The chief executive of online fashion retailer Debenhams could be in line for a bonus of almost £150 million under a new incentive scheme that does not require approval from the company's shareholders.
The Multi-Million Pound Incentive Plan
Debenhams Group has introduced a new executive bonus programme, officially termed its 'group turnaround scheme', designed to motivate its senior leadership to deliver on an ambitious recovery plan. Under these proposals, Chief Executive Dan Finley stands to receive a maximum bonus of £148.1 million.
This colossal payout is contingent on one key condition: the group's share value must climb to nearly 26 times its current level. Specifically, Debenhams shares would need to rise from their present price of 11.5p per share to £3 per share over a five-year period for the full payment to be triggered.
Such a dramatic increase would elevate the company's market capitalisation from approximately £145 million to a staggering £4.2 billion. For context, the business was valued at over £5 billion in 2020 during the peak of the e-commerce boom, but its value has declined sharply since then.
Shareholder Dispute and Financial Performance
In a move that is likely to prove controversial, Debenhams confirmed that the proposed scheme would not require shareholder approval at a general meeting. This differs from the customary practice at most publicly listed companies.
The Manchester-headquartered firm, which recently rebranded from Boohoo Group, justified its approach by pointing to the actions of 'a major competitor who is a significant shareholder of Debenhams'. It is widely understood this refers to Mike Ashley's Frasers Group, which holds close to 30% of the business.
Frasers Group has previously expressed strong disapproval of the company's pay policies and earlier this year voted against proposals for a corporate name change.
In a separate financial update, Debenhams disclosed some positive news. The company reported a pre-tax loss from ongoing operations of £2.5 million for the six months ending 31 August. This marks a significant improvement from the £130 million loss reported the previous year.
The company attributed this enhanced performance to the Debenhams brand, which saw growth in gross merchandise value and earnings. However, it wasn't all good news, as group revenues declined by 23% to £296.9 million during the same period.
Leadership's Vision and Wider Payouts
Commenting on the company's progress, Group Chief Executive Dan Finley stated: "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. These results show that our strategy is working."
Executives reported that the company's transformation is accelerating, aided by cost reductions of approximately £160 million.
It is important to note that Mr Finley would not be the only beneficiary of the new incentive scheme. The total payout across all participants would reach an eye-watering £222.2 million if the shares successfully return to the £3 mark.
