The saga of Sport Direct’s attempts to find a long-term in incentive to reward Mike Ashley, its Executive Deputy Chairman, continued yesterday with the announcement of a proposed “2015 Bonus Share Plan”.

The Company’s Remuneration Committee have certainly taken on board feedback from shareholders on the previous proposal and have created a fearsome performance requirement. There are challenging EBITDA targets for four years starting in 2016. The whole award falls away if just one year falls short of the target performance, even if the slack is made up the following year. These targets look far too strict for awards aimed at employees generally and are probably too strict for general management. While it is unimaginable that these targets weren’t discussed with Mike Ashley, one can’t help wondering whether the performance targets are too strict to be an effective incentive for him.

The underlying problem seems to be the desire to give Mr Ashley a potential reward that reflects the extraordinary return to shareholders over the last few years, during which he has received no executive remuneration of any kind. While there may be some sympathy with that view, a plan that could give away over 4% of the current issued shares in a FTSE 100 company may look disproportionate, no matter how challenging the performance targets, if it is targeted at one person.

This bring us to the main issue with the proposal. The Company has chosen to withhold from shareholders how the awards will be distributed – the eligibility criteria are to be determined by the Remuneration Committee and the Board. The only clues around eligibility point in opposite directions:

  • There is a clear focus on justifying a large award to Mike Ashley.
  • The Plan is said to motivate the Company’s employees and reinforce the Company’s “One Team” culture, indicating wide employee involvement.

This lack of transparency on a proposal of this nature looks unprecedented for a FTSE 100 company and we can expect pressure from shareholders for clarification ahead of the General Meeting on 2 July.