LONDON (Reuters) - Sports Direct’s (SPD.L) appointment of a law firm with close links to the retailer for a governance review is an issue for shareholder Legal & General Investment Management, LGIM said in its annual report on corporate governance on Tuesday.
LGIM, the fund arm of insurer Legal & General (LGEN.L) and one of the largest investors in British companies, said it had pushed for the review into Sports Direct’s labour practices after British members of parliament condemned the retailer’s “Victorian” working conditions, LGIM said in the report.
Law firm Reynolds Porter Chamberlain published the review into Sports Direct’s governance in September 2016.
“Concerns remain about the appointment of the company’s long-term law firm to carry out the review given its close links with the company,” LGIM said in the governance report. It also said it would continue to watch the company.
LGIM also said it had voted against the re-election of Sports Direct chairman Keith Hellawell in January 2017. Hellawell was re-elected after company founder Mike Ashley backed him.
“We will continue to engage with the company and monitor the ongoing issues,” LGIM said.
LGFM is one of several investors arguing for higher corporate governance standards at British companies. It said in the annual report it had voted against at least one resolution at shareholder meetings of 23 percent of British companies in 2016, up from 18 percent in 2015.
LGIM also said it was “currently engaged” with the board of GlaxoSmithKline (GSK.L) about its new pay policy, after opposing the drug company’s pay report in 2016 due to concerns over the size of executive bonuses.
GSK is one of a large number of British companies seeking shareholder approval for new pay policies at their respective annual shareholder meetings over the coming months.
Shareholders have already given the green light to some new company pay plans, but some have been forced to think again, including Imperial Brands (IMB.L), which withdrew its proposal after shareholder opposition.
LGIM has previously called for companies to publish the pay ratio between the median employee and the chief executive.
“The increasing pay gap is having an impact on society and that is why we are taking a stronger line on bonus awards and the need for companies to publish their pay ratio,” LGIM director of corporate governance Sacha Sadan said.
Reporting by Carolyn Cohn and Simon Jessop. Editing by Jane Merriman