Sports Direct faces new unease over latest bonus scheme

Sports Direct has been met with another series of resistance from its investors as the company introduces its fourth attempt to reward its founder, Mike Ashley, with a share-based bonus scheme. After investors previously voted against the former supplemental executive bonus share scheme,

which aimed to reward Ashley, who currently controls 57.7 percent of the company, with millions of shares, the sporting goods firm has introduced a new scheme that could award Ashley and undisclosed employees up to 200 million pounds worth of shares.

Company shareholders still not satisfied with Sport Direct's new share-based bonus scheme

However, fund management firms are contemplating voting against the new proposal, as the Association of British Insurers (ABI), one of the largest company shareholders with a 20 percent stake has called for a vote on Wednesday July 2. ABI previously issued a “red-top” alert to warn other shareholders about its concerns surrounding the scheme and corporate governance at the company.

“We don't issue a red top lightly,” said an ABI spokesman to Drapers. “It shows we have serious misgivings about something, in this case an issue of remuneration or governance. We feel there is an overall lack of accountability.” The ABI has been hosting a number of discussion between other company shareholders, who control a combined 18 percent stake in Sports Direct.

Company shareholders have also met with Sports Direct's chairman Keith Hellawell, who previously shared his feelings concerning the employee bonus share scheme earlier this month, after investor failed to back a previous bonus scheme for Ashley in April.

“The board and the remuneration committee have responded to the feedback received from shareholders to develop a long-term share incentive scheme which not only will continue to motivate the company's employees, but which also recognises and rewards the substantial contribution made by Mike Ashley over many years. Based on the stretching performance targets established, this scheme has the potential to create a further substantial increase in shareholder value.”

The latest bonus scheme introduced by Sports Direct differs from its previous scheme designed to award Ashley with millions of shares as a bonus because it is said to be open to “all eligible employees (including executive directors) who meet the qualifying conditions and performance criteria as determined and agreed by the remuneration committee and the board.”

However, it remains unclear to the other company shareholders how many of the 25 million shares may be allocated to Ashley, or how many employees can apply for the bonus scheme. Sports Direct currently has approximately over 20,000 employees on zero-hour contract, who would most likely be ineligible for the bonus scheme and only 3,000 employees on a full-time contract.

If shareholders do not back the share-based bonus scheme, it will be the fourth time that a share allocation bonus for Ashley and other executives has been blocked since September, 2012. Since the previous bonus scheme was withdrawn this April, the company has added annual profit targets to the share awards and increased the timescale of payouts from two years to four.