Broker calls for independent chairman at Boohoo
An independent chairman at Boohoo would be "a major part of the group’s rehabilitation in the eyes of investors and other stakeholders" leading broker Peel Hunt has said.
The Manchester-based fast fashion group, which is listed on AIM, has been embroiled in controversy this year surrounding the treatment of staff in its supply chain (particularly in factories that serve it in Leicester) and its approach to corporate governance.
Co-founder of the business, Mahmud Kamani, is the executive chairman of the Boohoo, having previously been joint-CEO with co-founder Carol Kane. The pair founded the business in 2006 and it was floated in 2014.
In March 2019, former Primark COO John Lyttle was appointed as CEO and its former independent chairman Peter Williams (now at Superdry) stood down.
At that time Kamani appointed himself as chairman, while Kane remained as an executive director with a particular focus on product. Kamani's sons are senior executives in the group with Samir Kamani holding the position of BoohooMAN CEO and Umar Kamani is CEO of PrettyLittleThing, a business he founded and which was acquired in full by Boohoo earlier this year.
Following reports over the summer that staff in its supply chain were paid as little as £3.50 an hour, the business tasked Alison Levitt QC to conduct an independent review of its supply chain. In her findings she said that the directors of the company had been aware of the issues for some time but had not felt it was their responsibility to rectify them. However she added that she didn't believe the company deliberately sought to profit from the issues either.
On Monday it was confirmed that Boohoo's auditor PwC had stood down from the business causing its share price to slump. Other major accountancy firms are said to have ruled themselves out of the process for taking on the group's audit.
According to The Telegraph, Peel Hunt analysts Jonathan Pritchard and John Stevenson believe that the company must now appoint an independent chair.
The heavy involvement of the Kamani family in key roles within the business was said to have been a bone of contention between Mahmud Kamani and Peter Williams when he was at the business.
Williams was said to believe that Kamani was running the listed firm as though it was still a family business and was against the idea of Kamani installing himself as chairman after his departure.
Just before the supply chain scandal broke, Boohoo announced a new incentive scheme for key directors in the business in June. Kane and Kamani are in line to receive 33.33% each of the £150m plan, which pays out if Boohoo's shares hit 600p. Samir Kamani is also set to benefit from the plan, among others.
Shortly before this in May Boohoo acquired the remaining shares that it didn't already own (it acquired two-thirds of its shares in 2017) in Umar Kamani's PrettyLittleThing for £269.8 million. This figure could rise by £54 million if the deal can help Boohoo shares hit 491p a share for a six-month period at some point over the next four years. PrettyLittleThing is one of the best-performing brands in the group.
Levitt says in her report that Boohoo directors raised concerns at five board meetings about the amount of influence exercised by the Kamani family between 2014 and 2020. Meanwhile Leicester West MP Liz Kendall wrote to shareholders calling for Kamani and John Lyttle to be removed from the business following the publication of Levitt's report.
Boohoo is believed in the process of appointing two non-executive directors to its board to improve impartiality and independence.
Boohoo shares are currently trading at 263p. Earlier this week Mahmud Kamani acquired a further 300,000 shares at a price of 243.07p each, an investment of £729,000, meaning he now owns a 12.6% stake in the business.