Shareholder advisory group Institutional Shareholder Services (ISS) is calling on investors in Sports Direct to abstain from voting on the reappointment of Grant Thornton as auditor, and to vote against authorising the board to fix the remuneration of auditors ahead of the company's annual general meeting (AGM), Calum Fuller reports
The recommendations are among five it makes ahead of the AGM on 6 September. It also calls for votes against the reappointments of chairman Keith Hellawell and chief executive Mike Ashley. Votes against the pair recognise ‘ongoing operational, governance and risk oversight concerns, and the company's apparent unwillingness to fully address the votes lodged by independent shareholders at the 2016 AGM and the EGM held earlier this year’, ISS said in a report explaining its position.
Abstaining on the vote to reappoint Grant Thornton as auditors is warranted, it said, as ‘the FRC is currently conducting an investigation into the advice given to the Group by Grant Thornton regarding the disclosure around related party transactions in connection with the 2016 financial statements.’
An abstention recognises that the investigations by the UK regulators are currently ongoing, it said. Indeed, the Financial Reporting Council (FRC) confirmed its investigation in November 2016.
‘This process should be allowed to conclude prior to the application of a more serious voting sanction,’ added the ISS. ‘This may be escalated at a later stage, pending the outcome of the investigation and the company's response, if relevant.’
Alongside that, ISS calls for shareholders to vote against granting the board authority to set the remuneration of the auditor.
‘The company has paid significant fees to its auditor for non-audit related work in each of the past three financial years,’ it said. In that time, Grant Thornton has received £1.4m in 2016, approximately £1m in 2015 and £457,000 in 2014 in non-audit fees, according Accountancy’s FTSE surveys for 2017 and 2016.
Grant Thornton has held Sports Direct’s audit since 2004.
ISS also calls for a vote against senior independent director Simon Bentley. ‘Having accrued 10 years of service on the board (served concurrently with Mike Ashley), he is no longer considered independent’ ISS said. ‘A vote against his re-election is appropriate given his seats on the Audit and Remuneration Committees.’
Sports Direct has been contacted for comment, while Grant Thornton declined to comment.