Debenhams Group has unveiled a new executive incentive programme that could result in its chief executive receiving nearly £150 million without requiring shareholder approval, should the online fashion retailer's valuation experience a substantial recovery.
The move comes amidst an ongoing dispute between Debenhams' leadership and major shareholder Mike Ashley. The bonus proposals were announced as executives at the company reported that its transformation is "gathering real pace" and the retailer has significantly narrowed its losses following cost reductions of approximately £160 million.
However, the Manchester headquartered company, which recently rebranded from Boohoo Group, has also disclosed a further decline in turnover. Debenhams unveiled a new executive bonus programme - termed its group turnaround scheme - aimed at motivating senior leadership to deliver on its recovery plan.
Under the proposals, chief executive Dan Finley stands to receive a maximum bonus of £148.1 million should the group's share value climb to nearly 26 times its present level. Debenhams shares would need to rise from their current price of 11.5p per share to £3 per share over a five-year timeframe for the full payment to be triggered.
This would elevate the company's market capitalisation from approximately £145 million to £4.2 billion. The business was worth over £5 billion in 2020 during the e-commerce boom, but has since declined sharply amid weakening consumer demand and mounting cost pressures.
The total payout across all participants in the incentive scheme would reach £222.2 million if shares returned to the £3 mark.
Debenhams confirmed the proposed scheme would not require shareholder approval at a general meeting, as is customary practice amongst most publicly listed companies.
In justifying its approach, the listed firm pointed to the actions of "a major competitor who is a significant shareholder of Debenhams" whom it alleges has attempted to "disrupt the Debenhams Group's growth strategy and operations".
It is understood this refers to Mike Ashley's Frasers Group, which holds close to 30% of the business.
Fr asers has previously expressed disapproval of the pay policies at the company and earlier this year voted against proposals for a corporate name change. In a separate financial update, Debenhams disclosed a pre-tax loss from ongoing operations of £2.5 million for the six months ending 31 August, a significant reduction from a £130 million loss the previous year.
The company attributed the improved performance to the Debenhams brand, which experienced growth in gross merchandise value and earnings over the half-year period. However, group revenues declined by 23% to £296.9 million during the same period.
Group Chief Executive, Mr Finley, commented: "Our turnaround is gathering real pace. We are making progress, we are moving fast, and we are transforming the business. We have returned all our brands to profitability and grown adjusted EBITDA (earnings before interest, tax, depreciation and amortisation). These results show that our strategy is working."
