Mike Ashely – Chief Executive of Sports Direct – recently complained publicly that the company faced ‘disproportionate scrutiny and misrepresentation’. Contributor Gerry Brown, Non-executive directorships expert and author of The Independent Director: The Non-Executive Director’s Guide to Effective Board Presence.
The official statement to the stock market from Ashley went on to identify independent ‘shareholders’ along with ‘pressure from the media and certain other organisations’ as the main culprits currently provoking his corporate governance supervision ire.
Non-executive directorships expert Gerry Brown asks, “When looked at dispassionately, why does a public company with a chairman and founder from the wrong side of the tracks rightly get held to account by government committees, shareholders and investor advisory groups while so many other companies and businesses slip under the radar until they actually fail or get close to imploding? Is it because Ashley clearly isn’t one of us? Or is it because he openly shows the contempt for staff, regulators, society and shareholders that the actions of other (scandal-ridden) public companies also exhibit?”
Clearly there are many and serial problems in corporate governance at Sports Direct. There is no excuse not to address these irrespective of whatever Ashley blusters. Before the annual meeting – what Sports Direct characterised as the ‘repeated hounding of Keith Hellawell’ – finally saw the former chairman take some measure of responsibility for the ongoing controversies over corporate governance issues and resign from his position.
Far from being a cause for celebration, Gerry Brown suggest that events last week at Sports Direct are a matter of real and present danger. “In some quarters this resignation (and Ashley’s public anger) has been presented as a triumph of directorial independence and shareholder democracy. When, in this instance, it has taken an alliance of interests – including close government scrutiny and criticism by investor advisory groups – many years to gain the merest illusory hint of the fig leaf of super light touch corporate governance supervision. What has been presented as a sign that existing legislative and consultative frameworks are able to successfully hold the boards and key executives of public companies to account – in fact – confirms its current toothlessness and ongoing failure.”
Brown continues, “Clearly Hellawell’s resignation conveniently kicks many urgent corporate governance cans into the bushes or down the road while it also ensures that in the short to medium term the Chairman and board of Sports Direct can continue to act with impunity with both existing and, of course, recently acquired companies too. What is required is specific government legislation on better understanding and supervising board composition. Below are five initial proposals to re-boot and strengthen the current legislative environment to ensure greater good corporate governance and board diversity.”
- Legal requirement for Directors to be properly trained and qualified (like any other profession!)
- The requirement for the selection of Directors to be the subject of a proper search and selection process, including the oversight by investors (surveys show that over fifty percent of public companies are not)
- Board Directors to be held to public and financial account for abuses not just on a one off basis by Select Committees
- Shareholders to be much more active in the supervision of the Boards of Companies in which they invest and their objections formally acted upon when made (rather than just taken into account or ignored)
- Business Schools to be formally required to place much greater emphasis on the role of Boards and Directors responsibilities in their full-time curricula and management training programmes
- Board Evaluation to be treated much more seriously