Sports Direct faced shareholder anger at its annual meeting with investors dissatisfied despite the firm’s pledge to improve staff working conditions.
Investors believe founder Mike Ashley, who owns 55% of the firm, wields too much control.
Shareholders want to depose chairman Keith Hellawell. The board has stood firm, backing Mr Hellawell despite his offer to resign over the weekend.
The meeting followed a critical report by the chain’s lawyers.
Sports Direct commissioned its legal advisers Reynolds Porter Chamberlain to carry out the review after MPs said working practices at its warehouse at Shirebrook in Derbyshire were closer to “that of a Victorian workhouse than that of a modern High Street retailer”.
Mr Hellawell made his offer to step down over the weekend due to the shortcomings highlighted in the report, but the board, including Mike Ashley, asked him to stay, the company said.
“He will stay in his role in order to assist with making further improvements,” Sports Direct said.
In a presentation released by Sports Direct ahead of its annual meeting, the firm insisted that despite speculation, billionaire founder Mr Ashley had no intention of taking the company private.
It also warned that profits – using its preferred EBITDA measure – would be about 300m for the 2017 financial year, 21% below 2016’s 381m.
Following the trading update, Sports Direct shares dropped 11% to 312p.
The sportswear firm also said it would continue to employ the boyfriend of Mike Ashley’s daughter to run its property arm.
“As previously disclosed, our property team will continue to be led by Michael Murray and his remuneration will be decided at the board’s discretion,” it said in a presentation released ahead of the meeting.
Last year an investigation by the Guardian newspaper revealed that staff at its Shirebook warehouse were subject to lengthy security searches which, in some cases, resulted in their pay falling below the legal minimum wage.
And a BBC investigation found ambulances were called out to Shirebrook 76 times in two years.
In Tuesday’s report, Sports Direct pledged to abolish zero-hours contracts for its directly employed, casual retail staff, and make sure all staff were paid above the national minimum wage.
Later, the firm said it would put a workers’ representative on its board to “give workers a voice at the highest level and to help ensure that all staff are treated with dignity and respect”.
Ashley Hamilton-Claxton, corporate governance manager at Royal London Asset Management, which owns shares in Sports Direct, told the BBC on Wednesday: “We need fundamental change at the top and that starts with the chairman.”
She said Mr Hellawell had “not shown sufficient leadership” and making “minor changes” to its employment practices was not enough.
Sports Direct has already commissioned a second review of working practices to monitor progress, but Ms Hamilton-Claxton said this review needed to be conducted under a new chairman “otherwise we are unlikely to see change”.
Shareholder Hermes also said it would vote against the reappointment of Mr Hellawell.
“When we’ve met him he always comes across as an individual with the highest integrity [but] we believe now is the time for him to step down and be replaced by a strong, credible individual with strong experience of chairing a FTSE company,” Leon Kamhi, the head of responsibility at Hermes Investment Management, told the BBC.
The Institute of Directors (IoD) has also called for an overhaul of the way the firm is run.
“It is good news that Sports Direct is responding to public and investor pressure to reform working practices at their facilities,” said Oliver Parry of the IoD.
“But this is only the first step towards restoring shareholder and employee trust in the management and board.
“A radical overhaul of their corporate governance arrangements needs to be the next step,” he added.
Read more: http://www.bbc.co.uk/news/business-37289052