The Investor Forum is calling on retail chain Sports Direct to commit to a fully independent review of its entire governance practices.

The Forum is an independent, not for profit organisation funded by a membership of 40 leading asset managers, insurance companies, pension funds and endownments.

The public call on the company to conduct the review follows an extensive process of collective shareholder engagement between a number of Forum members and the Board of Sports Direct International, over an extended period of time.

Following Sport’s Direct founder Mike Ashley’s appearance at the Business, Innovation and Skills Select Committee, shareholders requested that the board commit to an independent and comprehensive review.

The Forum was clear that the review would have to be independent, comprehensive and, as recommended by the BIS Committee report, cover all aspects of corporate governance across the business, not only employment practices.

The Forum said recent developments demonstrate continued reluctance on the part of the Board to act in line with the views of independent shareholders.

For example, the narrow benchmarking exercise of employment practices is being carried out by RPC solicitors, who SDI has a pre-existing relationship with, and therefore will not be independent. The recently announced external Board evaluation, (which is already a minimum requirement under the UK Corporate Governance Code), fails to reflect the breadth and magnitude of reform that is required.

“Governance failings are clearly resulting in declines in operating performance and long term shareholder value and, given the lack of progress and the broader impact on all stakeholders, the Forum now considers it important to make public its recommendations to the SDI Board.

“A clear plan of action is urgently required to begin rebuilding the confidence of shareholders and that of wider stakeholders. The Forum calls on the Board and Mike Ashley to launch an independent review of the company’s entire corporate governance framework at the AGM on 7th September and commit to implement the recommendations of that review,” it said.

The review the Forum are calling for would go beyond the currently proposed board effectiveness evaluation, and the terms of reference should address fully the previously raised investor concerns. These include corporate governance and board oversight effectiveness, related party transactions and potential conflicts of interest, employment practices, acquisition strategy and associated due diligence and oversight of key supplier relationships and the management of the store portfolio.

Investor Forum executive director Andy Griffiths said: “It is highly unusual for the Investor Forum to consider it necessary to make public their concerns and recommendations in this way. In prior situations we have always managed to work privately with companies to create effective long term solutions.

“We do not take this step lightly and whilst we welcome SDI’s move to hold an open day, we still have not received an appropriate level of commitment to respond to investor concerns and, as a result, the usual options have been exhausted.

“We remain committed to engaging with the Board constructively to enhance the value of Sports Direct’s franchise but this requires the company to reconsider its proposed actions and acknowledge the need for fundamental reform. If they are unable to do so, then members of the Board will have to ask themselves whether they are able to effectively represent the interests of all shareholders.”

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