Mike Ashley’s Sports Direct has threatened to pull a life-changing bonus scheme for its shop floor and warehouse staff unless shareholders agree to a multi-million-pound bonus payment to its billionaire founder.
The retailer has attempted to pay Mr Ashley a one-off bonus three times in the past three years, but has been blocked by shareholders on each occasion.
The most recent failure was in April when a shareholder meeting was cancelled just days before it was due to take place after it became clear the vote for a £73m payout would not pass.
Yesterday, the company, which also owns brands such as USC, Republic and Slazenger, said Mr Ashley’s payment would come from a bonus scheme intended for 3,000 full-time staff who would enjoy a 25 million-share pot worth £200m if they hit stringent profit targets.
Sports Direct declined to reveal how many of the free shares Mr Ashley would receive, although they are expected to be worth tens of millions of pounds.
Shareholders will be asked next month to vote through the resolution at the annual meeting. A £39m payout was rejected in 2012 by shareholders; the board promised to introduce a new bonus scheme in 2013 but decided against putting one forward after shareholders privately expressed doubts; and a third rejection took place in April.
The board of Sports Direct has attempted sweet-talking and strong-arming investors into making a payment to Mr Ashley – who sits as deputy executive chairman but has not taken a salary – for several years but to no avail.
In 2012 they tried to explain the importance of handing the Newcastle United owner a payout, saying it would be right to reward Mr Ashley for his contribution to the company he founded and pocketed £1bn from after its float.
Then earlier this year they hit out at shareholders, claiming that rejecting the award could cause future uncertainty about the business.
Yesterday the company set out the details of the latest scheme, which could see its value double to £10bn in just five years. Underlying profits must hit £480m in 2016, £570m in 2017, £650m in 2018 and £750m in 2019 for it to pay out. Some shareholders welcomed the new scheme, suggesting the targets were positive.
Sports Direct’s biggest institutional shareholder, Odey Asset Management, which has a 7.3 per cent stake, backed the new proposals, having previously supported paying Mr Ashley a bonus.
Its founding partner Crispin Odey said: “I just think he is a genius but he is also someone who needs motivating and that is what we are happy to do.”
If the vote fails, it would see workers miss out on big cash bonuses similar to those made in recent years. Store managers earning £30,000 a year received bonuses worth as much as £70,000.
However, the vast majority of staff will not be entitled to a payout, with 90 per cent of employees on controversial zero-hour contracts.
The widespread use of the contracts has led to politicians and campaigners calling for a reform of employment laws, citing Sports Direct as an employer that is abusing the system.