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Sports Direct shareholders to vote on payment to John Ashley Sports Direct under fire over £11m 'owed to Mike Ashley's brother'
(about 5 hours later)
Sports Direct shareholders are to vote on an £11m payment to the brother of billionaire founder Mike Ashley. Sports Direct shareholders have criticised the retailer's decision to ask investors to approve an £11m payment to the brother of founder Mike Ashley.
Mr Ashley will abstain from the vote along with the retailer's board, but they support the resolution, the company announced. Royal London Asset Management said the retailer had given "no evidence or detail explaining why" the sum was owed to John Ashley.
An internal probe looking into the retailer's affairs has found that John Ashley was underpaid. It would vote against the payment as it was a "consequence of poor governance".
He was denied the payments "because of concerns at the time about public relations", Sports Direct said. The fund manager has a 0.18% stake in Sports Direct worth about £3.7m.
The shareholder meeting will be held on 13 December. Ashley Hamilton Claxton, Royal London's head of responsible investment, said: "If appropriate governance measures were in place at Sports Direct in the first place, there would have been a clear and transparent process for paying John Ashley what he was due and there would be no need to review his compensation after the fact.
John Ashley, Mike's elder brother, left his job as the retailer's IT chief in 2015 to join a company that had a contract with Sports Direct. "Investors need to see a plausible reason as to why John Ashley is owed money, not how much he is owed."
That led to more criticism about the retailer's corporate governance standards, and put further pressure on chairman Keith Hellawell. Paul Lee, head of corporate governance at Aberdeen Standard Investments, added: "It's really difficult to see how it's in our clients' interest to support the proposal.
"This is a back payment from 10 years ago, for which our clients get no new benefit."
John Ashley, Mike's elder brother, departed as the retailer's IT chief in 2015 to join a company that held a contract with Sports Direct.
An internal Sports Direct investigation was conducted this year by its legal advisors RPC and accountants Smith & Williamson.
It concluded that John Ashley had been underpaid for his work since the company listed on the stock market in 2007 and was owed £11m in bonuses and performance-related share awards.
The founder's brother was denied the payments "because of concerns at the time about public relations", the company said.
Mike Ashley, who is Sports Direct's chief executive and owns a 60% stake in the company, will abstain from the vote - as will the retailer's board. However, the company said that directors supported the resolution.
Mike Ashley said John Ashley would have been paid the sum "if he were not my brother".
He added: "I fully expect that independent shareholders will vote against this proposal due to the passage of time involved, although in my opinion, technically the money is owed and therefore should be paid."
The internal review, examined "total amounts paid in money and in kind to John Ashley, which had been called into question given his position as brother of Mike Ashley".
The vote will be held at a shareholder meeting on 13 December.
Sports Direct chairman Keith Hellawell came under further pressure when John Ashley left as it raised more questions about the retailer's corporate governance standards.
In September, Mr Hellawell narrowly survived an attempt to oust him.In September, Mr Hellawell narrowly survived an attempt to oust him.
'Should be paid' Shares in Sports Direct fell 0.4% to 380.2p in afternoon trading, valuing Mike Ashley's stake in the company at about £1.2bn.
Mike Ashley said on Friday: "I intend to voluntarily abstain from the vote on whether or not John should receive the money that he would otherwise have earned at Sports Direct if he were not my brother." The stock has risen more than a third since the retailer floated a decade ago - but had been worth more than 900p in 2014.
"I fully expect that independent shareholders will vote against this proposal due to the passage of time involved, although in my opinion, technically the money is owed and therefore should be paid."
The purpose of the review, led by Sports Direct's legal advisors RPC and independent accountants Smith & Williamson, was to investigate "total amounts paid in money and in kind to John Ashley, which had been called into question given his position as brother of Mike Ashley".
The review found that he was owed the money in bonuses and performance-related share awards.