Boohoo is still facing backlash over last summer’s revelations about sweatshop-like conditions at its supplier factories in the English city of Leicester.
A leading proxy adviser is recommending that the fast-fashion e-tailer’s investors vote to oust co-founder and executive director Carol Kane at Boohoo’s upcoming annual meeting, citing concerns over her high compensation and “direct role” in the company’s “inadequate governance practices.” (Her co-founder—and current chairman—Mahmud Kamani, who admitted at a parliamentary hearing in December that mistakes were made, is not standing for reelection at the meeting.)
Both Kane and Kamani scored nearly 1.4 million pounds (just under $2 million) in pay—and CEO John Lyttle some 1.6 million pounds ($2.3 million)—after garnering annual bonuses of at least 900,000 pounds ($1.3 million) for the year ending Feb. 28, 2021.
Glass Lewis, which is headquartered in San Francisco, also pressed shareholders to reject Boohoo’s controversial remuneration proposal, saying that the incentive scheme could result in “excessive payouts” based on the performance of Boohoo’s share price, “which may primarily reflect market forces rather than company or management performance.”
Introduced last year, the scheme would see the firm’s top brass, including Kane, Kamani and Lyttle, divvy up a maximum payout of 150 million pounds ($212.3 million) if Boohoo’s market value vaults by two-thirds to 7.55 billion pounds ($10.7 billion) by June 2023. (It currently stands at 4 billion pounds, or $5.6 billion.) After the plan, which was introduced without a shareholder vote, was widely panned, Boohoo announced last month that the bonuses will only vest if critical governance and sustainability requirements are met during the period.
Moreover, 15 percent of its executive directors’ standard performance bonuses for the year through next February will now depend on the progress of its so-called Agenda for Change, which Boohoo instituted after an independent investigation of its British factory partners uncovered health, safety and wage violations in its supply chain.
“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 program has been successfully implemented over the performance period,” Glass Lewis said of Boohoo, which also owns the BoohooMan, MissPap, Nasty Gal, PrettyLittleThing, Karen Millen, Oasis and Warehouse brands, as well as the recently acquired Burton, Debenhams, Dorothy Perkins, and Wallis labels. “We believe this is a positive direction of travel in terms of aligning the awards with shareholders’ interests; however, [we] remain concerned with the underlying nature of the plan.”
A spokesperson for Boohoo defended the e-tailer’s scheme, noting that the remuneration committee had “engaged extensively” with shareholders to draw up the policy, “which includes [environmental and social] metrics” as part of the package. “The interaction was very constructive and has resulted in the company’s Agenda for Change being a key factor in determining senior executive remuneration,” the spokesperson added.
Glass Lewis’s advice is indicative of a broader trend of heightened shareholder sensitivity around environmental, social and governance issues, which, in turn, reflects current shifts in the consumer zeitgeist.
Last week, Amazon shareholders voted on a resolution calling for the internet Goliath to disclose how much of its plastic packaging ends up in the environment. Co-proposed by corporate accountability firm As You Sow, the resolution was ultimately rejected by a margin of 64.5 percent.
Though Amazon has not provided statistics, a recent report by the nonprofit Oceana estimated the company was responsible for 465 million pounds of plastic waste in 2020 alone. Roughly 22.44 million pounds of that, it said, ended up in the world’s freshwater and marine ecosystems as pollution in the same year—the rough equivalent of “a delivery van’s worth of plastic being dumped into major rivers, lakes and the oceans every 70 minutes.” (The Everything Store has denied the numbers, saying that Oceana has “dramatically miscalculated” its use of plastic.)
“We are pleased that 35 percent of Amazon investors want the company to properly address plastic waste, but that’s just not enough,” said Alex Truelove, zero waste campaign director for PIRG Education Fund, a member of the Public Interest Network with Green Century Capital Investment, a co-filer of the proposal. “This vote represents a sad reminder that too many people prioritize expediency over the future of our planet. We plan to continue to press Amazon’s management to step up and make concrete commitments to addressing their significant contribution to plastic pollution.”
The campaign was given a signal boost in early May, however, by Institutional Shareholders Services, a proxy advisor company that urged the retail juggernaut’s shareholders to vote in favor of the proposal, not only because of the environmental damage wrought by plastic waste but also with an eye on future government regulations.
“This is an especially encouraging result for the first year that a proposal is presented,” Conrad MacKerron, senior vice president of As You Sow, said in a statement. “We know from experience that management pays special attention to votes exceeding 20 percent as they tend to reflect not only the support of progressive ESG investors but mainstream investors who want to limit reputational risk to the company.”
It was with a view of risk—both moral and financial—that the Investor Alliance for Human Rights, a group of 160 institutional investors, said it would be “stepping up” its engagement with dozens of companies, including H&M, Zara owner Inditex and Nike, to “focus attention” on how business relationships in China’s Xinjiang Uyghur Autonomous Region could make them complicit in suspected genocidal abuses there.
Investors have a responsibility to “not contribute to severe violations of human rights through our investments,” Jan Erik Saugestad, CEO of Storebrand Asset Management, a financial services company in Norway, said at the time. “This is why it is important that we ask companies to map and disclose information about their supply chains, as well as disengage in activities that may contribute to human-rights violations.”
In April, the Interfaith Center on Corporate Responsibility led a call by more than 180 global institutional investors, representing over $4 trillion in assets under management, to ask brands to recommit to the Accord on Fire and Building Safety in Bangladesh, which was just given a three-month extension.
The Accord, the organizations said, both protect and respect the lives of workers while mitigating the risks to companies and their investors.
“After the tragic collapse of the Rana Plaza building eight years ago and the death and injury of 4,000 workers, an unprecedented 200 global companies signed the legally binding Accord on Fire and Building Safety in the hopes of transforming the Bangladesh garment sector,” David Schilling, senior program director for human rights at ICCR, said at the time. “That goal is being realized, and we commend these companies, particularly those that assumed leadership in the steering committee alongside global trade unions, for taking that important step.”
Now is not the time for them to “abandon this proven model for effective supply chain management,” he added. “We urge companies that have been part of the Accord—and those that have yet to participate—to demonstrate leadership by committing to this agreement, not just for Bangladesh, but for all the countries where workers’ health, safety and livelihoods are put in jeopardy simply by going to work each day.”