Sports Direct boss Mike Ashley queries own ability before MPs

Mike Ashley's many faces were on display yesterday as the retail billionaire turned up at Westminster to be grilled by MPs on working practices at his Sports Direct group.

Veering from penitent to petulant, the founder of Britain's biggest sports goods retailer finally admitted that his company had indeed paid staff less than the minimum wage, as revealed by a Guardian investigation last year, and was now under investigation by HM Revenue and Customs.

He accepted, for the first time, that too many staff at the company were employed, largely via agencies, on zero-hours contracts rather than being given permanent jobs. And he conceded Sports Direct’s policy of docking 15 minutes pay if a worker was just one minute late for their shift was “unacceptable”.

But perhaps the most astonishing revelation of all was Ashley’s admission that Sports Direct had “probably” outgrown his own ability to manage it effectively. This confession, which will doubtless alarm investors who hold the 45 per cent of shares not still controlled by Ashley, came after he had repeatedly responded to MPs questions by protesting that he could not know everything that went on within the business.

Culture of fear

Likening the group to a dinghy that had grown into an oil tanker, Ashley said it had become “a victim of its own success”. He told MPs he was shocked by some of the things he had heard, and was determined to do better, but insisted that he believed he could do more for employees than the unions could.

Ahead of Ashley’s grilling, MPs questioned officials from the Unite union, prompting some horrifying tales of working conditions at the group. The union spoke of a culture of fear at the group’s vast warehouse in Shirebrook, Derbyshire – known locally as “the gulag” – where staff often walk as many as 20 miles a day picking stock and are subjected to rigorous searches after their shifts have ended.

A steady stream of ambulances had been called to the warehouse in recent years in response to employee emergencies, including life-threatening conditions such as strokes, convulsions and breathing difficulties.

Union officials told MPs of one worker who had given birth in the toilets because she was too scared of losing her job to take time off.

New female employees at the warehouse were referred to as “fresh meat”, according to the union, which also claimed some women had been offered permanent contracts in return for sexual favours.

Apparently clueless

MPS also heard some workers got their wages via pre-paid card, for which they were charged £10. On top of that, there was a £10 a month management fee and employees had to pay 75p each time they used the card to withdraw cash from an ATM – and a further 10p when they were sent a text message confirming use of the card.

At times blustering and apparently clueless about some of the group’s processes, Ashley made one telling verbal slip during the hearing, when he agreed that improved management processes might mean a better income. What he meant, his PR man swiftly clarified, was a better outcome.

At least one institutional shareholder was unimpressed. Royal London Asset Management, one of the first to criticise Ashley publicly after the Guardian's investigation, said the hearing had highlighted the fact that significant corporate governance failings still exist and are yet to be addressed.

The investment management firm's chief investment officer, Piers Hillier, said Ashley's frequent suggestions at the hearing that he has no oversight or knowledge of large parts of the company's business "is extremely concerning for investors".

It is “critical” that these issues are addressed, said Hillier, adding: “The likelihood of this being achieved will be greatly increased by strengthening independent oversight on the board.”

Despite those concerns, Sports Direct shares ended the day over 5 per cent ahead at 383p, somewhat strange for a publicly quoted company that has just admitted for the first time that it breached employment law and is being investigated by the tax authorities.

Oh, and that its boss fears he may no longer be up to running the business.

But in terms of income, yesterday was a good day for Ashley – the 5 per cent hike in the shares added some £65 million (€83.2m) to the value of his stake. Fiona Walsh is business editor of theguardian.com