Sports Direct’s secret pay disgrace

How many millions of pounds will executive deputy chairman Mike Ashley earn from the bonus pool at Sports Direct? The scandalous answer is that we do not know.

The sum is likely to be millions, possibly tens of millions. But the precise or even approximate number is unknown. This lack of transparency is a disgrace and will fuel fears that in some boardrooms, the lessons of the recent past have not been learned.

Last week, Sports Direct investors voted in favour, by a relatively narrow 60 per cent, of a £200million employee bonus scheme. The huge sum will be shared between 3,000 staff, including Ashley. In previous years investors have voted down pay packages that could have granted him £70million. It seems likely his share in the latest package will be of that order of magnitude, but who knows?

There are targets to be met for the payout to be achieved and as I have commented before, Sports Direct’s inclusion of a large number of staff in its bonus system is in principle laudable.

But, even if the sums are not excessive, the fact that a director’s earnings can be a mystery flies in the face of good governance. Even the Institute of Directors warned last week that this was far from satisfactory.

What is disappointing is that so much effort and reform has gone into giving investors access to information and encouraging them to use their votes.

Last week, stockbroker The Share Centre hosted a round table to discuss ways small investors could be given better access to company information to help them use their votes. City watchdog The Financial Conduct Authority and the Department for Business were both represented and there was a real sense that this is an issue being taken seriously by the authorities.

This is a crucial effort if popular investing is to flourish and represent genuine ownership and engagement between private shareholders and firms. But if, as many small investors struggle to get their voices heard, City institutions are willing to approve unspecified benefits for directors, it does not augur well. They appear to be squandering their potential influence.

In a separate move last week, fund manager Fidelity complained of a lack of support among its peers for pay reform at top companies. Although it made no direct link to the Sports Direct row, Fidelity’s comments are about the same issue.

The financial crisis revealed that too many City institutions were asleep on the job, failing to call companies to account and turning a blind eye to excess. Some have learned the lessons, but it seems others are happy to return to rubber-stamping.