Boohoo, the fashion company responsible for popular brands like PrettyLittleThing and Nasty Gal, is under fire for its new bonus plan. The plan, which could potentially result in founders Mahmud Kamani and Carol Kane receiving £50 million each, has raised concerns among investors and shareholder advisory services.

One hedge fund, Shadowfall, has questioned the timing of the bonus plan. The announcement came just one day before Boohoo released a positive trading update, causing the company’s shares to rise by 6.6%. Matthew Earl, managing partner at Shadowfall, finds the use of the reference price in the plan “particularly odd” due to the management team’s likely awareness of the trading update.

The incentive plan is based on Boohoo’s market capitalisation, starting at £4.54 billion. To trigger the plan, the company’s market capitalisation must increase by 66% to £7.55 billion within three years, requiring a compound average growth rate of at least 18%. Kamani and Kane, along with other key individuals in the management team, could potentially receive a maximum payout of £50 million each.

Boohoo has defended the timing of the plan, stating that the target of 600p per share remained constant regardless of the share price taken from the average of the 30 days leading up to June 16 or 17. The company claims that any adjustments to the compound average growth rate would not significantly impact the plan.

Investor advisory service Minerva Analytics and Share Action have expressed their concerns about the plan. They argue that the plan was not subject to a shareholder vote, and the large payout amounts raise questions about fairness and corporate governance.

Boohoo argues that the reward scheme aims to incentivize its leadership team to drive sustainable long-term growth for shareholders. However, the criticism and concerns surrounding the incentive plan indicate that the company may face heightened scrutiny and pressure to address these issues in the future.

Useful links:

1. Boohoo official website
2. Competition and Markets Authority