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Sports Direct is asking shareholders to approve £11m in back pay for the elder brother of its founder, Mike Ashley, after an internal probe set up to scrutinise a family business arrangement found he had in fact been underpaid.
Executives have said that shareholder disquiet prompted the retail chain to hire law firm RPC to establish whether the older Mr Ashley’s family ties had affected how much he was paid over an eight-year spell ending in 2015.
The review, which has been seen by the Financial Times, found that the tycoon’s brother missed out on millions of pounds of benefits because of an effort to avoid any appearance of impropriety that the company now regards as overdone.
John Ashley left his job as an IT director at Sports Direct in 2015 before taking ownership of a company called Barlin Delivery. Barlin owned no trucks and employed no drivers, but received a share of Sports Direct’s international website sales.
After the Financial Times reported on the arrangement — of which John Ashley was the main beneficiary — Sports Direct tore up the deal.
The RPC review found that unlike his peers John Ashley did not receive a £5m bonus related to Sports Direct’s 2007 flotation, and was excluded from a performance-related share award worth £6.8m, the review found.
While the lawyers could not say for certain that he did not benefit from personal helicopter flights and corporate credit card spending, they calculated that such benefits could not have been worth more than a few thousand pounds a year.
Mike Ashley, a self-made billionaire who also owns — and is trying to sell — Newcastle United football club, has told colleagues that he expects independent shareholders to block his proposal to make the £11m payment to his brother. Documents mailed to investors on Thursday said he would not use his controlling stake in Sports Direct to overrule their objections.
“If John had owed one pound to Sports Direct, Mike would have ensured any sum was repaid in full,” one of the people said. “Mike hopes that shareholders will be reassured that everything is in order and that any concerns are laid to rest.”
The RPC probe found that John Ashley, who has since been re-hired by Sports Direct, could have received at most £167,000 from the Barlin arrangement.
The news of the underpayment comes weeks after Sports Direct acknowledged that a dispute between employment agencies it once used at its Shirebrook warehouse meant that some former workers had not received wages they were owed.
Speaking in September, Sports Direct chairman Keith Hellawell said: “Our concern is to pay our workers whatever they are owed. When you get third parties involved it isn’t as easy as it sounds.”