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Boohoo should link bosses' bonuses with workers rights and sustainability improvements, say MPs

Lauretta Roberts
05 March 2021

Boohoo should link a bonus scheme in place for senior executives to achievement of its pledges on workers' rights and environmental sustainability, MPs have said in a letter to its executive chairman Mahmud Kamani.

Parliament's Environmental Audit Committee chairman Philip Dunne MP has written to Kamani to seek an update on the Manchester-based online fashion group's commitments to environmental and social responsibilities made during Boohoo's appearance before the Committee in December.

The letter praises the group for steps it has taken to improve its practices, such as signing up to three leading sustainability initiatives and the appointment of Andrew Reaney, formerly of Primark, as Director of Responsible Sourcing & Group Product Operations.

Since allegations of poor working practices and under-payment of staff at some factories in Leicester, which supplied Boohoo, emerged last summer, the company also commissioned Alison Levitt QC to conduct an independent investigation of its supply chain and appointed retired judge Sir Brian Leveson to its board to hold it accountable for improvements in this area.

Boohoo was also praised for its commitment to UK manufacturing and the company has invited members of the EAC to visit a new manufacturing site it is building in Leicester. Following the allegations the company also deselected 64 suppliers in the city while improving terms for those suppliers it is retaining on its roster.

"We welcome Boohoo Group’s stated commitment to UK manufacturing and commend its 14 day payment terms. We also thank you for the invitation to visit the company’s new factory on Thurmaston Lane once it is completed. We were grateful for Mr Reaney’s explanation of how the business calculates an efficiency rating for suppliers.

"In our original inquiry we heard that aggressive cost pressures placed on suppliers can put them in a position where corners are cut on labour costs. Boohoo Group has called for the licensing of factories to improve compliance, but responsibility for compliance must also be shouldered by the powerful retailers and brands that place the orders," the letter states.

At the hearing in December, in which Kamani appeared, the MPs said they were unsatisfied with his answers in respect to corporate governance at Boohoo after Kamani admitted that mistakes had been made as a result of the company's rapid growth. He stated that Boohoo had grown between 50% and 100% year-on-year. In its last trading update for the 10 months to 31 December, Boohoo Group recorded sales of £1.48bn, up 42% on the prior year.

The leadership team at Boohoo is heavily incentivised to continue its rapid growth trajectory and the business has been acquisitive during the pandemic, snapping up the Oasis, Warehouse, Dorothy Perkins, Burton, Wallis and Debenhams brands, which all collapsed last year.

In June 2020, the company announced a generous incentive scheme for Kamani, fellow co-founder Carol Kane and other other executives, with bonuses of between £50 million and £150 million to be paid out if the company’s market value grows by two-thirds over three years. MPs are suggesting this scheme be tied to improvements in its supply chain and sustainable practice, and not just financial performance.

"We asked at the hearing in December whether you would be prepared to link your and other senior executive remuneration incentives to Environmental, Social, and Governance (ESG) improvements. We believe that such a move to link growth incentives to measurable ESG criteria — such as the environmental sustainability of your products and the welfare of workers — would demonstrate genuine commitment to environmental and social responsibility. You pledged to discuss this at the next board meeting. We would welcome an update when the Board has considered this matter; its decision; and the rationale behind the decision made," the letter states.

Read the full letter from Philip Dunne MP to Mahmud Kamani here. 

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