Bury-based FTSE 100 retailer JD Sports Fashion Plc has bowed to shareholder criticism of its corporate governance by announcing in an AGM statement it will split long-standing boss Peter Cowgill’s role as executive chairman and recruit a chief executive over the next year.
But JD Sports said it will merely “consider” repaying government furlough support on payroll costs — saying it will defer a final decision “until there is certainty on both the full easing of restrictions and the consequences of any further lockdowns during our peak trading period this winter.”
At the firm’s AGM on Thursday, the chairman of JD Sports’ remuneration committee which oversaw an unpopular pay package for Cowgill was forced off the board.
JD Sports said that it had failed to convince the necessary majority of independent shareholders to re-elect Andrew Leslie to the board.
Leslie will step down with immediate effect.
The Bury company also said there were “lower levels of support” for the company’s remuneration report at the AGM, which included a £4.3 million bonus for Cowgill.
JD Sports also gave updated guidance ahead of its AGM, saying: “While we must recognise the risk of further temporary store closures across our global estate and the potential repayment of government support to payroll costs in the current year, we presently believe that the group is on track to deliver profit before tax and exceptional items for the full year at an increased level of no less than £550 million.”
JD Sports shares rose 5% to around £9.65 to give the firm a stock market value of about £10 billion.
In an AGM statement, JD Sports said: “With regard to governance matters, we would like to clarify the following points: In conjunction with the board’s succession planning and to strengthen the depth of the management team it is our intention to divide the current role of Executive Chairman and CEO before the next Annual General Meeting and a comprehensive process will commence shortly.
“We fully accept that the composition of our board should reflect the current scale, momentum and global positioning of the group as well as its increased level of market capitalisation.
“In addition, the board fully supports the initiatives driven by the Hampton-Alexander Review and the Parker Review and acknowledges the need to create additional diversity within its membership.
“We are also mindful that certain board members have served on the board for longer than the recommended period of tenure within the Corporate Governance Code.
“The board, therefore, recognises the need to address its composition as soon as possible and have invited the independent non-executive directors to commence the selection process and make recommendations to the Nominations Committee.”
AJ Bell investment director Russ Mould said: “In a world where doing the right thing has never been more important for companies on the stock market, JD Sports is pushing its luck when it comes to certain issues.
“The fact it still hasn’t repaid furlough support from the Government despite guiding for at least £550 million in profit this year is disgraceful.
“It’s even more of an insult that it is still biding its time to make a firm decision or not whether to give back the money.
“This is an incredibly successful business which is making significant amounts of money.
“The furlough scheme was put in place to support companies during dark times, but JD Sports is one of many businesses which have thrived with online sales during the pandemic.
“Therefore, it should really use money from online operations to support disruption to its store estate, not rely on Government hand-me-downs.
“Shareholders should be pushing for the company to pull up its socks and give that money back.
“At least JD Sports has finally made the sensible decision to split the executive chairman and chief executive role.
“The company has been without a CEO since Barry Brown left in 2014, with Peter Cowgill being the dominant figure in the company ever since.
“The chairman’s role is to keep the board of directors in order, including oversight of the CEO.
“The chief executive oversees the day-to-day operations.
“While many US companies have executive chairs running the show, it is less common in the UK.
“In fact, it is considered best practice in the UK to keep the roles separate to avoid one person having too much decision-making power.
“JD Sports may be selling a considerable number of trainers and mountains of athleisure products, yet it cannot be complacent.
“An underappreciated risk is the likes of Nike and Adidas now selling direct to consumers, which means JD Sports effectively has new competition even though it continues to sell their products as well.”