Boohoo adjusts management incentive plan as share price slumbers
Boohoo Group’s Remuneration Committee has made a change to its performance plan as far as the rewards for its senior management are concerned as previous targets have been rendered redundant by the firm’s plunging share price. It’s also including more staff in the new plan.
The company said that “against the background of the unique and unprecedented set of macro-economic and market headwinds experienced over the last three years, Boohoo's market capitalisation has significantly decreased, despite the strong efforts of executive and senior management. As a result, it is the view of the Remuneration Committee that there is little or no value in the existing Growth Share Plan (introduced for the CEO in 2019) or the current Management Incentive Plan (introduced in 2020)”.
These plans “no longer operate as an effective incentive mechanism for this critical population who are responsible for driving business performance and delivering Boohoo's strategic objectives”.
The new plan is intended to “drive long-term sustainable growth and rebuild shareholder value while enabling the retention and motivation of significant core talent and the wider employee population”.
The company has consulted its biggest shareholders on this and the new plan includes five share price hurdles, the last of which would required the company’s market value based on its share price to reach £5 billion.
That would mean a share price of around £3.95, a 747% increase on the last closing share price of 46.65p this week. It would also mean a minimum 53% compound annual growth rate over the term of the proposed plan.
The other hurdles are the share price reaching 95p, £1.58, £2.37, and £3.16.
The maximum value of awards under the plan will be £175 million.
A previous incentive plan was announced back in June 2020 when the share price was booming and the firm had a market capitalisation of £5.16 billion. A year earlier it had been a little over half of that figure and five years earlier it wasn’t even worth 10% of the 2020 amount.
The 2020 plan, assuming that the good times would continue, offered rewards based on a potential market cap of £7.55 billion within three years. However, today (with that three years almost up) the firm is back to a market value of just £611 million.
Iain McDonald, Chairman of the Remuneration Committee, said the group has “an outstanding executive team whose ongoing retention is crucial, particularly in an era where the recruitment of such quality is more competitive than ever before. This plan facilitates retention and resolutely aligns our executives' interests with those of shareholders.”
And he added that “in designing the plan, we recognised it needed to go deeper into the business than prior schemes while leaving headroom to attract the world-class talent that is essential to the execution of our strategy and growth ambitions. This is why the plan extends beyond the executive to include additional members of the senior leadership and indeed the wider employee population while acting as a powerful recruitment and incentivisation tool for new joiners”.
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