Yesterday was the AGM of Sports Direct, one of the more 'colourful' UK public companies. It has recently been attacked for a poor approach to pay at both ends of the scale.
The company has been defeated several times in attempts to introduce an incentive scheme for Mike Ashley, hugely annoying shareholders not called Mike Ashley in the process. A scheme was passed - with a 40% vote against - earlier in the summer, though Ashley subsequently declined to participate in it. Many shareholders - and representative bodies like the NAPF, ABI and IoD - have argued that the pay issue reveals that there are real governance failings at the company. In short, Mike Ashley acts like it's his company alone, and the board don't stand up to him.
Meanwhile Sports Direct has also come under attack for its use of zero hours contracts. It is believed to be the employer with the largest number of workers employed on these terms, and the contracts also make it hard for staff to do other jobs to make up the hours. Hats off to Share Action for making the trip up to Shirebrook to raise this issue at the AGM. And it looks like Sports Direct's problems are expanding on this issue.
The voting results from the AGM tell their own story. Just looking at the headline stats, the remuneration policy attracted the largest vote against - about 12%. But when when you strip out Mike Ashley's controlling stake it's a very large vote (40%+) against - the Telegraph think a majority of non Mike Ashleys voted against, though that looks wrong to me.
Much less impressive, however, is the vote against the chair, Keith Hellawell which looks to be about 20% of the non-Ashley vote. There has been extensive criticism, both public and private, of the Sports Direct board. A strong vote here would have been an important signal that governance needs to be improved. But, yet again, the focus has been kept on pay, surely the symptom not the problem in this case. It remains the case that asset managers - unlike a number of asset owners - don't use their legal rights to challenge incumbent directors even where there are serious concerns.
No doubt some will claim, as they always do, they are putting pressure on privately and that we shouldn't read too much into the votes. Well, in a situation where we have a cowed board and a domineering controlling shareholder I think that is a strategy that is doomed to fail (and perhaps those adopting it are well aware of this). There is still a big gap between public declarations about stewardship and what happens in practice at problem companies. If you are a pension fund trustee, I would urge you to find out how your asset manager voted on this one.
PS. This example also reminds me of why folks using the example of controlling shareholders to argue against requiring a 75% threshold to pass rem policy really missed the bigger picture. Cases like Sports Direct are surely going to be more common.