Mike Ashley will finally get his bonus after the board of Sports Direct surrendered to pressure from shareholders for changes to the scheme, and shareholders succumbed to threats that rejecting it would deny payouts to thousands of staff and might even see the founder himself move on.
This has been a long and unseemly stand-off which has raised serious questions about standards of corporate governance and divided investors over whether or not Ashley was entitled to a mega-payout from the proposed £200 million pot.
The meeting to vote on the deal was initially planned for April but had to be postponed, although this is the fourth attempt to get an individual bonus paid to the company’s founder by those who deem him worth it. Some of those who objected to the initial deal were clearly swung by amendments that will see conditions attached to the payment as well as awards to 3,000 permanent staff.
These staff bonsues are not to be sniffed at, Last year store managers earning £30,000 a year received bonuses worth as much as £70,000. However, 90 per cent of employees are on controversial zero-hours contracts and will receive nothing.
An outstanding issue is exactly how much Ashley will receive from the bonus pool. He is the executive deputy chairman and does not take a salary. However, he is a 58 per cent shareholder which gives him control of the business. The generally held assumption is that his bonus is in the region of £73m, as proposed last time, but this was not confirmed and it could be higher.
The size of the deal has prompted an outcry, not least from the Institute of Directors whose director of corporate governance Roger Barker, said on Tuesday that “this type of package would be unthinkable for a senior executive who was not also the company’s major shareholder. It raises doubts about whether the board is acting as an effective independent check on Ashley’s power.”
In other words, the board is pandering to its majority shareholder in a way that it may not have done if he was merely a salaried executive. Were they really worried that Ashley would grab his replica shirt and quit the company in which he has tied up his fortune?
There are bigger worries here that after various revisions and tightening of the code on corporate governance another weak spot has been discovered that could set a dangerous precedent on how companies are run. At the very least, a lack of transparency does little to encourage trust and accountability in one of the country’s bigger quoted companies.