Sports Direct: Reviews, Fixed Hours and Shareholder Revolt

14 September 2016 -

The almost never-ending saga involving Sports Direct’s executives, staff and investors came to ahead in full public viewing. Insights assesses the mounting pressure on its management to overhaul the way it is run

Despite the sports apparel retailer pledging to improve working conditions for its staff, Sports Direct’s attempts to regain control of its image and better manage its employees seemingly failed to appease its angry shareholders at the company’s annual investor meeting.

A Sports Direct-commissioned review into the management practices at its much-criticised warehouse at Shirebrook in Derbyshire was revealed ahead of the meeting, describing the workplace as more akin to an oppressive “Victorian workhouse than that of a modern High Street retailer”.

The retailer’s management sought to react quickly to the report’s release by publicly promising to offer directly employed casual retail staff at least 12 guaranteed hours a week, instead of zero-hour contracts.

The pledge will provide relief to the firm's 18,250 casual store staff who work on zero hour contracts, which have been widely criticised for creating financial insecurity for employees, uncertainty around entitlements to benefits and workplace stress.

However, the 4,059 warehouse workers supplied by agency staff, will not qualify for the offer, including almost all staff at the firm's troubled Shirebrook warehouse.

The review, carried out by the retailer’s legal advisers, Reynolds Porter Chamberlain, and subsequent promise of reform of key management and organisational procedures is a unique situation for a thriving company, which has become one of the UK’s 100 biggest companies in the past five years, expanding its presence on high streets across the country as revenues soared to £2.8billion in 2015.

However, successive independent investigations conducted by mainstream media stalwarts the Guardian and the BBC uncovered a plethora of management flaws within the firm, especially in regards to the management of its store and warehouse staff.

From lengthy security searches on employees, which in some cases resulted in their pay falling below the legal minimum wage, to stressed and sick staff feeling scared of spending too long in the toilet, excessive chatting or taking a day off sick thanks to a ‘six strike system.’

Therefore, in addition to cutting zero hour contracts for some staff, Sport Direct’s chiefs have promised to appoint a full time nurse at its Shirebrook warehouse "who will hopefully be in a position to offer professional advice about when an ambulance is or is not required," additional training for warehouse supervisors to "ensure there should be no culture of fear" and offer a confidential reporting system for victims of sexual harassment.

Furthermore, a tannoy policy is set to be installed to ensure it is only used for logistical purposes and not to criticise staff for not working hard enough.

The firm also 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".

Real Changes or Lip Service?

Critics have criticised Sport Direct’s pledges, saying that the changes do not go deep enough, and that they were cynically timed to subdue ill feeling towards the retailer’s bosses just a day before the board met with investors.

Some shareholders and trade unions want a new, fully independent review of company practices. Major investors Legal and General and Standard Life backed the Unite union's call for another study, stating: "a full and independent review is required”.

Investors are also increasingly focusing their dismay at the reported poor treatment of staff, and its effect on the company’s reputation and relationship with the public, as well as on billionaire founder Mike Ashley and his leading executives.

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 chairman Keith Hellawell had "not shown sufficient leadership" and making "minor changes" to its employment practices was not enough. She added that any further reviews on Sports Direct management practices needed to be conducted under a new chairman "otherwise we are unlikely to see change".

Despite shareholders calling for chairman Keith Hellawell to resign, Mike Ashley, who owns 55% of the company, and the board refused to let Hellawell leave.

"He will stay in his role in order to assist with making further improvements," Sports Direct said. 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.