SHIREBROOK, England (Reuters) - The embattled chairman of British retailer Sports Direct (SPD.L) survived a vote to oust him by a slim margin on Wednesday, after he said he would resign if a majority of independent shareholders voted against him for a third time.
Investors have blamed Keith Hellawell for a string of management and governance failures at Sports Direct and accuse him of being unable to control Mike Ashley - the retailer’s billionaire founder, chief executive and 61 percent shareholder.
Hellawell, a former police chief constable and government drugs czar who has chaired Sports Direct for eight years, received the backing of 53.24 percent of votes cast by the company’s independent investors at its annual general meeting.
The 75-year old only kept his job last September and at another vote in January thanks to Ashley using his majority shareholding to secure his chairman’s re-election.
Ashley was not present at this year’s AGM, held at Sports Direct’s offices in Shirebrook, central England. Just 15 shareholders attended the 35-minute meeting.
The result of the ballot was revealed after the meeting and Hellawell declined to take any questions from journalists.
Sports Direct was heavily criticized last year by lawmakers for its treatment of workers, including paying some less than the minimum wage for shifts at its main warehouse.
During the meeting Hellawell defended the firm’s record.
He said Sports Direct employed 29,000 people and had paid 300 million pounds ($391 million) in employee bonuses. It paid staff sick and holiday pay and saw a high rate of job retention and applications.
“If we are so bad one wonders ... why people would want to come and join us and stay with us,” he said.
Several independent investors had called for a new chairman to speed up reforms of working practices, restructure the board and improve corporate governance.
Aberdeen Standard Investments Head of Corporate Governance Paul Lee said Ashley’s influence meant the result was never in doubt, but that the company had not kept its previous promises.
“We retain the concerns which led us to oppose several resolutions, and it is clear that the re-election of Keith Hellawell is far from a ringing endorsement from minorities,” he said. “In spite of the progress over the last year, there remain significant governance questions about Sports Direct.”
Given its recent history of bad publicity, Sports Direct may have struggled to find a high caliber replacement for Hellawell. It took three years to recruit a permanent finance director.
Hermes Investment Management, Royal London Asset Management and Aberdeen Standard Investments were among investors that said they would vote against Hellawell’s re-election.
In September 2016, 54 percent of the independent votes cast at the AGM opposed Hellawell’s re-election, prompting another ballot at a special meeting in January, at which the same proportion of independent votes opposed Hellawell.
“With Keith Hellawell surviving his second shareholder revolt in a year by the skin of his teeth, we believe that the board should urgently address the long list of governance concerns that have been raised by independent shareholders to help restore confidence in the board,” said Ashley Hamilton Claxton, corporate governance manager at Royal London Asset Management.
Hellawell said at the meeting that a review of the firm’s corporate governance was progressing, without giving details.
Sports Direct had earlier said it remained optimistic on its trading outlook, reiterating guidance for growth in core earnings of 5-15 percent in its 2017-18 financial year.
Core earnings slumped 29 percent in 2016-17, partly due to the weaker pound following last year’s Brexit vote.
The retailer said trading in new format flagship stores continued to exceed its expectations, while the quality of its stores was improving as smaller shops were relocated.
There was no mention of trading in the firm’s old, un-refurbished stores.
“We remain fully focused on our strategic goal of moving our core business towards the ‘Selfridges of sport’ in order to further strengthen our proposition and drive long-term profitability,” said Ashley in a statement, drawing parallels to the industry-leading London department store.
Shares in the firm closed up 1.4 percent at 390 pence. They were trading at over 900 pence in 2014.
Analysts at Peel Hunt, who have an “add” stance on Sports Direct, said the noise from the AGM was not fundamental to the firm’s prospects. “The underlying news today (the trading update) is solid,” they said.
Writing and additional reporting by James Davey and Alistair Smout, Editing by Mark Potter and Elaine Hardcastle