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LONDON – Two of Sports Direct’s biggest independent shareholders are selling out of the troubled stock, according to a report in the Guardian.
The paper reports on Friday that Standard Life Investments, Sports Direct’s biggest independent shareholder, sold its entire 5.8% stake in the discount sports retailer. Aviva has also reportedly reduced its shareholding.
The precise reasoning behind the sales is not immediately clear but it may well be frustration with Sports Direct’s corporate governance.
Founder Mike Ashley is the majority shareholder of Sports Direct and took over as CEO last year despite opposition from independents. Standard Life has been a vocal critic of what it sees as lax corporate governance standards at the company.
Euan Stirling, head of stewardship and Environmental, Social and Governance Investment at Standard Life Investments, said in a statement at Sports Direct’s AGM last year: “We are longstanding shareholders in the company and have engaged with senior executives and non-executives over many years, sadly to little effect. The responses to our enquiries have been either unconvincing or non-existent.”
Standard Life’s apparent ditching of Sports Direct comes after a recent lawsuit against Ashley laid bare his unconventional management style. Ashley admitted to being a “binge drinker” during cross examination in the case and admitted to doing some business while drinking.
Sports Direct tried to highlight progress it has made on corporate governance in its annual report, published on Thursday. Chairman Keith Hellawell writes in the report:
“In terms of stakeholder engagement, Mike Ashley and I have attended collective meetings with stakeholders on set dates in the financial calendar. Details of our current engagement policies are set out in our Engagement Statement on the Group website. Meanwhile, an independent third party, NJMD Corporate Services Ltd, has carried out our triannual Board evaluation and we intend to review the results in due course.”
Hellawell’s own position is in doubt. Independent shareholders failed to back his re-election last year and the former police chief was only returned to the position of chairman with the support of Ashley, who owns over 50% of Sports Direct’s shares. Hellawell has pledged to stand down if independent shareholders fail to back him at next month’s AGM.