Sports Direct hears shareholder anger at annual meeting
Sports Direct has heard from angry shareholders at its meeting with investors, despite the firm's pledge to improve working conditions.
Some major investors believe founder Mike Ashley, who still owns 55%, wields too much control at the retailer.
They moved to depose chairman Keith Hellawell, but Mr Ashley and the board are standing firm in their backing for Mr Hellawell.
The animated meeting saw shareholders at one point corner Mr Ashley.
Standard Life, the biggest shareholder after Mr Ashley, said it has voted against the company on several issues at the meeting, including executive pay.
Standard Life's Euan Stirling said it had engaged with Sports Direct's board "over many years, sadly to little effect. The responses to our enquiries have been either unconvincing or non existent."
The shareholder showdown comes after the sportswear chain's lawyers produced a critical report of its working conditions.
Sports Direct commissioned its legal advisers Reynolds Porter Chamberlain to carry out the review after MPs said working practices at the Shirebrook warehouse in Derbyshire were closer to "that of a Victorian workhouse than that of a modern High Street retailer".
Despite its assessment, some shareholders and unions want a new, fully independent review of company practices.
'Wad of notes': BBC's Joe Miller reports
It was a telling moment in a day that was otherwise an almost perfectly orchestrated piece of corporate theatre.
In a bid to prove to assembled reporters that he was all too aware of Sports Direct employees's daily ordeals, billionaire founder Mike Ashley demonstrated a routine search procedure at the company's Shirebrook warehouse.
In his pockets? A huge wad of red £50 notes - almost a perfect caricature of a 1980s business tycoon.
A brash, outspoken and often controversial figure, Mr Ashley is in some ways moulded by the decade in which he founded the sports retail empire.
But the charm offensive on display at this year's annual general meeting was an attempt to recast himself, and Sports Direct, in an age when the negative publicity that accompanies criticism of a firm's labour practices can hammer its bottom line, as well as its reputation.
"I agree with Theresa May," Mr Ashley told shareholders, a nod to the prime minister's pledge to change the way big businesses are governed, by giving workers and investors a greater say.
After an early skirmish with a Unite representative, Mr Ashley appeared genuinely repentant, not avoiding any difficult questions from the press, and promising that conditions would improve.
"If the headline is sorry then so be it," he said, while emphasising the sheer size of the Sports Direct operation.
One of the chief causes of uproar over the company's employment practices was that it had been paying its staff less than the legal, minimum wage.
There had been reports that Sports Direct had since refunded these workers £1m in underpayments.
But Mr Hellawell said at the meeting that they had in fact received "much less" than that.
He said the firm was trying to trace affected workers, some of whom had "moved on".
Mr Hellawell offered to resign over the weekend due to the shortcomings highlighted in the report, but the board, including Mike Ashley, asked him to stay, the company said.
"He will stay in his role in order to assist with making further improvements," Sports Direct said.
Mr Hellawell, who is 74, said he would leave by the time of next year's annual meeting if he had not gained the support of shareholders by then.
In a presentation released by Sports Direct ahead of its annual meeting, the firm insisted that despite speculation, billionaire founder Mr Ashley had no intention of taking the company private.
It also warned that profits - using its preferred EBITDA measure - would be about £300m for the 2017 financial year, 21% below 2016's £381m.
Following the trading update, Sports Direct shares dropped 11% to 312p.
The sportswear firm also said it would continue to employ the boyfriend of Mike Ashley's daughter to run its property arm.
"As previously disclosed, our property team will continue to be led by Michael Murray and his remuneration will be decided at the board's discretion," it said in a presentation released ahead of the meeting.
Last year an investigation by the Guardian newspaper revealed that staff at its Shirebook warehouse were subject to lengthy security searches which, in some cases, resulted in their pay falling below the legal minimum wage.
And a BBC investigation found ambulances were called out to Shirebrook 76 times in two years.
In Tuesday's report, Sports Direct pledged to abolish zero-hours contracts for its directly employed, casual retail staff, and make sure all staff were paid above the national minimum wage.
Later, the firm said it would put a workers' representative on its board to "give workers a voice at the highest level and to help ensure that all staff are treated with dignity and respect".
Ashley Hamilton-Claxton, corporate governance manager at Royal London Asset Management, which owns shares in Sports Direct, told the BBC on Wednesday: "We need fundamental change at the top and that starts with the chairman."
She said Mr Hellawell had "not shown sufficient leadership" and making "minor changes" to its employment practices was not enough.
Sports Direct has already commissioned a second review of working practices to monitor progress, but Ms Hamilton-Claxton said this review needed to be conducted under a new chairman "otherwise we are unlikely to see change".
Shareholder Hermes also said it would vote against the reappointment of Mr Hellawell.
"When we've met him he always comes across as an individual with the highest integrity [but] we believe now is the time for him to step down and be replaced by a strong, credible individual with strong experience of chairing a FTSE company," Leon Kamhi, the head of responsibility at Hermes Investment Management, told the BBC.
The Institute of Directors (IoD) has also called for an overhaul of the way the firm is run.
"It is good news that Sports Direct is responding to public and investor pressure to reform working practices at their facilities," said Oliver Parry of the IoD.
"But this is only the first step towards restoring shareholder and employee trust in the management and board.
"A radical overhaul of their corporate governance arrangements needs to be the next step," he added.