Financial commentator, author Gerry Brown, suggests a quick cost-effective solution for Sports Direct, considering the impending investigative report due out tomorrow from the Department of Business Innovation and Skills

Sports Direct has come under fire for its ‘Victorian’ work ethics for a little over a year now, prompting a full report, due out tomorrow, from the Department of Business Innovation and Skills into the company.

In April 2015, Britain’s largest union, Unite, launched a confidential advice and support line as part of a campaign to confront abusive work practices at Sports Direct and a culture of fear at the retailer’s Shirebrook warehouse in Derbyshire.

Channel 4’s Dispatches programme last year, ‘The secrets of Sports Direct’, exposed a zero-hours contract workforce in constant fear of losing their jobs.

The draconian working conditions, as revealed by the programme, are underpinned by a ‘six strikes and you’re out’ disciplinary procedure. Workers can get strikes for long toilet breaks, excessive chatting and even having time off for sickness. 

According to Unite assistant general secretary Steve Turner, the state of working conditions at Sport Direct is “like a throw-back to the Victorian era, (with) workers on zero hours contracts… being shamefully exploited and living in daily fear of losing their job.”

“Mike Ashley and Sport Direct’s shameful business model which is built on low pay and exploitative zero hours contracts, where workers are treated with contempt, has no place on the high streets of 21st century Britain,” he said. “Shoppers at Sports Direct need to remember this when they buy a cheap tee-shirt or pair of trainers. 

The media outrage following a series of whistleblowing has The Guardian’s Nils Pratley recommending Mike Ashley to hire “properly independent non-executive directors” as a quick solution to sort save Sports Direct from itself. Properly independent non-executive directors who “are not deaf to outsiders’ criticisms” would advise the Sports Direct boss and board when to listen and act.

Highlighting the strategic skills and benefits independent non-executive directors (NED) can bring to business, author Gerry Brown believes NED can be the stitch in time that can save nine at Sports Direct. “The crucial importance of the need for genuine and real independence in board decision making, governance, strategy formulation and operations is a requirement for any business – including Sports Direct – and should brook no dispute in any serious company.”
 
Brown identifies immediate strategic and supervisory benefits completely independent non-executive directors can offer to shareholders, pension funds, investors, government, management, staff and the public, even in the case of companies like Sports Direct. 
 
Due diligence. As well as overseeing formal due diligence, independent directors can scrutinise valuations, consider the strategic importance and value of any new acquisition, advise on the competencies of its management team, and consider any broader business issues.

Business strategy. Independent directors can analyse the company’s current strategic position, understand key strategic issues (including marketing, financial, operational and human resources issues, and the relative of merits of mergers and acquisitions and alliances or partnerships), be able to develop strategic options, assist in the choice of a strategy, and then monitor its progress.

Resourcing. Human resources management, including appraisal, recruitment, selection, training and development, and remuneration can be managed fairly and objectively by NED. They are also able to understand cash flow and liquidity,
debt-to-equity ratios, profit forecasts, capital requirements, financial controls, bank support, and insurance.

Corporate governance. NED can be directly involved in a range of issues, including directors’ remuneration, shareholder relations, and in particular relations with institutional shareholders, audit, and reporting requirements.

Independent advice. Among the roles independent directors play are those of sounding board, counsellor, challenger, facilitator, and coach to the CEO and other senior executives. They are there to assist the executive team, but not follow them blindly and must be prepared to stand up and be counted if they disagree fundamentally with what the executives propose to do.

Bridge between investors, staff and management. Independent directors oversee the relationship between shareholders, staff and management.

Assistance to the executive team. Includes technical advice, liaison with customers, visits to operational sites, making personal introductions to advisors or partners who might be useful, and getting involved in financing and fundraising.

The Independent Director: The Non-Executive Director’s Guide to Effective Board Presence
Gerry Brown
Palgrave Macmillan
328 pages
£29.99
Hardback

Gerry Brown is currently chair of Novaquest Capital Management, a private equity firm focused on life sciences. Prior to this, he was chair of NFT Distribution Ltd, senior independent director of Keller plc, chair of Biocompatibles International plc, senior independent director at Forth Ports plc. He also represented 3i on the Board of Vantec Corporation – a management buy-out from Nissan in Japan – until its very successful exit. He is a Fellow of the Chartered Institute of Logistics. He is a Board Mentor with Critical Eye and is a member of the Council of the University of Exeter.