Boohoo u-turns on exec bonuses after investor outrage

28th May 2024 14:07

(Sharecast News) - Fast fashion retailer Boohoo has backtracked on a plan to seek investor approval to hand £1m each in bonuses to co-founders Mahmud Kamani and Carol Kane along with chief executive John Lyttle.

The u-turn comes after a backlash from some investors, who were gearing up to revolt against the plan when it came to a vote at Boohoo's annual general meeting on June 20, given the company posted wider full-year losses of £160m in the year to February 28 from £90.7m a year earlier. Revenues fell 17% to £1.46bn, while net debt rocketed to £95m from almost £6m in cash in 2022/23.

The company acknowledged in its annual report that none of the executives were eligible for bonuses after financial targets were missed.

But the remuneration committee subsequently agreed the payouts as it felt "the formulaic outcome is not an accurate reflection of the excellent work carried out during the year".

One unnamed top five shareholder told the Times newspaper they were "furious", while "several" other leading investors were reportedly set to vote against the payouts and would also vote against a new long-term incentive plan.

Investors are understood to be unhappy that the proposed scheme has not been discussed with shareholders first. One said it was "outrageous" they had not been consulted.

However, on Tuesday afternoon Boohoo issued a statement saying that having engaged with "certain shareholders", it had decided not to implement the incentive plan and that the three directors had waived their "entire bonus entitlement".

Kane, who is an executive director, co-founded Boohoo in 2006 with Kamani. The retailer thrived during the pandemic, but since then it has been hit by customers returning to shops as well as the cost-of-living crisis.

Dan Coatsworth, investment analyst at AJ Bell, said: "Boohoo never seems to do itself any favours from a governance perspective. The fast fashion company has faced criticism over its supply chain and greenwashing claims during a scandal-hit stay on the stock market."

He said the company had "retreated with its tail between its legs after being publicly shamed" over the plans "despite the business racking up losses".

"What was it thinking in the first place? The idea of doling out the cash to line the pockets of the bigwigs when Boohoo has gone into reverse with earnings is madness. The whole point of bonuses is that senior managers and directors share the gain when things are going well and share the pain when they aren't. The heads you win, tails you win mentality no longer cuts the mustard."

Reporting by Frank Prenesti and Abigail Townsend