Sports Direct chairman stays on thanks to founder's backing

LONDON (Reuters) - Sports Direct's SPD.L embattled chairman Keith Hellawell was re-elected on Thursday after company founder Mike Ashley backed him, ensuring he would stay in the role despite being opposed by a majority of the retailer's independent shareholders.

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Investors have blamed Hellawell for a string of management and governance failures at the sportswear group, and he only kept his job at the annual meeting in September with the help of Ashley’s majority control.

“Keith has my full backing and will be continuing in his role on the basis that he has the unanimous support of the board,” Ashley said after a second vote on Thursday at a special meeting called by the company in Derbyshire.

“I note that many of those who voted against Keith have acknowledged that we have made positive progress since the AGM.”

Hellawell faced another ballot under new rules designed to give shareholders a bigger say, but his re-election was a foregone conclusion because he had the support of Ashley, who owns 55 percent of the group.

However, the 54 percent of the independent votes cast opposing him was unchanged from September, indicating that investors have not been persuaded by his pledge to drive improvement at the company.

Shareholder Aberdeen Asset Management said it was no surprise that Hellawell, a 74-year-old former police chief constable and government drugs czar, had been re-elected given Ashley’s support.

Paul Lee, the investor’s head of corporate governance, said the real test would come at the next annual shareholder meeting later this year when Hellawell has pledged to step down if he again fails to win the backing of independent investors.

He said progress was needed on a genuinely independent review of working practices and governance, the group needed to deliver on its undertakings to its workforce, and it needed to enhance its reporting.

“Most importantly, we need to see progress towards appointing a new executive team with the necessary skill set and experience to manage a company of Sports Direct’s size and scale,” he said.

Hellawell said in September he had offered to resign, but the board had persuaded him to stay to oversee improvements in working practices and independent scrutiny.

Sports Direct was condemned by lawmakers last year for its treatment of workers, including paying some less than the minimum wage for shifts at its warehouse in central England.

An independent report commissioned by the company found “serious shortcomings” in working practices, which it is taking steps to tackle.

The Unite trade union said in August that thousands of workers at Sports Direct’s main warehouse were set to receive back pay totalling about 1 million pounds ($1.3 million) after their wages fell short of the legal minimum. [nL8N1AW2NA]

Investors, counting the cost of the damage to the company’s reputation, have also endured a slump in profits at the sportswear retailer, in part caused by Britain’s vote to leave the European Union, which has pushed up its costs. [nL5N1E311C]

The shares, which have halved in price over the last year, traded 2.5 percent higher at 1418 GMT.

Editing by Mark Potter and Adrian Croft