The Advisors' Blog

An online fashion retailer out of the UK is linking executive pay to improvements in supply chain workers’ rights – in response to government pressure to do so. Although it’s hard to imagine regulators here requiring particular metrics, it’s not a stretch that investors would carry that mantle.

In this case, allegations of mistreatment sparked a £1bn hit to the company’s share price and resulted in one of the company’s largest shareholders divesting its holdings. Here’s more detail on the comp plan that’s being submitted for shareholder approval this week (see pgs. 71 & 81 of the annual report):

– Vesting of 15% of executive awards depends on the company successfully implementing its “Agenda for Change” program to fix supply chain issues (the “Agenda for Change” includes 6 steps to enhance the company’s supplier audit & compliance procedures, including publishing a full list of its UK suppliers)

– 3-year performance period

– Payout is also tied to stock price performance (could pay up to £150m in total if shares rise by 66% over three years from June 2020)

– Payout decisions will be made by independent compensation committee

Meanwhile, according to the Glass Lewis Controversy Alert, the proxy advisor remains concerned about the company’s ability to mitigate its risk of “modern slavery” issues and is concerned that the board was aware of issues in 2019 and failed to take adequate action prior to this issue emerging in the media in mid-2020. In light of those concerns, it’s recommending against reelection of the company’s co-founder and executive director. ESG issues could have a real impact at this meeting.

– Liz Dunshee