More than £400m was wiped off the value of Sports Direct as City investors and MPs turned on the company following disappointing financial results and revelations over pay and working conditions unearthed by a Guardian investigation. The Guardian revealed on Wednesday how the retailer’s temporary warehouse workers are subjected to an extraordinary regime of searches and surveillance. Undercover reporters also found evidence that thousands of workers received effective hourly pay rates below the minimum wage.
The company was branded a “scar on British business” by the Institute of Directors. Its shareholders rounded on it, and opposition MPs demanded that HMRC investigate the FTSE 100 company. The revelations and a worse-than-expected sales performance over recent months prompted the worst day’s trading for Sports Direct shares for nearly two years. On Thursday, the Guardian also laid bare some pricing policies employed by the retailer and the crisis of corporate governance at the firm, which has been widely criticized for conditions in its warehouse where workers are warned they will be sacked if they receive six marks – or “strikes” – over six months. Strike offenses include a “period of reported sickness,”; “errors,”; “excessive/long toilet breaks,”; “time-wasting,”; “excessive chatting,”; “horseplay,”; and “using a mobile phone in the warehouse.”
A string of normally guarded City figures emerged to criticize the company’s business practices due to the Guardian’s revelations. Shadow ministers and local Labour MPs pledged to write to HM Revenue & Customs to demand an investigation into whether the company was adhering to national minimum wage legislation. Simon Walker, director-general of the Institute of Directors, said: “Unfortunately, Sports Direct’s actions will scar British business. IoD members share the public’s outrage.
When the reputation of corporate Britain is on shaky foundations, another scandal is hard to stomach for the overwhelming majority of businesses with integrity at their core. “I urge people to remember that Sports Direct is categorically not a representative of British business, and those who believe passionately that successful economies live and die by the strength of the private sector must point the finger when companies step out of line.”
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the attack. Shareholders have met with the company to discuss whether everybody is employed properly and that the company lives by the rules, among other things. Ne leading shareholder, who did not want to be named, said: “Sadly, we have to expect this sort of problem at the company. Se has heard undertakings from management, but I’m not sure we can have a great deal of confidence in them.”
Another top shareholder said investors were becoming increasingly restless because the company’s behavior and reputation affected the share price, and financial results were weaker. “You can’t ignore this behavior because it will come back to bite you. If you’re not looking after your staff, it will ultimately hit the share price. Now we’ve got a tranche of issues that people didn’t see or didn’t think were important, but when the bottom line starts moving, it becomes an issue of governance and fund management.” In Westminster, the shadow chancellor, John McDonnell, said: “If these allegations of breaches of the national minimum wage by Sports Direct are true, then it should be setting off alarm bells at HMRC. And I’d fully expect them to investigate and leave no stone unturned.”
McDonnell added: “There’s a basic responsibility that society expects from– not to exploit their customers, staff, or the taxpayer. There can be no idle response. To prevent large companies from refusing to take their minimum wage responsibilities seriously, the government needs to increase fines against recalcitrant employers.” The shadow business secretary, Angela Eagle, said: “If there are allegations of non-payment of the national minimum wage, backed with evidence, these should be ruthlessly and forensically investigated by the authorities.”
Ian Austin, a former Labour minister, and MP for Dudley North, said he had tabled a series of parliamentary questions to the chancellor and the secretary of state for business demanding an investigation into whether Sports Direct is paying the minimum wage. Austin was also supported by Emily Thornberry, the shadow minister for employment, local MPs Dennis Skinner, and the shadow minister for electoral registration, Gloria de Piero, who all pledged to write to HMRC to ask for an investigation.
Ashley, whose fortune is estimated at £3.5bn, did not attend a presentation the company gave on its results to City analysts on Thursday morning, leaving the chief executive, Dave Forsey, to answer questions on the group’s half-yearly performance. Forsey said Sports Direct had produced “excellent results” in a tough market and denied that publicity around the group’s treatment of staff had affected sales or relationships with suppliers. “We need to do a better job of getting our side of the story over. That’s what we’ll continue to do,” Forsey said. “We are more determined than ever to make sure we are a better business and have the welfare of our permanent and casual staff in the forefront of our mind.”