Boohoo’s biggest outside investor rejects call for leadership change
Jupiter tells MP it has ‘significantly escalated’ its engagement with fashion group’s board
Boohoo’s largest external shareholder has rejected a call for the fast-fashion retailer’s leadership to be removed in light of widespread labour abuse in its supply chain, but warned that “more needs to be done” to improve corporate governance.
Jupiter Fund Management wrote to Leicester MP Liz Kendall this week setting out its position, two weeks after she urged shareholders to “demand” new senior directors at Boohoo following “appalling failures” to address illegally low wages among its UK suppliers.
In the letter, seen by the Financial Times, Jupiter chair Nichola Pease said the group had “significantly escalated” its engagement with Boohoo’s board and management after allegations of poor conditions and pay at some of its Leicester suppliers resurfaced in July.
Boohoo, which has benefited from the Covid-19 pandemic as its short supply chains enabled it to make a rapid shift to selling lockdown-appropriate loungewear, had largely recovered from a knock to investor confidence, when the company scrambled to defend how its clothes are made.
But its share price took another dive this week after the Financial Times revealed that PwC, which has served as Boohoo’s auditor since it listed in 2014, had decided to stop working for the Aim-listed group.
The stock has lost a third of its value since the beginning of July, taking its market value to about £3.3bn.
Ms Kendall had argued that it “would make a mockery of any claims to support responsible investing if the same executives who allowed these appalling failures to take place, despite repeated warnings over many years, were kept in place by the shareholders”.
Boohoo’s largest shareholder is its co-founder and executive chairman Mahmud Kamani, with critics, including former chairman Peter Williams, arguing that the public fashion group is still run as a family firm.
Jupiter, which owns just under 10 per cent of Boohoo, rejected the call for new leadership, however. Ms Pease said she was reassured by recent measures, which include a promise to publish a list of suppliers and add two new board members to oversee sustainability work and Boohoo’s “change agenda”.
“[Jupiter] pushed them very hard to go down this particular route and in credit to the company, they haven’t pushed back,” said one person with knowledge of the two parties’ conversations.
Boohoo last month published an independent review into its supply chain by senior lawyer Alison Levitt, who found the company had not profited from the “widespread” underpayment of workers, but knew about it and did not act quickly enough.
The online retailer’s oversight of its supply chain had been “inadequate for many years” and its internal processes were “well below the standard which would be expected of a company of its size and status”, Ms Levitt noted.
Having had access to notes from board meetings, Ms Levitt also revealed that senior executives had raised concerns about the amount of influence exercised by Mr Kamani and his family on at least five occasions since 2014.
Ms Pease said Jupiter had pushed Boohoo to make the review public, arguing that transparency was key to rebuilding trust in the company, even though the review contained “disappointing aspects that are rightly critical of the company’s previous approach”.