The British clothing retailer Boohoo Group Plc wants to counteract the ongoing fall in the price of its shares with a new bonus system for management. As part of the “growth plan” presented on Thursday, the Group will in future link the performance-based remuneration to clearly defined progress in increasing the stock market value. The company’s share price has fallen almost 90 percent since its peak in mid-2019.
“Against the backdrop of a unique and unprecedented combination of macroeconomic and stock market headwinds over the past three years, Boohoo’s market capitalization has declined significantly, despite the great efforts of the executive team,” the company said in a statement. Due to this development, the existing bonus programs would have “little or no use” and therefore no longer function as “effective incentive mechanisms” for important executives.
As part of the five-year model now presented, the bonuses are linked to specific targets for increasing the share price. A total of five levels are planned, the first being reached when the share price, which is currently just under 49 British pence, improves to 95 British pence. The maximum bonus is achieved with a share price of £3.95 and a resulting market capitalization of £5.0 billion.
The executives involved receive a specified number of new shares in the Group when each target is reached. According to this, CEO John Lyttle would pocket the highest bonuses. If the maximum target is reached, he could look forward to a total of £50 million (€56 million) in additional share-based payments.
The new model was developed after an “extensive consultation process with shareholders” and ensures “a direct link between the interests of executives and those of shareholders,” explained Boohoo. Although there is no legal obligation to do so, the group intends to put the plan to a vote “in the interests of good corporate culture” at the upcoming annual general meeting in March.