The independence of The Hut Group’s board directors has been called into question as it gears up for the first major stock market float in the UK since the Covid crisis struck.
The online retailer, which sells a wide range of health and beauty products and is eyeing a £4.5billion listing, has emerged as one of the biggest winners from the internet shopping boom during lockdown.
But concerns have been raised about the way the company is run as it prepares to become a listed company which ordinary savers can invest in.
Bubbly: The Hut Group founder Matthew Moulding is taking on both the chief executive and chairman roles – a direct breach of the UK’s Corporate Governance code
Following a string of corporate governance failings at firms ranging from Sports Direct to Boohoo, one shareholder group said the make-up of The Hut Group’s board had set ‘red warning lights flashing for investors’.
Under the UK’s Corporate Governance Code at least half a company’s board, excluding the chairman, has to be made up of independent non-executive directors.
The guidelines are designed to ensure that key decisions taken by management are made in the interests of shareholders and subjected to sufficient scrutiny.
The group does not technically have to comply with the code as it is applying for a ‘standard’ rather than a ‘premium’ listing on the stock market – meaning it is subject to less scrutiny.
But many firms with standard listings voluntarily sign up to the guidelines anyway, to help protect investors.
A source close to The Hut Group said it wants to retain some of its entrepreneurial structure that has made it so successful. Founder Matthew Moulding is taking on both the chief executive and chairman roles – a direct breach of the code.
His stake is worth £765million and he will receive up to £700million of further shares if the company reaches a value of £7.25billion in the next two years.
Private equity tycoon Dominic Murphy, whose stake is worth £50million, is listed as one of just two independent directors on the six strong board.
The 53-year-old brokered private equity firm KKR’s deal to buy a 20 per cent stake in Hut in 2014. The senior independent director, Zillah Byng-Thorne, was an adviser to the company for four years before joining the board in 2018.
The two other two non-executive directors are Edward Koopman, of Belgian investment firm Sofina, and Iain McDonald, of London-based private equity firm Belerion Capital.
Both Murphy, who was appointed in 2014, and McDonald, who joined in 2010, have also served on the board longer than the six-year maximum recommended to ensure directors remain independent.
Peter Parry, of the UK Shareholders’ Association, said: ‘This doesn’t look very good at all. These are certainly red warning lights flashing here for investors. These independent directors do not look very independent at all.
‘It’s good for directors to be invested in the company so they have skin in the game. But these supposedly independent directors appear to have a big vested interest, which is a bit worrying.
‘Some also seem to have been there longer than they should be. After a while, people go native and cease to challenge the board.’
The Hut Group declined to comment. But a source close to it pointed out that a number of big firms that demand high levels of governance – including Blackrock and KKR – have backed the retailer.