Boohoo May Link Bonuses to ESG Targets as Part of Wider Reform
(Bloomberg) -- Boohoo Group Plc is considering linking executive bonuses to specific environmental, social and governance targets as part of wider efforts to reform the online fashion retailer following a labor supply chain scandal.
An influential committee of U.K. lawmakers pushing for change in Britain’s fast fashion sector said Saturday that Mahmud Kamani, executive chairman of Boohoo, confirmed in a letter that the company may change some of the ways it measures the performance of top executives.
Philip Dunne, a member of Parliament and chairman of the Environmental Audit Committee, said the development “sends promising signals” that Boohoo is becoming aware of environmental and social responsibilities.
“Bonuses shouldn’t just be linked to breakneck growth,” he said in an emailed statement. “Boohoo needs to demonstrate that it is delivering verifiable improvements in workers’ rights and the climate impact of its products.”
The committee wrote to Kamani in March asking Boohoo to consider linking executive pay to ESG targets. A spokesman for Boohoo told Bloomberg the company’s remuneration committee is already engaging with shareholders who have given constructive feedback on its plans. Further details will be published in the annual report next month.
The proposed change is the latest move by Boohoo to recover from a damaging minimum-wage and safety scandal at supplier factories in Leicester, England, last year. An independent review found that Boohoo had prioritized profit and growth and ignored “red flags” about labor violations, but cleared the company of any direct involvement.
Since then, Boohoo has appointed U.K. judge Brian Leveson to supervise the reform process. The retailer, which owns brands such as Nasty Gal, PrettyLittleThing and Karen Millen, also hired several senior executives to oversee supply-chain compliance and last month published its list of suppliers for the first time.
Linking remuneration to social, environmental and governance goals would mark a shift for a fast-fashion retailer that has until now tied executive pay to aggressive share price and sales growth targets.
Last year, just before the labor scandal broke, Boohoo revealed a long-term incentive plan that would award the top team at Boohoo, including Kamani, a shared 150 million-pound ($208 million) bonus if the stock price hits 600 pence by June 2023.
Chief Executive Officer John Lyttle, who was hired from Primark in 2018, could receive as much as 50 million pounds under a separate bonus plan if Boohoo’s market value reaches 6 billion pounds by 2024.
©2021 Bloomberg L.P.