SPORTS Direct’s billionaire founder Mike Ashley has withdrawn from the retailer’s controversial bonus scheme just days after it was backed by a slender majority of shareholders.
The 2015 bonus plan has the potential to pay out £200 million among thousands of staff, including executive deputy chairman Ashley, pictured below, if earnings more than double over the next five years.
But the group said today that its remuneration committee was told after discussions with the tycoon that he did not wish to participate in the scheme. Non-executive chairman Keith Hellawell blamed “recent unhelpful speculation” surrounding the size of Ashley’s potential payout for his surprise withdrawal.
The Newcastle United FC owner has not received a salary or bonus since the retail giant listed in 2007, although he netted £929m in the flotation and has since banked hundreds of millions of pounds selling shares in the business. He still owns 58 per cent of the company.
Sports Direct, which has some 400 UK stores and operations in 19 countries in Europe, has not paid a dividend since its flotation. However, analysts speculated that Ashley’s move to shun the bonus could prompt a rethink.
The 2015 bonus scheme would have awarded him a multi-million-pound payout, but it attracted criticism from investor lobby groups as well as the Institute of Directors (IoD), unhappy that a major investor could receive a bonus, even if he was an executive.
Roger Barker, director of corporate governance at the IoD, congratulated Ashley on his decision to opt out of the scheme. He said: “As a director, senior executive and major shareholder of Sports Direct, he occupies a position of unique influence in the organisation. By taking this step, he is helping improve external perceptions of Sports Direct’s governance, which will ultimately be beneficial to all stakeholders.”
Ashley has also said he does not expect any other incentive scheme to be proposed to shareholders over the term of the current bonus plan. To achieve the payout, the firm’s earnings will have to hit £480m at the end of the 2016 financial year and rise to £750m by 2019. In results due today, Sports Direct is expected to report earnings of around £330m. Part of the firm’s recent success has been put down to its employee bonus scheme, with the 2011 staff plan on track to reward more than 3,000 workers – having surpassed two of the four targets. Just over 60 per cent of the shareholders eligible to vote backed the current plan at a special meeting at the company’s headquarters earlier this month.
In April, the group pulled a proposal that could have awarded Ashley more than £70m based on targets for this year and 2015. The business initially tried to hand him a bonus in September 2012, but again failed to win enough investor support.