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Investor group rebukes Sports Direct, wants review of management

* Investor Forum represents 12 pct of Sports Direct equity

* Wants fully independent review into corporate governance

* Sports Direct AGM on Sept. 7

* Shares (Berlin: DI6.BE - news) down 48 pct so far this year (Adds stance of shareholder Legal & General (LSE: LGEN.L - news) )

By James Davey

LONDON, Aug 25 (Reuters) - An investor group whose members manage 850 billion pounds ($1.1 trillion) of UK equities has taken the unusual step of publicly rebuking the management of Sports Direct and calling for an independent review.

The Investor Forum, which speaks for some 12 percent of the retailer's equity, called on Thursday on the Sports Direct board and billionaire founder Mike Ashley to launch an independent review of its corporate governance at its annual shareholder meeting (AGM) on Sept. 7, and to implement any recommendations.

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The forum comprises 40 asset managers, insurance companies, pension funds and endowments.

Ashley, who owns 55 percent of the sportswear retailer, has been fiercely criticised this year by senior politicians, unions and shareholders after a newspaper investigation revealed some workers received less than the minimum wage.

In July, British lawmakers said Ashley should be held accountable for what they called "appalling" working conditions and practices at the retailer's shops and warehouse, saying the environment was closer to that of a Victorian workhouse than a modern, reputable retailer.

The company's corporate governance has also come under fire after Ashley admitted the firm may have outgrown his ability to manage it.

Sports Direct, a mainstay of Britain's shopping streets offering low-priced sports goods through 450 stores, has had a torrid year, issuing three profit warnings and losing its place in Britain's FTSE 100 index of leading shares.

The stock, which has fallen 48 percent this year, was down 9.6 pence at 300 pence at 1254 GMT, valuing the business at 1.78 billion pounds.

Sports Direct could not be immediately reached for comment.

On Wednesday, it said it would host an Open Day for interested observers at its Shirebrook headquarters in central England on the same day as its AGM.

SERIOUS QUESTIONS

The company said last week that a report on working practices being undertaken by law firm RPC (NYSE: RES - news) , which will review and report on an internal investigation announced last December, will be published in the week of the annual meeting. It also said an external evaluation of the board was planned.

The Investor Forum, however, said RPC's remit was too narrow and in any case the law firm could not be considered independent as Sports Direct already has a relationship with it. The investors also said the planned external board evaluation failed to reflect the breadth and magnitude of the reform required.

They want a review of corporate governance and board oversight, related party transactions and potential conflicts of interest, employment practices, acquisition strategy, oversight of supplier relationships and the management of stores.

"Should the non-executive directors be unwilling to implement this review, serious questions will be raised as to whether they truly represent the interests of all shareholders," said the forum. "Shareholders will have to consider their voting at the AGM with great care given recent events at the company."

At the AGM, shareholders will vote on a resolution put forward by the Unite trade union calling for an independent review into work practices.

That resolution has been backed by the Local Authority Pension Fund Forum (LAPFF) and Legal & General Investment Management, the fund arm of insurer Legal & General, which is Sports Direct's 11th largest shareholder with a 1.02 percent stake, according to Reuters data.

Legal & General also said on Thursday it would oppose the re-election of chairman Keith Hellawell for the third consecutive year, as well as his fellow non-executive directors.

Shareholder advisory group Pensions and Investment Research Consultants (PIRC) has recommended Sports Direct investors vote against the re-election of both Hellawell and Ashley, who holds the executive deputy chairman role. (Additional reporting by Carolyn Cohn; editing by David Clarke)