The FTSE 250 retailer was urged to launch the review at its annual meeting in Derbyshire next month by the Investor Forum, a corporate governance body that represents asset managers controlling £14.5tn of assets.
In a statement, the Investor Forum said the independent review should look at corporate governance and employment practices at the company and take urgent action to begin rebuilding investor confidence.
The move highlights the growing frustration of shareholders at Sports Direct, led by billionaire businessman Mike Ashley, who is executive deputy chairman and owns 55 per cent of the group.
Sports Direct did not respond to a request for comment.
Standard Life, Aviva Investors, Fidelity International and Legal & General — some of the UK’s biggest investment groups with a combined stake of 8.7 per cent in Sports Direct — were leading instigators behind the Investor Forum initiative. The four are among Sports Direct’s 12 biggest shareholders, according to Bloomberg.
Legal & General, which has a 1 per cent stake in the group, said it would be voting against the re-election of chairman Keith Hellawell at the September 7 annual meeting for the third year in a row.
Sacha Sadan, director of corporate governance at L&G’s asset management arm, criticised Sports Direct and Mr Ashley for failing to appoint any new outside board members in the past five years.
“We will be voting against the re-election of all non-executive directors as we believe Sports Direct needs a stronger body of independent non-executive directors to ensure the business is run in the interests of shareholders,” he said. “When you have a strong owner, you need good oversight from a strong chairman and strong board.”
The Investor Forum, launched in 2014 to improve corporate governance and relations between asset managers and the UK’s biggest listed companies, said it was the first time it had singled out an individual group for public criticism.
Andy Griffiths, executive director at the Investor Forum, said: “It is highly unusual for the Investor Forum to consider it necessary to make public their concerns and recommendations in this way. We do not take this step lightly, but we have not received an appropriate level of commitment to respond to investor concerns.”
Simon Fraser, chairman of the Investor Forum, added: “It was a move of the last resort. We are hopeful that the company and Mr Ashley will listen to us.
“It is one of the poorest companies in governance terms that I have come across. Mike Ashley has been a very successful entrepreneur, but now his company has grown and become more complex, he needs a stronger and more experienced board to help him.”
The board of Sports Direct has had a turbulent history, and analysts have questioned whether it is independent enough to challenge Mr Ashley’s decisions.
Two non-executive directors hired by the company at the time of its flotation in 2007 quit after only a few months. The retailer’s first chairman, David Richardson, lasted less than three months in the role.
Current chairman Mr Hellawell is a former high-ranking police officer who was appointed by the Labour government as ‘drugs tsar’ in the late 1990s. But he has little business experience.
The company has no permanent chief financial officer, although it promoted 36-year-old Matt Pearson to the role on an acting basis last June after leaving the job vacant for more than a year.
Additional reporting Patrick Jenkins
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