Boohoo exec incentive plan criticised

By

Barbara Santamaria

Published
Jun 30, 2020

A hedge fund has questioned the timing of Boohoo’s new bonus plan, which could see founders Mahmud Kamani and Carol Kane pocket £50 million each.

The group behind fashion brands including PrettyLittleThing, Nasty Gal and Miss Pap announced the management incentive plan last Friday.

Boohoo was not required to put the plan to a shareholder vote and on Monday it revealed that the scheme had been implemented.

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A number of investors, including investor advisory service Minerva Analytics and Share Action have expressed concerns about the plan, which is measured against a starting market capitalisation of £4.54 billion. 

They were particularly concerned as it was announced a day before the release of an encouraging trading update, sending Boohoo shares up 6.6%. 

Hedge fund Shadowfall, which has previously criticised the company, also expressed concern. Matthew Earl, Shadowfall’s managing partner, told The Times: “We believe the timing of the reference price immediately before this update is particularly odd given management’s likely awareness of the content of that trading update. Especially considering the fact that the shares rose sharply on the back of it.” 

Based solely on the company’s share price, the incentive plan will be triggered if Boohoo’s market capitalisation rises by 66% to £7.55 billion in three years' time, which equates to a compound average growth rate (CAGR) of at least 18%.

Founders Mahmud Kamani and Carol Kane are in line to receive a maximum payout of £50 million each, with CFO Neil Catto, Mahmud Kamani’s son Samir Kamani and other key individuals across the management team also benefitting.

Boohoo said the reward scheme will ensure that its leadership team “is motivated to deliver long-term sustainable growth for its shareholders.”

A Boohoo spokesperson also defended the timing, saying:  “The 600p target would have remained constant irrespective of the share price being taken from the average of the 30 days to June 16 or 17. It would merely have resulted in an immaterial adjustment to the CAGR.”