boohoo sees working practices slammed in independent report

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Boohoo Group PLC (LON:BOO) was too focused on revenues and ignored its corporate governance responsibilities, a highly critical independent review into its working practices has concluded.

The review states Boohoo’s senior directors “knew for a fact that there were very serious issues about the treatment of factory workers in Leicester and whilst it put in place a programme intended to remedy this, it did not move quickly enough”.

A Sunday Times investigation in July accused one of the AIM-listed group’s Leicester-based suppliers of ignoring coronavirus restrictions and paying below minimum wages in conditions akin to modern-day slavery..

In the report’s conclusions, Alison Levitt QC who carried out the inquiry stated: “I am satisfied that the allegations about poor working conditions and low rates of pay in many Leicester factories are not merely well-founded but substantially true”

“Boohoo’s monitoring of its Leicester supply chain was inadequate and this was attributable to weak corporate governance,” she added.

The company ought to have appreciated the serious risks created by ‘lockdown’ in relation to potential exploitation of the workforce of the Leicester factories, the report said.

“It capitalised on the commercial opportunities offered by lockdown and believed that it was supporting Leicester factories by not cancelling orders, but took no responsibility for the consequences for those who made the clothes they sold.”

However, in spite of these issues, there was no evidence the company itself or its officers committed any criminal offences, Levitt added.

In more general conclusions, Levitt noted that boohoo’s management had become focused on revenue generation and its corporate governance practices had failed to keep pace with its growth.

There were was no responsibility for conditions at its suppliers in Leicester other than on a superficial level and it failed to appreciate the responsibility that comes with being a publicly-listed company.

Boohoo said it acknowledged that the report had identified ‘significant and clearly unacceptable issues’ within its supply chain and said it had decided to publish the report in full and to implement the recommendations made.

At board level, two new non-executive directors will be appointed, one with governance experience while supply chain compliance will become mandatory at board meetings.

Purchasing practices will be overhauled, it added, with a new group director of responsible sourcing appointed, while the list of suppliers will be consolidated and a trust established to support workers’ in Leicester.

In a statement, John Lyttle, Boohoo’s chief executive, said: “Today we publish Ms Levitt’s Independent Review in full. This has identified significant and clearly unacceptable issues in our supply chain, and the steps we had taken to address them, but it is clear that we need to go further and faster to improve our governance, oversight and compliance.

“As a Board, we recognise that we need to rebuild confidence that these matters will be dealt with appropriately and sensitively, and that they will not recur.”

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