Fashion retailer Boohoo has linked a bonus pot for its top executives to its resolution of issues in its supply chain following a backlash from shareholders.
In September Boohoo accepted the findings of a damning independent report into poor working practices in its supply chain.
The report, by Alison Levitt QC, found that allegations about poor working conditions in factories in Boohoo’s supply chain in Leicester were “substantially true” and that Boohoo’s directors knew about the problems from December 2019 at the latest but did not do enough to resolve them.
In its annual report published on 19 May, Boohoo said it had reviewed a management incentive plan set up in June 2020 for 15 senior directors and managers including the founders of the business Mahmud Kamani and Carol Kane. The bonus pot under the scheme could hit a maximum of £150m by June 2023 if the company hits market capitalisation growth targets.
Boohoo said it had reviewed the scheme in the light of “supply chain issues” that had been raised over the course of the financial year.
“We ultimately believe that the full resolution (or otherwise) of these issues will be reflected in long-term share price performance (and thus have an impact on the value of awards) we have also agreed with participants to add a new nonfinancial performance condition,” the report said.
Under the changes the remuneration committee must be satisfied that Boohoo’s supply chain remediation plan has been successfully implemented before the vesting of any awards.
Boohoo’s remuneration committee said it had initiated the review in light of “the heightened level of scrutiny of the business, the size of the vote against the directors’ remuneration report at the 2020 AGM, feedback from leading shareholders and our desire to ensure…the strongest possible alignment between executive pay and the long-term interests of all stakeholders.”
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