Ashley’s suicide mission
SO METHING must give at Sports Direct. The stunning votes against chairman Keith hellawell and the ‘independent’ directors represent an unprecedented mauling for a public company. If anything ever called for regulatory intervention in support of the corporate governance codes it is this.
No number of grovelling apologies about the Victorian conditions at the Shirebrook campus in Derbyshire or high-vis jacket tours of the warehouse for investors and media makes good on the fundamental flaws in the boardroom.
A new elected workers representative on the board will be positive, but when push comes to shove anything he or she says will likely be squashed. The real danger now is that Mike Ashley and his cohorts are putting the business in jeopardy. There is a negative feedback loop, which started at working conditions, has reached the performance of the company and the share price and contaminated the boardroom.
Profits are dropping sharply. The latest forecast is 20pc down at £300m for the current financial year and we cannot be sure that is the whole story.
Sweetheart deals for family members and a lack of transparency around some of Ashley’s transactions on the company’s behalf place Sports Direct out of the boundaries of what is acceptable. The latest 9pc fall in the share price to 319p brings the losses over the last 12 months to 62pc. That is a not a sustainable trajectory.
If brokers Goldman Sachs cannot persuade Ashley to change direction and ditch hellawell and strengthen the non-executives they should jump off the clattering train. After all Goldman doesn’t need another BhS on its hands.
Carney pain
MARK Carney cannot have been surprised by the hostility behind some of the questioning before the Treasury Select Committee (TSC). he may be ‘serene’ about his pre-Brexit forecasts of turbulence to come, including the possibility of a mild technical recession but clearly the Brexit contingent on the committee, led by the powder-dry Jacob Rees-Mogg, have no doubt he overstepped the mark.
The Canadian governor always felt that he had a duty to pronounce on the likely consequences of Brexit and was convinced as early as April, before the campaign was at its most raw, that it was already having a negative impact on investment particularly in construction.
The real issue is whether Carney should have allowed the Bank to have been dragged centre stage, along with the International Monetary Fund, OeCD and everyone else, or maintained a strategic silence in public. One imagines that his predecessors would have done so rather than risk hard-won independence.
At some point the bitterness between Remain and Leave supporters will hopefully subside and the economic caravan will move on, but not yet it seems. In the Commons 24hours earlier, former Cabinet minister Michael Gove was back poking fun at the experts over their doom and gloom predictions after a hatful of better economic numbers.
Carney is too fleet of foot to be caught up in such statistical games. The thrust of his response to the TSC critics was to suggest that among the reasons why the economy has bounced after the shock of June 23 is precisely because the Bank of england acted. There is an element of truth to this. In the vacuum before the Tories had selected their new leader it was Carney behind the podium on Threadneedle Street reassuring global markets that despite heavy falls in shares, bank stocks and the pound, the financial system was safe.
This was followed up by the August interest rate cut, more money printing and a new ‘term funding’ scheme that is designed to ensure households and small companies do receive the benefit of the rate cut. The problem for Carney is that the bounce has been so robust, as demonstrated by the latest purchasing managers surveys for construction, industry and services that the Bank may look to have overdone the monetary accommodation. Carney did acknowledge that perhaps the downgrades for growth may have gone too far.
It has always been my view, based on what happened in the financial crisis, that it was better to get ahead of events and row back than sit on hands. The big problem is that in keeping the economy moving, Carney and the Bank have delivered harsh punishment to savers and the solvency of pension funds.
It may have been important to avert any prospect of a premature recession, but the Bank’s actions delivered serious hurt to a cohort of citizens who have borne the brunt of the pain since the financial crisis.
Aussie power
‘AUSTRALIANS all let us rejoice’ is the ringing first line of the national anthem. Now there is really something to celebrate.
Gordon Brown may have promised to end ‘boom and bust’ in Britain, but it is the kith and kin down under who actually have achieved it. Annual growth in the Aussie economy picked up to 3.3pc last quarter, which means it has a remarkable run of 25 years of uninterrupted growth despite the ups and downs of natural resource prices. International trade is the biggest contributor to output, which make it ever more desirable for the UK to strike an early trade deal as soon as a settlement with the eU is struck.
Advance Australia fair…