Asos is restructuring its executive pay to drive substantial shareholder value through share price growth.
- The proposed ‘Value Creation Plan’ replaces the existing Long Term Incentive Scheme to better align with ambitious growth targets.
- Executives could earn bonuses up to 150% of their base salary under the new incentive scheme.
- The new structure’s effectiveness is contingent on the share price exceeding £6.70.
- A significant share price drop followed the announcement, raising concerns among stakeholders.
Asos is taking strategic steps to overhaul its executive compensation strategy with the introduction of a new plan aimed at generating substantial shareholder value. The proposed ‘Value Creation Plan’ (VCP) seeks to replace the current Long Term Incentive Scheme with a system designed to align executive rewards with the company’s ambitious growth goals. Executives stand to earn bonuses as high as 150% of their base salaries, contingent on achieving significant share price improvements.
The new incentive framework comes amidst recent financial challenges for Asos, which reported an 18% decline in sales for the 26 weeks leading up to March 3, 2024. However, the company notes an improvement in free cash flow by £240 million compared to the previous year, reflecting efforts to stabilize financial performance.
Central to the proposed remuneration plan is the goal of exceeding a share price threshold of £6.70. This target represents a substantial increase, nearly double the share price when the plan was initially conceived. The upcoming general meeting on August 20 in London will be pivotal, as shareholders convene to discuss and decide on the adoption of this new compensation model.
Following the announcement on August 2, there was a notable decline in Asos’ share price, dropping from £3.61 to £3.40 by August 5. This immediate market reaction underscores stakeholders’ apprehension regarding the plan’s potential impact and the broader financial strategy.
In a recent statement, Asos emphasized the necessity of competitive reward arrangements, highlighting the disparity between management and general workforce compensation as a reflection of its competitive recruitment market. Notably, the company has decided to eliminate bonus incentives tied to diversity, equity, and inclusion, choosing to concentrate on profitability as a primary focus.
Asos’ strategic shift in executive compensation seeks to drive growth, yet poses uncertainties amid current market responses.
