Boohoo shareholders have rebelled against high pay for executives at the fast fashion group, criticizing it for paying “very low” prices to factories making its clothing.
Just over a third of shareholders who voted at the group’s annual meeting on Friday came out against the group’s remuneration report, which revealed that the chief executive, John Lyttle, was paid almost £1.4m last year after he was awarded a generous bonus despite missing targets.
The company handed Lyttle a £712,631 bonus, three times what he would have received based on stated targets, as it said the lower payout “would fail to reflect the tremendous progress made by management over the year”. Co-founders Mahmud Kamani and Carol Kane did not take any bonus for the year, however.
A quarter of shareholders also voted against a new long-term incentive scheme for executives under which they could earn a bonus worth up to double their salary if they meet financial and business goals including ethical and sustainability measures.
The scheme was introduced after it became apparent that an earlier plan, which would have awarded up to £150m to executives, including Kamani and Kane, if the group’s market value reached just over £7.5bn by June 2023, was likely to be unachievable. Boohoo’s market value currently stands at under £1bn after a major slump in the past year.
The revolt over executive pay came after activists said workers in factories in Leicester that supply Boohoo could be owed as much as £125m in underpaid wages. Labor Behind the Label and ShareAction have estimated the underpayment based on the fact some of the retailer’s suppliers previously paid workers below the minimum wage.
Campaigners at the shareholder meeting asked whether Boohoo would ensure workers are paid back in full “for the underpayment of the minimum wage that has been the basis of much of its margin for a number of years”.
Campaigners will also sought clarification on what the Manchester-based firm is doing to “make sure that its prices will enable the payment of a living wage to workers in the UK, and are enough to allow suppliers to operate legally, turn a profit and invest in their factories in order to create a sustainable industry”.
Boohoo, which this week revealed an 8% fall in revenues in the three months to May, held its annual shareholder meeting at a new showcase factory in Leicester to highlight efforts to reform its UK supply chain. In 2020, evidence of poor practice emerged after an investigation by an undercover reporter.
The meeting came after a new survey revealed that poor working conditions persist in Leicester’s garment factories almost two years on†
More than half of the garment workers involved in the study, by the University of Nottingham’s Rights Lab and De Montfort University, said they were paid below the minimum wage and received no holiday pay.
A Boohoo group spokesperson said: “We strongly reject any inference that people in our supply chain are paid less than the national minimum wage, and we do not recognize the [historic] figures quoted by Labor Behind the Label referencing the shortfall in pay. When we have requested evidence from Labor Behind the Label to substantiate these claims, they have failed to provide it.”
The company said it had donated £1.1m to set up a new independent charity to advocate for workers’ rights in Leicester. It also completed an “agenda for change” revamp of its supply chain practices in February, with progress signed off by retired judge Sir Brian Leveson and advisory firm KPMG.
“The program included significant investment in our compliance teams and a tightening of our code of conduct which helps to ensure that the people who make our clothes have their rights in the workplace protected,” the spokesperson said.
“We work collaboratively with our suppliers, sharing best practice and insights so that they can grow their businesses and invest for the long-term. Our new manufacturing center of excellence in Leicester is a visible demonstration of our commitment to the city.”
At a showcase for Leicester suppliers on Thursday, many said they felt the recent study was unfair and did not reflect a much-changed industry.
However, several suppliers said brands, including Boohoo, continue to try to reduce payments for orders, despite rising costs for factories such as soaring energy bills, increased wages and the higher costs of importing fabrics.
Brands and suppliers attending the showcase said the cost of production had risen by at least 15%, but some factory owners said they had not been able to increase prices by the same amount.
One supplier said he had lost orders representing 30% of his production in a matter of weeks after the collapse of the online fashion site Missguided and the withdrawal of orders by other brands who would not accept the prices being offered.
One supplier said: “Boohoo have changed in so many ways and been proactive … There is a lot more paperwork involved, but they still want prices low and that’s unobtainable with the minimum wage going up.”
He said many brands did not give contracts to UK manufacturers setting out a deal to buy a certain number of garments. “They want to be [as] flexible as possible but that doesn’t help the supply chain. they do [contracts] abroad but not here,” he said.
Another supplier said Boohoo’s prices were low but that it did pay on time and try to support an “ethical position”.
Shaista Jakhura from local campaign group Hope for Justice said brands needed to take more responsibility for paying a fair price.
“How do we expect exploitation to be eliminated if there is not good buying practice,” she said. “If brands are not paying money properly and not treating manufacturers fairly, what can you expect?”
She said that some manufacturers who had lost out on the collapse of Missguided, or because Boohoo had reduced its number of suppliers in Leicester, had chosen to work for cheap “cash and carry” brands who did not monitor their working practices leading to “uncontrolled exploitation”.
However, one brand executive at the supplier event said more brands were now considering sourcing in Leicester as there was a broader range of products on offer, an improvement in ethical standards and benefits in terms of fast turnarounds and a lower carbon footprint.
“The UK can be a fantastic place to source products from if you work with the right people,” the executive said. “It is better for the British economy and the environment as you are not shipping stuff around the world.”