Sports Direct Landlord Hermes Turns To 'Anti-Slavery' Clauses

One of the UK's biggest commercial property landlords has begun inserting anti-slavery clauses in tenancy contracts amid growing scrutiny of working practices at retailers including Sports Direct International (Other OTC: SDIPF - news) .

Sky News has learnt that Hermes Real Estate, an £8.2bn property group which is part of Hermes Investment Management, recently told Sports Direct of its anger at working conditions for the chain's warehouse and shop-floor staff.

Hermes Real Estate has also asked lawyers to include anti-slavery clauses in all new lease management contracts - although the provisions do not apply to existing tenancy agreements, according to people close to the situation.

Sources said that Chris Taylor, Hermes Real Estate's chief executive, had written to Sports Direct's company secretary, Cameron Olsen, to express its concerns about the retailer.

"We believe that good human capital management, including the provision of fair living wages, robust health and safety practices and investment in training and development programmes, is the foundation of a stable and productive workforce and the maintenance of businesses' social licences to operate," he is understood to have said.

Mr Taylor, who is also president of the British Property Federation, is one of the most influential figures in Britain's real estate industry, while Hermes' name carries significant weight across the asset management sector.

Insiders said Mr Taylor's letter did not amount to a veiled threat to seek to terminate Sports Direct's leases at Hermes-managed properties.

The property manager oversees Sports Direct leases in Milton Keynes, Tunbridge Wells and three other locations.

Hermes' asset management arm has already declared that it intends to vote against the re-election of Sports Direct's chairman, Keith Hellawell, and a trio of other directors at Wednesday's annual general meeting.

It remains unclear whether a series of pledges made by Sports Direct , which is controlled by the pugilistic tycoon Mike Ashley, following a review conducted by the law firm RPC (NYSE: RES - news) will be sufficient to appease disgruntled investors.

The retailer said it would offer better working conditions for employees at its main warehouse in Derbyshire, and said shop staff would have the option of working guaranteed hours as an alternative to zero-hours contracts.

In a statement responding to RPC's report, Leon Kamhi, head of responsibility at Hermes Investment Management, described it as "an encouraging step forward".

"We welcome Sports Direct's report on working practices and commend the board on its candour, accountability and the specific solutions it has put in place to address the working terms and conditions at Sports Direct.

"We look forward in due course to RPC's report on Sports Direct's governance practices that the board has promised".

City institutions, which control a minority of Sports Direct's shares, are demanding a wide-ranging and Independent review of the company's corporate governance.

The Investor Forum, whose members manage assets worth more than £14trn, last month made an unprecedented public statement criticising the company after years of unsuccessful behind-the-scenes attempts to secure governance reforms.

Mr Ashley is now facing a major revolt over his leadership of Sports Direct at Wednesday's AGM, with two proxy voting advisers recommending that investors oppose his re-election.

Sources said that Glass Lewis had joined ISS (LSE: 0QRS.L - news) in warning that Mr Ashley had demonstrated leadership failings, although unlike its peer, Glass Lewis had not recommended that investors vote against Mr Hellawell.

The dual recommendations represent a further humiliation to Mr Ashley, the chain's founder, who has seen its share price plunge in the last 12 months amid growing disquiet over employment, governance and performance issues.

Aberdeen Asset Management (Other OTC: ABDNF - news) , Legal & General Investment Management and Royal London Asset Management are among the blue-chip investors which plan to vote against a number of directors.

The intensifying row ‎follows months of damaging revelations about Sports Direct, including the disclosure that it was effectively paying many workers below the minimum wage, with MPs who investigated the company accusing it of being run like a "Victorian workhouse".

Investors are furious that Mr Ashley has done so little to overhaul the running of the company despite the fact that its shares have fallen by nearly 60% over the last year.

Sports Direct now has a market value of just £1.95bn.