Boohoo’s sold-out investor to overhaul company practice after factory scandal

Standard Life Aberdeen Boohoo scandal Euan Stirling
Boohoo's shares slumped in July after allegations that workers were being paid less than the minimum wage
// Boohoo investor Standard Life Aberdeen has overhauled its company engagement process
// The overhaul comes after Boohoo’s recent Leicester factory scandal

Boohoo’s recent Leicester factory scandal has prompted asset manager Standard Life Aberdeen to overhaul its company engagement process after being affected by the allegations against the retailer.

The online retailer hit the headlines earlier this year over investigations into a multi-million pound money laundering network in Leicester and staff operating without social distancing measures in place amid the Covid-19 pandemic.

Boohoo’s shares slumped in July after allegations that workers were being paid less than the minimum wage at some of the company’s suppliers.

READ MORE: PwC resigns as Boohoo auditor

In September, Boohoo accepted all the recommendations of an independent review, which found several failings in its supply chain.

The review, led by Alison Levitt QC, identified “many failings”, but it freed it from allegations of deliberately allowing poor conditions and low pay for garment workers.

The independent probe was called after reporters uncovered serious concerns about some of Boohoo’s suppliers in Leicester over the summer, including allegations of modern slavery.

The review concluded that hat Boohoo “did not deliberately allow poor conditions and low pay to exist within its supply chain, it did not intentionally profit from them and its business model is not founded on exploiting workers in Leicester”.

Standard Life Aberdeen, which had previously been one of Boohoo’s largest investors, subsequently sold out after describing the company’s response to the allegations as “inadequate”.

Aberdeen Standard Investments Global Head of Stewardship, Euan Stirling said the experience had been “painful”, particularly after his team had engaged heavily with Boohoo.

“What we had been doing over the period was not just sitting idly by and counting the pennies as they rolled in,” Stirling said.

“We had been making quite significant demands of the company and of specific executives in providing us and the board with assurance over their supply chain, and encouraging them quite forcefully to adopt stronger industry-led practices.”

As a result of the experience, Stirling said he had decided to change the process for key engagements going forward.

Institutional investors use “engagements” to talk to companies they invest in about a range of issues, including corporate governance.

“We’re trying to now make them more rigorous; specific milestones set out at the beginning of an engagement programme, timelines associated with that and (then) looking for specific outcomes as well,” he said.

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