An influential shareholder advisory group has recommended blocking the reappointment of Boohoo’s co-founder Carol Kane amid concerns about high pay and management’s failures to tackle poor conditions at the factories that make its clothes.
Glass Lewis also advised shareholders to vote against Boohoo’s remuneration report saying that a new management incentive scheme could lead to “excessive payouts” based predominantly on the performance of Boohoo’s share price.
Under the controversial scheme introduced last year, the co-founders Mahmud Kamani and Kane are both due to receive £50m, a third each of a £150m bonus to 15 key managers, if Boohoo’s market valuation – at about £4bn currently – reaches just over £7.5bn by June 2023.
After protests about the plan, which was introduced without a shareholder vote, Boohoo this month said the board would have the power to reduce the payout if the group’s Agenda for Change programme was not implemented in full. The change plan includes establishing a whistleblowing system and responsible sourcing plan as well as publishing the names of all factories used by Boohoo worldwide.
A separate bonus scheme for the chief executive, John Lyttle, under which he will receive a £50m bonus if the company’s market value reaches £6bn by 2024, and directors’ annual bonus scheme, have also been linked to improvements in dealings with suppliers.
Glass Lewis said in its report: “We have reservations regarding these plans, whereby the executives may be eligible for extremely large payouts based predominantly on share price performance, which may primarily reflect market forces rather than company or management performance.
“We acknowledge that the company has introduced an underpin to the awards under these schemes, whereby vesting is subject to the committee being satisfied that the Agenda for Change programme has been successfully implemented over the performance period. We believe this is a positive direction of travel in terms of aligning the awards with shareholders’ interests; however, remain concerned with the underlying nature of the plan.”
Pirc, another influential shareholder advisory body said it was sceptical about the board reining in pay after a decision to pay full annual bonuses this year to Boohoo’s top directors despite a report by Alison Levitt QC finding they were aware of “very serious issues” about the treatment of workers at the group’s Leicester suppliers which they “did not move quickly enough” to rectify.
He said: “If there was ever going to be a period Boohoo thinks the board didn’t do a brilliant job on supply chain issues, I would think it would be last year,” adding that approval of the full bonus did “not give us confidence on how they would implement [the limits on future bonuses] in practice”.
Both Kamani and Kane received nearly £1.4m in pay and Lyttle nearly £1.6m after each received annual bonuses of £900,000 or more for the year to February 2021.
While the report makes clear that in future the entire annual bonus could be ditched if the plan for change is not fully implement, just 15% is directly linked to progress on the plan.
A spokesperson for Boohoo said: “During recent months the remuneration committee engaged extensively with institutional shareholders in drawing up the overall remuneration policy which includes [environmental and social] metrics as part of the annual remuneration for directors. The interaction was very constructive and has resulted in the company’s Agenda for Change being a key factor in determining senior executive remuneration.”