Sports Direct's Mike Ashley vows to cut back on zero hours contracts

Retailer Sports Direct pledged to cut back on zero hour contracts after a damaging report on working practices at its key Shirebrook warehouse in Derbyshire. In the report commissioned by the firm, the retailer said it "deeply regrets" the conditions at the warehouse, which were likened by MPs earlier this year to a Victorian workhouse.

Among its conclusions the report, by law firm PRC, said that casual staff should be offered at least 12 hours of guaranteed work instead of zero hours contracts.

However, almost all staff at the firm's troubled Shirebrook warehouse, which employs 5,000, are agency workers and so are not eligible.

The report added that the retailer, run by founder and billionaire Mike Ashley, should ensure all warehouse staff are paid above the national minimum wage.

The report said the group should beef up its human resources division and should employ a full-time nurse and welfare officer.

Investigations by the Guardian newspaper last year found that staff at its Derbyshire warehouse were harangued for not working fast enough, while long staff searches after work sometimes meant workers earned below the minimum wage. There were also allegations that female staff were promised permanent contracts in exchange for sexual favours.

Sports Direct said it "is categoric that there should be zero tolerance to sexual harassment and bullying in the workplace and any culture of fear".

The retailer added that it had commissioned RPC to do another year-long review of working practices and corporate governance throughout the group which will be presented to shareholders next year.

Institute of Directors head of corporate governance Oliver Parry said: "It is good news that Sports Direct is responding to public and investor pressure to reform working practices at their facilities.

"From what we have seen in the past two years, the corporate governance standards have fallen way below what we would expect from a listed company."

"It is imperative that the promised governance review is seen as completely independent, so we still have reservations about the connections of the law firm to Sports Direct. Ultimately, the minority shareholders will only be protected if it's clear the board is acting in everyone's interests, not just Mike Ashley's."

Sports Direct faces concerted opposition from its shareholders at its annual meeting in Derbyshire on Wednesday (7 August) over how the group is run.

The Investor Forum, which represents huge asset management groups such as BlackRock and Allianz Global Investors, last month called for an independent review of the retailer's corporate governance.

Investors complain that RPC regularly works for Sports Direct and so cannot give fully independent advice. The move highlights the growing frustration between shareholders in the scandal-hit firm and its billionaire founder Mike Ashley, who owns a 55% stake in the business.

The Investor Forum will call for a report to "cover all aspects of corporate governance across the business, not only employment practices" at the firm's annual meeting on 7 September. The investor body says it represents 27% of the firm's independent shareholders.

A number of Sports Direct investors have warned they plan to oppose the re-election of the firm's chairman Keith Hellawell and other senior directors at the company's annual meeting due to a lack of independent leadership.

Ashley's family under scrutiny as well

The Local Authority Pension Fund Forum (LAPFF) said last month it would support trade union plans to begin an investigation into Sports Direct's working conditions. Legal & General Investment Management, one of the biggest single investors‎ in blue-chip UK companies, has voted against Hellawell, at the last two years' annual meetings.

Pirc, the investment consultancy, has also urged shareholders to remove Mr Hellawell, who it said "failed to show leadership in a critical period for the company". The consultancy has also called for the removal of Ashley citing concerns about his influence over other board members.

The Financial Times reported in August that a company owned by Ashley's brother is involved in distributing products sold by Sports Direct, while in January his daughter's 26-year boyfriend was put in charge of the group's vast property portfolio.

The annual meeting comes as sales at the retailer, once a high street powerhouse, have faltered. In July it posted full-year underlying earnings down 0.5% to £381.4m ($508.7m), blaming a "tough trading environment" in the second half of the year and after issuing a profit warning in January.

Shares in the retailer rose more than 5.5% in early trading today (6 August), and investors hoped the group was getting to grips with its long-running work practices and governance problems, however the stock has tumbled around 57% over the past year.

This story was last updated with additional information at 2.35pm BST on 6 August 2016.