Boohoo saga should jolt in­vestors into tak­ing a stand

Stan­dard Life Aberdeen’s move is a step for­ward, but be­fore is it hailed as a brave cam­paigner for work­ers’ rights some per­spec­tive is needed

The Daily Telegraph - Business - - Business Comment - Ben Mar­low

The de­ci­sion of one of Boohoo’s big­gest share­hold­ers to dump its stake in re­sponse to al­le­ga­tions that the fash­ion chain uses sweat­shop labour sends a pow­er­ful mes­sage. Stan­dard Life Aberdeen, which was among its big­gest in­vestors, ex­ited with a dev­as­tat­ing as­sess­ment, la­belling the com­pany’s re­sponse “in­ad­e­quate in scope, time­li­ness and grav­ity”. Hav­ing de­nied the ac­cu­sa­tions and hired top QC Ali­son Le­vitt to au­dit its sup­ply chain, those words of con­dem­na­tion will have stung.

Still, be­fore Stan­dard Life is hailed as a brave cam­paigner for work­ers’ rights some per­spec­tive is needed. Yes, it shows that big share­hold­ers with strong en­vi­ron­men­tal, so­cial and gover­nance man­dates are pre­pared to put their money where their mouth is but come on, the fund man­ager had been on Boohoo’s share­holder reg­is­ter for six years so why has it taken this long to speak out? Why have other big share­hold­ers such as Le­gal & Gen­eral In­vest­ment Man­age­ment, Man Group and JP Morgan not fol­lowed suit?

Con­cerns about Le­ices­ter’s cloth­ing fac­to­ries are so long stand­ing that they pre-date the new gen­er­a­tion of fast-fash­ion la­bels. Chan­nel 4’s

Dis­patches pro­gramme re­ported “ap­palling con­di­tions” back in 2010 at sites mak­ing clothes for es­tab­lished chains such as BHS, New Look and C&A.

Then in Fe­bru­ary 2015, a Univer­sity of Le­ices­ter in­ves­ti­ga­tion found that the ma­jor­ity of the city’s 11,700 gar­ment work­ers were earn­ing way be­low na­tional min­i­mum wage. It de­scribed “a ‘new’ ap­parel man­u­fac­tur­ing in­dus­try” char­ac­terised by “very small mar­gins, rel­a­tively small but nu­mer­ous or­ders and fast turn­around times”. Fast fash­ion had taken over.

In 2017, af­ter re­turn­ing to Le­ices­ter’s cloth­ing trade, Dis­patches ac­cused River Is­land, New Look, Boohoo and Miss­guided of pay­ing work­ers less than half the min­i­mum wage.

That same year, MPs on the hu­man rights com­mit­tee claimed there was an “epi­demic” of work­ers be­ing poorly treated, and in 2019 the par­lia­men­tary en­vi­ron­men­tal au­dit com­mit­tee said fac­to­ries were still “break­ing the law to max­imise prof­its”.

So where was Stan­dard Life then? In­deed, how did it come to own shares in Boohoo in the first place? The in­vestor says the re­tailer passed its eth­i­cal screen­ing when it first in­vested in 2014, which raises ques­tions about how rig­or­ous those tests were. It also in­sists that it has re­peat­edly lob­bied man­age­ment in pri­vate in the years since, and therein lies a big part of the prob­lem.

The fund man­age­ment in­dus­try prefers to op­er­ate be­hind the scenes, press­ing for change dis­creetly, but too of­ten this softly-softly ap­proach is in­ef­fec­tive.

The City has been “en­gag­ing” on ex­ec­u­tive pay for as long as I can re­mem­ber and look at the re­sults: bosses are earn­ing more than ever, in­clud­ing at Boohoo where the board saw fit to in­tro­duce a new £150m bumper bonus scheme at a time when com­pa­nies are ex­pected to show sol­i­dar­ity with the rest of the work­force.

As ac­tivist Sir Chris Hohn said at the week­end, a gen­tle­manly tap on the shoul­der is easy to ig­nore. Be­sides, share­hold­ers are more in­clined to look the other way when the share price is only go­ing up, and few stocks had risen like Boohoo’s in re­cent years.

On the other hand, Hohn and other ac­tivists have shown what hap­pens when in­vestors make a noise – com­pa­nies are forced to act – yet most fund man­agers are still only pay­ing lip ser­vice to ESG is­sues.

‘Why has it taken this long to speak out? Why have other in­vestors not fol­lowed suit’

A taste of what is to come?

Itsu has joined the grow­ing queue of restau­rant chains con­sid­er­ing in­sol­vency. It’s a shame, and not just be­cause it means one less de­cent place to buy lunch when I start writ­ing from The Daily

Tele­graph’s of­fices in Vic­to­ria, Lon­don, again. The high street is far more than just re­tail. It is food, drink, and leisure too, and in re­cent years the tide of clo­sures has been held back by a pro­lif­er­a­tion of din­ing chains snap­ping up va­cated premises.

But the re­treat is al­ready firmly un­der way, and not just be­cause Covid-19 has dec­i­mated foot­fall. The pan­demic is merely the fi­nal blow to a sec­tor that got fat on pri­vate eq­uity back­ing, cheap bank debt and low rents. Even in the good times there are only so many mid­dling burger, pizza and sand­wich chains the world needs.

The Chan­cel­lor’s in­no­va­tive meal voucher scheme will be a life­line to many, but will come too late to save those that left them­selves over­stretched.

Finding busi­nesses to take on empty prop­er­ties, es­pe­cially in places like cen­tral Lon­don where com­muter and tourism num­bers have fallen off a cliff, will be one of the big­gest chal­lenges of this cri­sis.

Hal­fords hits the brakes

Hal­fords has reaped the re­wards of be­ing de­clared an es­sen­tial re­tailer dur­ing lock­down. In the cur­rent cir­cum­stances, flat turnover and only a slight fall in prof­its for the year to the end of April should be con­sid­ered a great re­sult. As is news that first-quar­ter sales are only slightly down on the pre­vi­ous year.

So its de­ci­sion to push ahead with plans to close 60 stores and garages is bit­terly dis­ap­point­ing.

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