FAST-FASHION giant Boohoo has decided to cancel £3 million in annual bonuses and abandon a new compensation scheme for top executives following discussions with shareholders amidst increasing losses, reported Financial Times.
This move follows the company's recent announcement in its annual report to simplify its remuneration policy before the upcoming investor meeting on June 20.
In a statement released on Tuesday (28), Boohoo stated it "has engaged with certain shareholders... and has decided not to implement the incentive plan at this time," adding that it will "consider further engagement with shareholders."
Executive directors, including Boohoo co-founders Mahmud Kamani and Carol Kane, along with CEO John Lyttle, will forgo bonuses worth £3m for the fiscal year ending February 29, 2024, the FT report added.
This decision comes as pre-tax losses increased to nearly £160m, up from £90.7m the previous year.
Kamani, Kane, and Lyttle were each slated to receive £1m in cash and shares, according to the latest annual report, having previously received £1.6m in bonuses the year before.
The online retailer, which experienced a boom during the Covid pandemic, is now grappling with a sales decline due to the cost-of-living crisis and a quicker-than-expected return of shoppers to physical stores.
Boohoo’s stock has plummeted nearly 85 per cent over the past five years, resulting in a market capitalization of £435m. The company also reported net debts of £95m in its most recent financial year, compared to almost £6m of net cash the year prior.
“What was it thinking in the first place? The idea of doling out cash to the bigwigs when Boohoo has gone into reverse with earnings is madness,” commented Dan Coatsworth, an investment analyst at AJ Bell.
This reversal is the latest in a series of disputes with shareholders over executive compensation.
The proposed new incentive plan could have resulted in a maximum award of up to 500 per cent of the executives’ salaries this financial year, based on performance targets.
According to Boohoo’s remuneration policy, Kamani, Kane, and Lyttle were not eligible for a bonus for the year ending February 29, 2024, due to the group's poor financial performance. However, the remuneration committee had agreed to a payout nonetheless.
The annual report stated that the committee "feels that the formulaic outcome is not an accurate reflection of the excellent work carried out during the year to set the business up for future success, nor will it ensure that the management team is motivated and retained throughout the next financial year which will be pivotal for the group’s long-term success."
