Sports Direct is like a "backstreet operation"
MPs aren't impressed with Sports Direct, saying that they're being run like a "backstreet outfit", complete with deals being made behind the board's back, withholding payments from suppliers, nonsense with the USC fashion chain, and a whole load more.
Keith Hellawell, chairman of Sports Direct, is looking at a barrage of accusations from the Scottish Affairs Select Committee, who say that the way his company dealt with the collapse of USC was so poor, that his past is in danger of being tarnished. Retroactive tarnishing! Nice.
You might know that USC went under in January and was bought back by Sports Direct, debt-free. This left staff redundant and £15.3m in money owed to landlords and suppliers, unpaid and wiped off the record. Also erased from history was the £700,000 owed to HMRC, who are now picking up the tab for the redundancy payments too.
Not only that, the company is being hammered over their reliance on zero-hours contracts - they currently have 75% of their staff on these controversial deals.
Hellawell is pleading innocence, saying that he had no idea that USC was about to go under and that, in fact, chief executive Dave Forsey, and deputy executive chairman, Mike Ashley, had met administrators without his knowledge a whole two months before USC went kaput. The committee also found that USC went under after bosses held back payment to Diesel, because they thought the fashion brand might stop supplying USC, which would have made other suppliers stop.
Thanks to being completely backed into a corner, Hellawell admitted that this withheld money was tantamount to holding Diesel "to ransom". He added, dimly, that he had no idea how widespread the practice was in the company, adding: "We are in negotiations with a large number of landlords to reduce the cost of property at the moment… clearly I am going to ask some searching questions of the board."
Simon Reevell MP wasn't having any of it, saying: "You actively breached a contract with Diesel in order to try to bring them to the negotiating table. You are the chairman of a FTSE 100 company and you are in that role to bring credibility as a [former] senior police officer. At least on one occasion the company tried to renegotiate a deal by withholding …payments it is contractually obliged to pay. That sounds like some sort of backstreet outfit … can you understand that we struggle to understand why reputational matters such as this are completely unknown to you as a chairman?"
Chairman of the committee, Ian Davidson, chipped in: "Some members of the board knew that these discussions were going on, like Mike Ashley and the chief executive. Other members of the board, including you, did not know that. There are two categories of board members – those that are in the know and those that are not. Essentially you were there for decoration, to make a final decision that had already been made to be rubber-stamped."
Is the culture at Sports Direct going to change? Don't hold your breath.