Sports Direct Panned Over PR Firm Ownership After Ashley Gaffes
(Bloomberg) -- Sports Direct International Plc and its billionaire founder Mike Ashley have come in for more criticism from investors and governance experts, this time over the U.K. retailer’s control of its public-relations adviser.
Sports Direct owns 51 percent of Keith Bishop Associates, a company that mainly represents celebrities such as the wrestler Hulk Hogan and topless model turned actress Linda Lusardi. After recent public-relations gaffes by Ashley undermined attempts to improve Sports Direct’s reputation, more impartial counsel is needed, said Paul Lee, head of corporate governance at shareholder Aberdeen Asset Management.
“The company needs to bolster the independence of the advice it receives and the strength of the team around Mike Ashley,” Lee said.
Sports Direct is the only publicly-listed client of KBA, according to the website of the PR firm founded in 2012 by Ashley’s long-term friend Keith Bishop. The billionaire, Sports Direct’s controlling shareholder, has appointed close personal connections to prominent roles, fueling concern over corporate governance that came to a head this year amid a slump in profit and criticism of the company’s working practices by U.K. lawmakers.
A representative for KBA, which replaced Powerscourt as Sports Direct’s media adviser earlier this year, declined to comment.
Ashley has described himself as a “PR nightmare.” In a BBC television interview this week, the executive admitted he travels to work by helicopter and prefers flying aboard private jets. That followed an open day held to address criticism of working conditions at Sports Direct, during which Ashley emptied a wad of 50-pound ($65.33) notes from his pockets while demonstrating how security guards search staffers to prevent theft.
The Institute of Directors, which described Sports Direct as a “scar on British business” earlier this year, says Ashley needs a new PR adviser. “Reputation can affect share price,” said Oliver Parry, the IOD’s head of corporate governance.
Ashley’s associates carry out key functions at Sports Direct. His daughter’s boyfriend, a former nightclub promoter, acts as the company’s property director. Barlin Delivery, a company owned by Ashley’s brother John, receives a share of the revenue that Sports Direct generates from overseas orders. The company didn’t disclose that relationship in its annual report, and later admitted it should have.
Earlier this week, Ashley bowed to shareholder pressure by agreeing to appoint an independent law firm to conduct a review of its boardroom arrangements and employment practices, in one of the first signs that he’s heeding investor concerns.
The retailer isn’t disadvantaged by having Bishop’s company as its media adviser, said Rory Godson, chief executive officer of Powerscourt, which had represented Sports Direct since January 2014.
Bishop sat by Ashley’s side during a parliamentary hearing into Sports Direct’s working practices in June. He’s also been pictured attending Newcastle United soccer matches with Ashley, who’s been the club’s owner since 2007.
That level of familiarity doesn’t sit well with some.
“Sports Direct needs to employ a well-known PR agency that can provide strategic advice on how Mike Ashley can improve both his reputation and that of the business,” said Helen Dunne, editor and publisher of trade magazine CorpComms. “Investors don’t like to see companies in the headlines for the wrong reasons.”