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Furlough and Riches

European Investment Manager18 Nov 2020

An ill thought through remuneration policy can have a negative impact on shareholder value. Inappropriate rewards for senior executives can lead to a misaligned leadership team while unbalanced reward structures can demotivate large swathes of the workforce.

SVM have voted against the approval of UK online retailer Asos PLC’s Remuneration Report at the company’s upcoming AGM. Well above inflation salary increases for both the CEO and CFO have been proposed with the justification based upon a peer group analysis. In addition, substantial increases are also proposed for both annual bonuses and long-term incentives for the individuals concerned. Should targets be achieved the result would be a 20% higher total remuneration package for the CEO and an increase of 33% for the CFO.

In isolation we would always question increases of this magnitude, but the company’s reaction to the Covid-19 pandemic has added a further cause for concern. In early 2020 Asos took advantage of the UK Government’s furlough programme resulting in an unquantified number of the general workforce receiving cuts to their pay. While the company has since re-paid the state aid, the fact remains that there is a clear mismatch between the remuneration policy for senior management and the more general workforce. Voting against this report will hopefully send a signal to the company’s Remuneration Committee that such actions are not in the long-term interest of shareholders and result in more appropriate and fair awards in the coming years.

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