The online fashion specialist Boohoo has backtracked on a plan to pay three top executives £1m each in bonuses after reporting widening losses and falling into debt.
The move comes after shareholders complained that bonuses were going to be awarded to directors despite the chief executive, John Lyttle, and Boohoo’s co-founders, Mahmud Kamani and Carol Kane, missing bonus targets on sales, profits and cashflow as well as environmental and IT aims.
Investors had been due to vote on 20 June on whether to approve the remuneration plan, which was announced last week in Boohoo’s annual report.
It showed the retail group, which owns Debenhams, Warehouse, Dorothy Perkins and Pretty Little Thing, built up net debts of £95m in the year to the end of February – down from almost £6m of net cash a year before – after losses widened 76% to £160m and sales fell to £1.8bn.
The difficult year meant the three bosses were set to receive no bonus but the group’s remuneration committee said in the annual report that it had awarded them a one-off bonus of £1m each, 30% of which would have been in cash and the rest in shares.
The committee said it wanted to make the award because a zero bonus “is not an accurate reflection of the excellent work carried out during the year to set the business up for future success” and that it would not “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”.
However, in a short statement released on Tuesday, Boohoo revealed it was backtracking and had “decided not to implement the incentive plan at this time” after it had “engaged with certain shareholders”.
That came after a report in the Times that one major shareholder was “furious” about the change to the bonus scheme while another said it was “outrageous” that proposals for the one-off bonus been released in the annual report without consulting investors first.
The loss of the awards means Kamani’s pay for the year will be just under £503,000, Kane’s just under £524,000 and Lyttle’s £713,175. Both Kamani and Lyttle earned more than £1m in the year before and Kane earned £986,984.
The latest upset comes after a string of wrangles between Boohoo’s founders and shareholders over bonus payouts. Last year, shareholders narrowly approved a new “growth share plan” under which Lyttle could receive a maximum of £50m in Boohoo shares, part of a total £175m payout to executives, if the company’s share price reaches 395p – and remains there within a 90-day average window within five years.
Boohoo executives would start to receive initial payouts once the share price returned to 95p, close to the level it was at in February 2022. It currently stands at less than 35p.
Kane, who co-founded Boohoo in 2006 along with the executive chairman Kamani, would also receive a bonus under the scheme.
