Sports Direct Loses Biggest Independent Investor by Rupert Steiner - Article Example

This paper looks at evaluating an article on corporate governance which has been published in the last 2 months. Based on the above dimension an article titled “Sports Direct loses biggest independent investor” by Rupert Steiner which was published on 3rd August 2017 in the Guardian News & Media Limited has been selected. The paper analyzes the above mentioned article based on different dimensions. On the forefront the paper presents the different corporate governance issues which have been highlighted in the article. This is then backed by highlighting the different issues with different corporate governance issues and the reason the article has got prominence in the media. The paper then provided my personal opinion regarding the manner in which corporate governance issues were ignored. The paper would thereby help to provide useful insights and act as a guide in helping to deal with the different issues of corporate governance and the manner in which the overall working condition can be improved. The article states that Sports Direct has lost its biggest independent investors as both Standard Life and Aviva have sold their stake. The reason for selling the stake has been cited as different corporate governance issues which Sports Direct faces. Some of the core corporate governance issues which have been highlighted are dominance of Mike Ashley who is the CEO of Sports Direct in all business matter, the excessive rewards which the business makes to its employees and poor treatment of workers. It has been stated that Sports Direct hasn’t been able to work on the above stated issues which has made it difficult for the investors to be associated with the business. Sports Direct on the other hand has highlighted the different steps which the business has taken with regard to the different issues. The business has looked at improving the condition of workers by taking feedback from them and working in that direction. The business has also looked to provide English training as most of the people working with Sports Direct don’t have English as their primary language. Apart from it other steps with regard to improvement in working condition like Wi-Fi in canteen, dealing with employees’ issues and ensuring smooth operations has taken place. Sports Direct states that they have taken steps in different directions and will help the business over a certain period of time as the results will come after a certain time interval. Despite the different efforts the independent investors are worried that Sports Direct has hardly taken any constructive steps to control the issues which have led towards violation of the corporate governance norm. As a result Sports Direct has lost its biggest independent investors as both Standard Life and Aviva have sold their stake. This would create hurdle in the manner Sports Direct works in the future and will have an adverse effect on the overall working situation. Based on the analysis of the article it is seen that different corporate issues have been ignored by Sports Direct. The paper will now link the different corporate governance issues with different corporate governance theory so that better understanding can be garnered and the manner in which the working can be improved can be identified. On the forefront it is clearly visible that there is lack of transparency in the working style. Sports Direct claims that they have taken steps where they are looking to improve the conditions of the worker and have started a number of new avenues like taking feedback from employees and working on it, having English classes so that people who don’t have English as the primary language are able to learn it and similar other steps. On the other hand the independent directors say that there is no transparency as the different claims forwarded by Sports Direct are misleading and no such steps have been taken (Freeman, Edward, Wicks & Andrew, 2004). This brings forward that there is lack of proper corporate governance policies in the organization as the organization is unable justify their work which has created doubts and suspicion in the mind of independent directors. Apart from it the other corporate governance issue which is witnessed is that there is lack of fairness in the working process (Hill & Jones, 2002). The independent directors have claimed that excessive pay rewards are being made to employees without any proper linkage between results and rewards. This has resulted in huge loss for the business as a lot of money is doled out for rewards. Since, there is lack of fairness in the policies and lack of transparency in the manner the business rewards its employee it creates doubts and suspicion that the funds are bring used for other purposes. It is important that Sports Direct looks at having proper fairness in the manner employees are rewarded so that better relations can be fostered. The organization also needs to craft policies where a proper linkage between rewards and results are made so that the different factors and the impact it has on business is understood. In addition to it the article highlights that the control of power is mostly exercised by Ashley the CEO of the company. The use of power to control the business has resulted in diluting the rights of other and over dominating the overall business (Barlev & Haddad, 2003). The situation has turned out in such a manner that independent directors are of the suspicion that decisions are taken for the gain of CEO and no importance is given to the stakeholders’ (Donaldson & Davis, 1991). This clearly highlights that the stakeholder theory of corporate governance is being ignored as the business gives relevance and importance to individual decision taken by the CEO. Instead the business should look at taking decision for the stakeholder and the role and interference of the CEO should decrease so that the business can be carried out smoothly. Apart from it the article shows lack of proper monitoring and governance which has resulted in confusion and impacted the overall working style. The fact that proper corporate governance is not being adopted has resulted in poor working style (Poskitt, 2005). Sports Direct should instead look at having agents who monitor the business so that they don’t take decisions for their own benefit. The process will help to preserve the right and interest of the stakeholders and would ensure that the corporate governance norms will be strictly adopted by the organization. This should be matched by crafting a corporate governance policy which every individual within the organization has to follow (Mitton, 2001). This will help to define a proper set of code which every employee including the CEO has to abide with. The process would reduce the differences and help to ensure that the business is carried out within the defined boundaries thereby ensuring better working conditions. It is clearly seen that Sports Direct has ignored the different aspect of corporate governance which has resulted in independent directors selling their stake. It is imperative that the business looks at the issue of corporate governance seriously so that the business can be carried out without any difficulties in the future. The article has found a place in the media as Sports Direct didn’t look to abide with the corporate governance norms which has been highlighted by the media. The manner in which businesses are transforming it is imperative that corporate governance policies are followed and not adhering to those catches the attention of people (Bonazzi & Islam, 2007). Since, Sports Direct didn’t look at achieving the required corporate governance norm has caught the attention of the media. Apart from it the fact that the CEO Ashley had claimed that he would remain the CEO as independent directors would support him and re-elect him but instead the independent directors have sold their stake has caught the attention of the media. The media as a result has brought forward the issue to the society so that the society is able to understand the manner in which the business is working and are able to take proper business decisions based on it. In addition to it the need and importance of corporate governance is continuously increasing. Businesses not adhering to the corporate governance norm catch the attention of the media as the interest of the stakeholder is not protected. Since, the overall interest of the society is not being protected and it is the right of the media to bring forward the same before the people so the article has been highlighted in the media (Moxey & Priddy, 2008). This will help to catch the attention of the people and the management as well which could lead towards taking steps so that improvements in corporate governance takes place. The other reason which has led the article to catch the attention of the media is that the wants the society to understand the manner in which Sports Direct is working. The media wants the people to understand the tussle between the company and the independent directors. This will help them to take important decisions with regard to investment. The society as a large will have the required knowledge which could help them to take better decisions (Tony & Kerry, 2009). As a result the overall society would be protected as the risk would come down and having material knowledge will help to take useful business decisions. The media has thereby looked at informing the society an ensuring that the different decisions benefits them. Thus, there are different reasons which has led the article bring highlighted in the media with the intention that it improves the knowledge within the society and provides an opportunity through which better decisions can be taken. This would also make Sports Direct think seriously on their policies and would lead towards creating proper corporate governance norm within the organization. According to me I feel that Sports Direct ignored the need and importance of corporate governance within the organization. I feel that the business is being dominated by Ashley and it has become a situation of ego clashes as the CEO wants to retain his position and has thereby looked at taking all possible steps. It is clearly seen that all aspect of corporate governance are ignored and the business has no linkage between the rewards and results for employees. I feel that there is clear lack of transparency and fairness in the working manner. The business is not able to justify the rewards which are being provided to the employees as there is no linkage between rewards and results. This is being matched by the fact that the business is being dominated by the CEO and all major decisions are taken by him. This has resulted in decisions being taken for their own benefit instead of looking for the entire shareholders (Jensen, 2004). I feel that it is important that decisions which are taken should benefit the entire stakeholders but instead the business has been dominated by individual gains. Apart from it having poor working conditions is something which is unjustified as it would result in poor results. This further creates doubt as excessive rewards are bring given but the working conditions is not up to the mark. This clearly highlights that the business lacks corporate governance (Corfield, 1998). In addition to it I feel that the business lacks proper corporate governance policies which has resulted in creating such an environment and would thereby require working in that dimension so that overall business potential improves. The paper thereby evaluates the manner in which Sports Direct ignored the aspect of corporate governance in their organization. The paper brings forward the different corporate governance issues which were ignored and requires development of policies which improves the overall working condition. The paper shows the need and importance of having corporate governance policies in Sports Direct and developing process through which corporate governance policy is adopted. This will help Sports Direct to improve the manner in which the business is governed and would ensure that the business will be carried out smoothly in the future. References Bonazzi, L. & Islam, S. 2007. Agency Theory and Corporate Governance: A study of effectiveness of board in monitoring of CEO’s. Journal of Modelling in Management, 2 (1), 7-23 Barlev, Y. & Haddad, T. 2003. Fair value accounting and the management of firm. Critical perspective on accounting, Australia Taxation Board, Australia Corfield, A. 1998. The Stakeholder Theory and its Future in Australian Corporate Governance. Bond Law Review, 10 (2), 213 Donaldson, L. & Davis, J. 1991. Stewardship Theory or Agency Theory: CEO Governance & Shareholder Return. Australian Journal of Management, 16 (1), pp. 49-64 Freeman, S., Edward, R., Wicks, H. & Andrew, C. 2004. Stakeholder Theory & the Corporate Objective Revisited. Organization science Hill, C. & Jones, T. 2002. Stakeholder Agency Theory. Journal of Management Studies, 24 (2), 191-205 Jensen, M. 2004. Value Maximization, Stakeholder Theory & Corporate Objective Function. Harvard Business School, Research Paper No 01-01 Moxey, P. & Priddy, S. 2008. Corporate governance and credit crunch. Association of Chartered Certified Accountants Mitton, T. 2001. A cross firm analysis of corporate governance on the East Asian Financial Crisis. Journal of Financial Economics, Elsevier Science Poskitt, R. 2005. Disclosure Regulation & information risk. Accounting & finance, volume 45 (3), pp. 457-477 Steiner, R. 2017. Direct loses biggest independent investor. Guardian News & Media Limited. Retrieved on August 15, 2017 from https://www.theguardian.com/business/2017/aug/03/sports-direct-loses-biggest-independent-investor-standard-life-aviva Tony, N. & Kerry, H. 2009. The stakeholder theory in the modern global business environment. International Journal of Applied Institution Governance, 1 (1), 3 Read More