Online fashion retailer Boohoo has drastically altered its bonus plan for senior executives after its share price crashed. The Manchester-based firm said there was "little or no value" in its existing incentive plans.
The changes come as its market capitalisation fell drastically. At the time of writing Boohoo's share price stands at 54.7p per share, down from a high of 413p in June 2020. Boohoo's market capitalisation stands at £591.67m, according to BusinessLive.
The company said its Growth Share Plan and Management Incentive Plan can "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". Under the new plan, £175m would be handed out to senior management over a period of time but only if the company's market capitalisation reaches £5bn.
Such a target would mean Boohoo's share price would stand at £3.95, more than 700% of its current figure.
Executive chairman and co-founder Mahmud Kamani said: "I wholeheartedly endorse the Remuneration Committee's proposed Growth Plan, designed to rebuild very substantial shareholder value within the next five years.
"While these are extremely ambitious targets in a changed world, in my view as executive chairman and the company's largest shareholder it's absolutely the right thing to do to align the interests of the management team and all of our hardworking colleagues with those of all of our shareholders."
If achieved the new plan would mean chief executive John Lyttle would be eligible for a maximum bonus of £50m. Meanwhile, chief finance officer Shaun McCabe could earn £25m, co-founder Carol Kane could receive £20m, and the CEO of Boohoo and BoohooMAN Samir Kamani could earn £12.5m.
BusinessLive reported in May 2022, that Mr Lyttle was eligible for a bonus worth 200% of his £652,000 salary if he met certain targets over three years. At the time, the group brought in a new long-term incentive plan (LTIP) that would see the CEO benefit if targets were met covering revenue, earnings growth ad ESG markers.
Mr Lyttle would also gain £50 if the company's stock market capitalisation increased to £5.6bn by 2024.
Iain McDonald, chairman of the Remuneration Committee, said: "The Boohoo 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. 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.
