Sports Direct review finds it underpaid Mike Ashley’s brother £11m

Sports Direct is seeking shareholder approval for an £11m payout to the brother of Mike Ashley, the company’s founder and majority shareholder, after an internal review into a controversial business deal concluded that he had been underpaid.

Last year, Sports Direct was heavily criticised by its own shareholders and corporate governance experts after it emerged that the sportswear retailer was paying a company owned by John Ashley to deliver online orders outside the UK. The arrangement with Barlin Delivery Ltd, which was unwound earlier this year, had not been disclosed in Sports Direct’s annual report.

On Friday morning, Sports Direct said it now wanted to pay John Ashley £11m and would hold a special shareholder meeting on 13 December at which independent shareholders would be given the chance to approve the payout. Mike Ashley, who owns nearly 61% of Sports Direct, will abstain from the vote but the statement made clear that he, and the rest of the retailer’s board, were supportive of the payout.

Sports Direct said it wanted to make the additional payment after asking its law firm RPC to review John Ashley’s history with the company and the total “paid in money and in kind to John Ashley, which had been called into question given his position as brother of Mike Ashley”.

John Ashley, a computer science graduate, built Sports Direct’s IT systems from scratch after joining his brother’s business in 1989.

In a statement to the Stock Exchange, Sports Direct said RPC’s review, conducted with accountants Smith & Williamson, had concluded that if John Ashley had been treated equally with other senior executives who had helped develop Sports Direct he would receive additional payments totalling about £11m. It said he had been denied this “because of concerns at the time about public relations”.

Mike Ashley said in the statement: “I fully expect that independent shareholders will vote against this proposal due to the passage of time involved, although in my opinion, technically the money is owed and therefore should be paid.

“It’s important for me to say that if John had owed £1 to Sports Direct, I would have ensured any sum was repaid in full. I hope shareholders will therefore be reassured that everything is in order and that any concerns are laid to rest.”

When news of the contract with Barlin emerged, it spurred shareholder unease about corporate governance of Sports Direct which had already been fuelled by Ashley’s decision to put his daughter’s boyfriend in charge of the firm’s property team.

The company has also faced criticism over the treatment of workers and its business practices. Thousands of Sports Direct warehouse workers were awarded back pay totalling about £1m after a Guardian investigation revealed the company was effectively paying workers in its warehouse in Derbyshire below the minimum wage.

The company also said on Friday it wanted to approve a £3-a-share minimum payout to executives Karen Byers and Sean Nevitt, the only remaining participants in the Sports Direct executive bonus share scheme, if they elect to exercise their shares before September 2018 or £4 a share after that month.

In the wake of the revelations about Barlin, independent shareholders voted out Sports Direct’s chairman Keith Hellawell last year, but he stayed in his job with the backing of Mike Ashley. At this year’s annual shareholder meeting, independent shareholders narrowly backed Hellawell to remain in post.