationship with the company;

 has received or receives additional remuneration from the company apart from a director’s fee, participates in the company’s share option or a performance- related pay scheme, or is a member of the company’s pension scheme;

has close family ties with any of the company’s advisers, directors or senior employees;

We have the whole year to talk about this.....in a year when corporate governance is in strong focus, icymi just up on Forbes.


Categories: Scrutiny, Appointments, Governance