Troubled U.K. Retailer Sports Direct Appoints Founder and Majority Owner as CEO - TheStreet

In a move that has shocked many, the controversial founder and majority shareholder of beleaguered U.K. retailer Sports Direct (SDISY) is now also its CEO.

The company announced today that CEO Dave Forsey is stepping down.  Ashley, who has had a testy relationship with the City for much of the group's more-than seven years as a public company, will take the helm with immediate effect.

Forsey resigned yesterday, the statement said. "I feel like I have lost my right arm," Ashley said in the statement. Ashley was the executive deputy chairman.

Shares in the company were up 3.4% today at 296.70 pence but have lost more than 60% of their value over the past year.

The beleaguered British sports retailer has come under fire for a series of failings, including its treatment of workers, who are said to be paid well below minimum wage. A television documentary called its distribution center a "sweatshop."

The company's practices were also the subject of a parliamentary investigation earlier this year. The Business, Innovation and Skills committee of lawmakers also called for a review of the working practices and corporate governance at Sports Direct.

Analysts from Peel Hunt said, "Clearly the issues surrounding accountability and working practices have caused an internal shakeout and the calls for Mike Ashley to have a more executive role have been answered.

"The management change is interesting but ultimately the shares will succeed or fail on the implementation of the new strategy."

Hargreaves Lansdown analyst George Salmon said after a shareholder rebellion at the annual shareholder meeting it was not surprising that there was a change of management or that Ashley stepped into the top spot.

"It's not clear how much of a change in direction this will actually be for Sports Direct. Indeed, with Mike Ashley now officially back at the top of the tree after stepping across from executive deputy chairman, many will see this as welcome clarification of the company's leadership," Salmon said.

This week the company said it would appoint an independent law firm to conduct a corporate governance review, after calls from investors.

The Investor Forum, a group representing institutions with £14.5 trillion ($19.1 trillion) under management, said in late August that a review that was being conducted into employment practices was not independent as the reviewers, RPC Solicitors, had a pre-existing relationship with the company.

"Governance failings are clearly resulting in declines in operating performance and long-term shareholder value," Investor Forum said at the time.

On Tuesday,  the company said the board had decided to replace RPC as the reviewer after listening to shareholders. "The board will continue constructive dialogue with the company's independent shareholders in order to reach agreement regarding the specific nature and timing of the review," it said.

Investor Forum represents 27% of independent shareholders and has been engaging with the board since April 2014. Eight meetings have been held with the company to address issues.

Sports Direct on Tuesday also said the selection process for a worker representative on the board would be done through "democratic staff elections."

The company also promoted Karen Byers to the role of global head of operations and Sean Nevitt to the position of global head of commercial.