Boohoo Links Bonuses to Sustainability and Governance Targets

Boohoo Group Plc is to link executive bonuses and a long-term incentive plan to environmental, social and governance targets as it seeks to recover from a labor supply chain scandal last year.

The U.K. online fast-fashion retailer said 15% of executive directors’ annual bonuses for the year through February 2022 will now depend on whether certain milestones are achieved. The remuneration committee will have the discretion to scrap the entire bonus if it is determined that change hasn’t been implemented, the company said in an annual report on Wednesday.

In addition, a lucrative long-term incentive plan for Boohoo’s top team will only vest if key governance and sustainability requirements are met during the three-year performance period. Under the plan, managers including co-founder Mahmud Kamani would share a 150 million-pound ($213 million) bonus if the stock price hits 600 pence by June 2023.

Boohoo Links Bonuses to Sustainability and Governance Targets

The proposed changes, which will be voted on by shareholders at next month’s annual meeting, are the latest moves by Boohoo to recover from a damaging minimum-wage and safety scandal at supplier factories in Leicester, England, last year.

An independent review by U.K. lawyer Alison Levitt found that Boohoo had prioritized profit and growth and ignored red flags about labor violations, but cleared the company of any direct involvement. Levitt made a series of recommendations that are incorporated in Boohoo’s Agenda for Change reform plan.

Linking remuneration to social, environmental and governance goals would mark a shift for a retailer that has until now tied executive pay to aggressive share price and sales growth targets.

Chief Executive Officer John Lyttle, who was hired from Primark in 2018, has agreed to an amendment to a separate bonus plan that was to award him as much as 50 million pounds if Boohoo’s market value reached 6 billion pounds by 2024.

Kamani was asked to consider linking executive pay to ESG targets when he appeared before an influential committee of U.K. lawmakers last year.

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