Mr Ashley receives no remuneration but, as deputy executive chairman, Sports Direct said he had played a central role in growing its value from £2bn in 2012 to a FTSE 100 Index-listed firm worth £5bn today.
Sports Direct shares have risen almost 90 per cent over the past year.
The company will seek approval for the incentive scheme at a shareholder meeting next month, although the shares will not vest until summer 2018. Mr Ashley, who is majority owner of the company, will not vote on the resolution.
The grant of the shares is conditional on the company achieving underlying earnings of £330m in this financial year and £410m in 2015, as well as a target in relation to net debt at the end of the next financial year. Company earnings were £287.9m in the year to last July.
A previous scheme for Mr Ashley that would have delivered a £26m windfall was rejected in a shareholder vote in the summer of 2012.
The company said its new proposal has already received support from its largest institutional shareholder, Odey Asset Management.
Sports Direct chairman Keith Hellawell said: "The board believes that Mike is one of the outstanding retailers of his generation and that all shareholders benefit from his ongoing commitment to Sports Direct."
Part of Sports Direct's recent success has been put down to the company's employee bonus scheme, which last summer rewarded around 2,000 staff with shares worth around 68,000.
The 2011 staff scheme is also on track to reward more than 3,000 staff having already surpassed two of the four earnings targets.
Unions have accused the firm of a culture of low pay and poor treatment after it emerged last year that all 20,000 part-time staff at Sports Direct were employed on zero hours contracts, which usually leaves them not knowing how many hours they will work from week to week, with no sick pay or holiday pay.
Sports Direct has around 400 UK stores and operations in 19 countries in Europe. It also owns brands including Dunlop, Karrimor and Slazenger.