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Sports Direct leads the way in staff share schemes Sports Direct leads the way in staff share schemes
(2 months later)
"These schemes are typically only for the executives, but this goes deep into the company. I'm surprised more businesses haven't adopted something like this." So says Dave Forsey, chief executive of Sports Direct, where the share-based bonus scheme is showering rewards on the 2,000 or so employees who qualified for the 2009 plan and stayed with the business."These schemes are typically only for the executives, but this goes deep into the company. I'm surprised more businesses haven't adopted something like this." So says Dave Forsey, chief executive of Sports Direct, where the share-based bonus scheme is showering rewards on the 2,000 or so employees who qualified for the 2009 plan and stayed with the business.
Profit targets have been beaten every year and the imminent release of the latest batch of shares means some individuals will soon have received equity worth about £100,000 at today's share price.Profit targets have been beaten every year and the imminent release of the latest batch of shares means some individuals will soon have received equity worth about £100,000 at today's share price.
In part, the numbers are so impressive because the recovery in Sports Direct's shares has been so spectacular. The 2009 scheme used prices of 100p and 125p to calculate potential rewards as a percentage of salary; now that payday has arrived, the shares trade at 638p. But that's not a coincidence. As Forsey says: "The schemes have been crucial to influencing staff behaviour and maximising the group performance."In part, the numbers are so impressive because the recovery in Sports Direct's shares has been so spectacular. The 2009 scheme used prices of 100p and 125p to calculate potential rewards as a percentage of salary; now that payday has arrived, the shares trade at 638p. But that's not a coincidence. As Forsey says: "The schemes have been crucial to influencing staff behaviour and maximising the group performance."
So why don't other retailers copy Sports Direct? Many operate share-based schemes but few do so on the scale of the sports retailer. The main reason, one suspects, is that companies believe only the officer class responds to the lure of a big bonus or can make a meaningful difference to performance.So why don't other retailers copy Sports Direct? Many operate share-based schemes but few do so on the scale of the sports retailer. The main reason, one suspects, is that companies believe only the officer class responds to the lure of a big bonus or can make a meaningful difference to performance.
Sports Direct, let's hope, has demolished that prejudice. Mike Ashley, owner of 70% of the company, is not running a worker's co-operative. Nor was it an act of charity of his part when he set up the 2009 scheme. Ashley was pursuing the entirely commercial objectives of trying to reduce staff turnover and increase productivity. He was also making the straightforward calculation that issuing 21m new shares to staff (less than 5% of the share base) would be a bargain if profit targets were met.Sports Direct, let's hope, has demolished that prejudice. Mike Ashley, owner of 70% of the company, is not running a worker's co-operative. Nor was it an act of charity of his part when he set up the 2009 scheme. Ashley was pursuing the entirely commercial objectives of trying to reduce staff turnover and increase productivity. He was also making the straightforward calculation that issuing 21m new shares to staff (less than 5% of the share base) would be a bargain if profit targets were met.
Now that Ashley has shown how it's done, others should follow. Indeed, City shareholders should insist on it: it might be in their own interests.Now that Ashley has shown how it's done, others should follow. Indeed, City shareholders should insist on it: it might be in their own interests.
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