Shareholders in Revolt at Sports Direct Corporate Governance

The strained relationship between the Board of Sports Direct plc and its shareholders is perhaps the best topical example in the UK at the moment of the issue of corporate governance.

As this article from The Guardian explains, the institutional shareholders of Sports Direct plc are becoming increasingly agitated about the way in the which the business is being run by the Board of Directors, including non-executive directors.

Sports Direct has come under fierce criticism and scrutiny for its working practices in recent months. External shareholders who have formed an "activist" group are now linking the way the business is run (corporate governance) with business performance: they claim that:

"Governance failings are clearly resulting in declines in operating performance and long-term shareholder value,”

One shareholder - Aberdeen Asset Management - is quoted in the article that:

"Sports Direct is a multimillion-pound business that would benefit from an injection of new talent with the skill sets required to run an enterprise of its size and complexity."

...which in other words means that this shareholder doesn't believe the current Board of Directors is up to the job.

Of course these shareholders can't run the business themselves - they need to rely on the business being managed by experienced directors.

This is an example of the so-called "divorce of ownership and control".