Boohoo will be tying its generous executive bonuses to environmental, social and corporate governance (ESG) targets, including improved workers’ rights, following suggestions by British lawmakers in March that the Manchester-based conglomerate “put its money where its mouth is” when it comes to tackling supply-chain abuses in the wake of last summer’s sweatshop imbroglio.
The fast-fashion e-tailer said Wednesday that 15 percent of its executive directors’ performance bonuses for the year through next February will now hinge on the progress of its program to rehabilitate its corporate governance, purchasing and labor-welfare practices, which it instituted after a third-party investigation of its U.K. factories uncovered “widespread if not endemic” problems with low wages and unsafe conditions.
The remuneration committee, which consists of non-executive directors, will also have the authority to “scale back” the entire bonus if this so-called Agenda for Change has not been successfully implemented over the financial year “irrespective of the share price growth achieved over the performance period,” Boohoo wrote in its annual report.
“We have redesigned the executive directors’ remuneration policy to align the interests of the executives with stakeholders, including the introduction of performance conditions linked to ESG criteria,” said 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. “This is an important part of the board’s response to the findings of the independent review and the successful implementation of the corporate governance aspects of our Agenda for Change program.”
Its previously criticized three-year management incentive plan, which would allow top brass, including co-founders Carol Kane and Mahmud Kamani, to share a maximum payout of 150 million pounds ($212.5 million) if Boohoo’s market value spiked by two-thirds to 7.55 billion pounds ($10.7 billion) by June 2023, will only vest if critical governance and sustainability requirements are met during the period, the company said.
“Whilst we ultimately believe that the full resolution (or otherwise) of these (supply chain) 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 non-financial performance condition,” Boohoo said. “Under this new target, the [remuneration] committee must be satisfied that the Agenda for Change program has been successfully implemented over the three-year performance period before the vesting of any [incentive plan] awards.”
The Environmental Audit Committee at the House of Commons, which has urged Boohoo to “demonstrate genuine commitment to environmental and social responsibility” by pegging its payouts to ESG criteria rather than aggressive sales targets, welcomed the announcement.
“While it appears that only 15 percent of the bonus will be tied to ESG improvements, it is encouraging that Boohoo’s remuneration committee will have the discretion to scrap the entire bonus if these much-needed changes are not implemented,” Member of Parliament Philip Dunne, chairman of the committee, said in a statement Wednesday. “I hope these powers are used to keep Boohoo’s management on track. Bonuses shouldn’t just be linked to breakneck growth.”
“I hope we are reaching a turning point in fast fashion’s awareness of its environmental and social responsibilities and would encourage other firms to follow suit,” he added.
Boohoo has quickly bounced back from both the Covid-19 pandemic and any reputational fallout from last year’s searing supply-chain scrutiny. Earlier this month, the trend-driven purveyor reported a 41 percent bump in full-year pre-tax revenues, amassing 1.7 billion pounds ($2.4 billion) in the 12 months through Feb. 28.
“Over the last year, the group has made great progress, delivering another set of record results despite the challenges posed by the Covid-19 pandemic,” Cane and Kamani said in a statement at the time. “We have made significant progress on our Agenda for Change program, with greater oversight of our supply chain, stronger governance and more transparency. We are embedding a new way of working and improving the sustainability of the group for the benefit of all stakeholders.”