Sports Direct apology over regime at Shirebrook comes at 11th hour

It will be standing-room only on the 07.58 from St Pancras International to Chesterfield this morning, as shareholders, institutional investors, the media, unions and other interested observers travel north to the notorious Shirebrook headquarters of Sports Direct International.

At 11.00, the long-awaited showdown with the beleaguered board of Britain’s biggest sports retailer will begin.

Sports Direct, controlled by the combative and controversial Mike Ashley, is used to squaring up to unhappy investors, having suffered several revolts in recent years, notably on a multimillion-pound bonus scheme for Ashley.

But this time the scale and intensity of the anger over the group’s treatment of its workers at the huge Shirebrook warehouse – known locally as “the gulag” – is unprecedented.

‘Victorian workhouse’

A parliamentary report into working practices there likened it to a “Victorian workhouse” where employees were bullied, subjected to a “six strikes and you’re out” policy and lived in fear of being sacked if they took a day off sick.

The draconian regime at Shirebrook, where most workers are employed via agencies on zero-hour contracts, first came to light after an undercover investigation by the Guardian nine months ago. It revealed a catalogue of offences, notably that staff were effectively being paid below the minimum wage as they were forced to wait so long for end-of-shift searches. Workers who were one minute late for a shift, or returning from a break, would be docked 15 minutes pay.

The shocking disclosures saw Ashley hauled before MPs to answer questions at Westminster and sparked widespread public anger. In the City, meanwhile, Sports Direct shares tumbled amid growing concerns over the way the business was being run.

Over the past 12 months, the shares have shed some 60 per cent of their value, although they rose 5 per cent yesterday as, in a last minute attempt appease investors, Sports Direct published the findings of a review into its working practices. It concluded there had been “serious shortcomings” for which the group apologised and said it “deeply regretted”.

Sports Direct now says it has abandoned its “six strike” policy and pledged that casual staff at its retail outlets would be offered guaranteed hours instead of zero-hour contracts. It will hire a full-time nurse to be on site at Shirebrook and promised that there would be fewer searches of staff.

Concessions

If Ashley thought these concessions would head off shareholder anger today, he’ll be sadly disappointed. The review does nothing to address the serious governance concerns at the group, not does it deal with its widely-criticised practice of employing several thousand warehouse workers via agencies.

As well as approving the re-election of directors, shareholders will vote on a resolution calling for an independent report to be commissioned, a resolution the group is urging investors to vote against.

Although some institutional shareholders welcomed yesterday’s moves by Sports Direct, they still want an independent report – and the head of company chairman Keith Hellawell.

Hellawell (74), a former head of West Yorkshire police – and apparently referred to by Ashley as “Plod” – is blamed by institutions for failing to reign in the retail billionaire. Ashley has the title of deputy chairman but controls 55 per cent of the shares and is undoubtedly a hands-on manager.

Recent revelations that an obscure company controlled by Ashley’s brother is employed to handle Sports Direct’s overseas deliveries have served to heighten governance concerns at the group. His daughter’s boyfriend, a former nightclub promoter, runs the group’s property arm.

As Royal London Asset Management (RLAM) pointed out, the findings and recommendations of the review released yesterday focused primarily on the failings already highlighted by the media and MPs. RLAM has been one of the most vocal institutional critics of Sports Direct and believes the position of the chairman "remains untenable".

Unions

For the unions, while the apology from Ashley was a good start, it was "too little, too late", according to TUC general secretary Frances O'Grady. "A report written by a law firm that previously represented Mike Ashley and management simply won't cut it. Sports Direct cannot be allowed to mark their own homework," she said.

Along with the shareholder meeting, Ashley, in an unaccustomed spirit of transparency, has invited anyone who’s interested to attend the proceedings – and take a tour of the notorious warehouse. It’s not clear whether they will be allowed to talk to any of the agency workers there, however. All in all, it should be quite a day up in Shirebrook.

Fiona Walsh is business editor of theguardian.com