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debenhams The group has launched a new executive bonus scheme which could see its boss paid around £150 million without a shareholder vote if the online fashion firm’s value rises sharply.
It comes amid a major dispute between Debenhams’ leadership and a key shareholder mike ashley,
The bonus schemes come as bosses at the business said its turnaround was “getting real momentum” and the retailer significantly reduced its losses after cutting costs by almost £160 million.
But the business, which was recently renamed from Boohoo Group, also recorded another decline in revenue.
On Thursday, Debenhams unveiled a new bonus plan for owners – called its group turnaround plan – designed to incentivize executives and some other members of its senior management team to execute its turnaround strategy.
As part of this, it said chief executive Dan Finlay would secure a maximum bonus of £148.1 million if the group’s share price rises to around 26 times its current value.
To receive the full payment Debenhams shares would have to rise from their current level of 11.5p per share to £3 per share over a five-year period.
This would increase the company’s market value from approximately £145 million to £4.2 billion.
The company was valued at more than £5 billion in 2020 as e-commerce stocks surged, but that has declined in recent years amid declining consumer demand and rising cost pressures.
If shares get back to £3 the company will pay a total of £222.2 million to all members of the incentive scheme.
Debenhams said the planned scheme would not require a shareholder vote at a general meeting, as is typical among most listed companies.
Supporting its decision, the listed company highlighted the actions of “a major competitor which is a significant shareholder of Debenhams”, which it claims has tried to “disrupt the growth strategy and operations of the Debenhams Group”.
It is understood to be related to Mike Ashley’s Frasers Group, which owns about 30% of the business.
Frasers has previously criticized pay policies at the business and earlier this year voted against plans to change the business’s corporate name.
In a separate results announcement, Debenhams reported a pre-tax loss from continuing operations of £2.5 million for the six months to August 31, down from a loss of £130 million a year earlier.
It said the improvement in performance was driven by the Debenhams brand, which saw growth in gross merchandise value and earnings in the half year.
Nevertheless, group revenues fell 23% to £296.9 million in the half year.
Group chief executive Mr Finlay said: “Our transformation is gaining real momentum.
“We are making progress, we are moving fast, and we are transforming business.
“We have returned all of our brands to profitability and grown adjusted EBITDA (earnings before interest, taxes, depreciation and amortization). These results show that our strategy is working.”