ALEX BRUMMER: JD Sports needs a powerful chairman

On the High Street and in shopping centres around the country, JD Sports was among the standout performers before lockdown when retail was already ailing. 

The company’s reputation is high, largely because of the intelligent and philanthropic ownership of Pentland Group, the Rubin family vehicle which built its fortune on the back of Reebok sports shoes. 

It is disappointing that Go Outdoors, a JD offshoot, which employs 2,400 people, has announced it will go into administration. 

It was intended that government measures for the economy, including furlough and the break on business rates, together with a broad range of credit facilities, would prevent this kind of injury. 

Nevertheless, a walk down the High Street or through a shopping mall tells its own story of damage done by lockdown. While many of us have been sheltering in our homes, crews of workmen have been stripping a variety of retail outlets of fittings, leaving behind bare pock-marked walls and lights torn out of the ceilings. 

It is unfortunate timing that JD Sport’s executive chairman, Peter Cowgill, chose to sell 1.98m shares in the company earlier this month, raising £13.3m for himself and family in the midst of pandemic. 

Top business people often have good reason for selling shares at awkward moments, ranging from unexpected swoops by HMRC or family requirements. The optics are all wrong in a crisis when JD was contemplating administrators for part of the business. It is not as if Cowgill had no inkling of trouble. He was already in dispute with landlords over nonpayment of rents on Go Outdoors outlets. 

Doubtless Cowgill intended nothing untoward. But his triple role of chairman, chief executive and chairman of the nominations committee grants him unusual dominance on the board of a FTSE100 company. As is often the case, when all is going well, governance rules easily are swept aside. 

The sharp fall in JD Sports shares, the rent disputes, the administration of Go Outdoors and the Cowgill share sale are all good reasons why the firm – at very least – needs a powerful independent chairman who can protect the interests of all stakeholders.

Flawed policing 

Chancellor Rishi Sunak has done the right thing in reaching outside the Financial Conduct Authority (FCA) for its chief executive. Nikhil Rathi looks well suited. He has direct experience of how financial markets work from his role at the London Stock Exchange and knows about European Union financial services from a Treasury stint. 

The danger of financial regulators who are not market savvy has been exposed by the scandal at Wirecard in Germany. When potential problems at the fintech pioneer were first revealed, the immediate reaction was for Bafin, the equivalent of the FCA, to turn its fire on the messengers in the shape of short-sellers and the FT journalists who reported on the company. 

Its prime interest should have been testing if disclosures were true and protecting consumers. Germany finds it hard to understand that while short-sellers may be locusts – feeding off longer term investors – they also are a critical part of the price formation process. At Wirecard the instincts of short sellers were on the money now that it emerges that there is an alleged £1.6billion black hole in the firm’s accounts. 

The FCA is far from being a reliable enforcer, as investors in Neil Woodford’s deeply flawed investment empire might testify. Indeed, in the last few days a parcel of biotech shares, recently sold by authorised corporate director Link, has rapidly been sold on at profit which should belong to Woodford investors. Rathi’s key challenge will be overturning the FCA’s legalistic and lackadaisical culture.

Red lines 

Never has the value of Britain’s life sciences companies, as adjuncts to public policy, been more important than during the coronavirus crisis. 

Glaxosmithkline and Astrazeneca came to the rescue with testing labs when Public Health England was under siege. Both are working 24/7 on vaccines. AZ in combination with Moderna of Oxford University is promising something as soon as the autumn. GSK is aiming its tried and tested adjuvant technology at creating and gearing up a vaccine with ‘longer or better efficacy’. 

Business Secretary Alok Sharma will enshrine the vital role of firms fighting the virus in law, giving them a measure of protection from takeovers. Not before time.