The boyfriend of Mike Ashley’s eldest daughter could earn about £2.5m a year after being controversially put in charge of Sports Direct’s property empire.
Corporate governance watchdogs criticised Sports Direct, the sporting retailer controlled by Ashley, after the retailer revealed that Michael Murray would lead its UK and international property team.
Related: Revealed: how Sports Direct effectively pays below minimum wage
Sports Direct said in a stock market statement that Murray would not be paid a salary; instead, the 26-year-old has a “consultancy arrangement” with the company.
However, Murray’s consultancy, MM Prop Consultancy Limited, was only set up on 17 December and is registered to the same address as Ashley’s business interests.
The Institute of Directors, the business leaders’ group, said the arrangement would not be tolerated at other companies and warned that shareholders would seek assurances over Murray’s role and qualifications. Before working with Sports Direct, Murray ran student nights in Reading, Berkshire with a friend.
The controversy comes weeks after a Guardian investigation revealed that the company effectively pays thousands of temporary workers below the national minimum wage of £6.70 an hour and subjects warehouse staff to a regime of searches and surveillance.
Last week, Sports Direct bowed to growing pressure over its employment practices and announced it would increase the pay of thousands of staff on the minimum wage by 15p per hour.
Murray’s remuneration is based “solely on creating value”, Sports Direct said. The company’s non-executive directors will oversee an independent review every year to decide with their “absolute discretion” how much he should be paid. The maximum Murray can be paid is 25% of the increased value.
Sports Direct declined to clarify how it would measure the value added, but Murray is in line to earn millions of pounds if it uses the profits it banks from property every year.
The company controls £443m of property, plant and equipment. In its last financial year, Sports Direct earned profits of £10.3m from the buying and selling of property. Under this measure, Murray would collect up to £2.58m in remuneration.
He is at risk of being categorised as a de facto or shadow director under existing guidelines, making him subject to the same duties and liabilities as Sports Direct’s board. According to the Institute of Chartered Accountants in England and Wales, a person can be categorised as a de facto director if they are “negotiating with third parties on behalf of the board”.
However, by paying Murray as a consultant and not directly employing him, Sports Direct does not have to make the same financial and regulatory disclosures.
Oliver Parry, senior corporate governance adviser at the IoD, said: “Although it is ultimately up to each individual company to determine who they appoint to executive roles, shareholders will rightly be concerned about the appointment process surrounding Michael Murray, as well as how he will be remunerated.
“At any other FTSE 100 company, this would not be tolerated. The board should provide more details about how they will assess his ‘value’ and what his targets will be, which should be high achieving.
“Considering the importance of Mr Murray’s role to Sports Direct’s future, shareholders and other employees deserve to know more about this appointment.”
Sarah Wilson, chief executive of Manifest, the shareholder representative group, said related party transactions between directors and their associates were a “hot topic” for investors, although Sports Direct is not thought to consider the agreement with Murray as a related party transaction.
She said: “Any transfer of wealth from a listed company to a controlling shareholder through related party vehicles have the potential to be detrimental to minority shareholders. Loose or informal governance arrangements have the potential to surprise investors, something they would rather avoid.”
“Investors look to high quality disclosures to reassure themselves about the nature and extent of such transactions. We have no doubt that institutional investors will seek assurance and clarity about the nature of the business relationships.”
Sports Direct issued the statement after reports that Murray had been appointed as a director to companies connected to Ashley.
Murray is a director at Mash Services, a new vehicle linked to Ashley’s main company Mash Holdings, as well as McGrove Developments, Ashley’s new property group, and Strawberry Place Newcastle Limited, which owns land next to Newcastle United’s football stadium and plans to develop offices, student homes and a hotel.
Murray is the boyfriend of Anna Ashley, the tycoon’s eldest daughter. Murray bought a property in Belgravia for £10.75m in June 2013 with Ashley lending him money for the deal. In addition, Murray’s former home in Chelsea is now owned by Matilda Ashley, the tycoon’s youngest daughter, who paid £5.1m for the property in September.
Sports Direct, which has 400 stores across the country, said the primary task for the property team was to find new sites for its larger format stores and its combined retail and gym units. The retailer is ready to commit £250m towards buying new sites, particularly in south-east of England, and rolling out the new stores.
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