Who would be the better chief executive of a severely ailing online retailer? Candidate A isn’t everyone’s cup of tea but he does tend to deliver the goods: his 73%-owned retail business has defied doubters for a couple of decades, has adapted to the digital age and sits in the FTSE 100 index sporting a market value of £4.6bn.
Or would you prefer candidate B? This one is yet to be identified because the last bloke only resigned suddenly a week ago. But she or he would be chosen by a board that has overseen a collapse in the share price of 90% in the past five years, to the point where a former bright star of the UK retailing scene is worth just £375m.
Put like that, it’s a no-brainer. You go for Mike Ashley, for it is he, of Frasers Group/Sports Direct fame to be boss of troubled Boohoo. And, if you were an outside shareholder in Boohoo, you might reflect that it could happen anyway because Ashley backed his unorthodox public application for the job on Thursday with a threat to call a special meeting of Boohoo shareholders, of which Frasers is the largest with a 27% stake.
Except there’s a large red flag over Ashley. It’s not that he and Mahmud Kamani, Boohoo’s co-founder and current executive chair, have personal history – Boohoo bagged the Debenhams brand in 2021 when Ashley thought he had it; Frasers grabbed Missguided the following year when Boohoo looked to be favourite.
Rather, it’s that the short-term future of Boohoo may involve a break-up into its constituent parts – the core fast-fashion bit that also takes in PrettyLittleThing; the Debenhams brand that has been converted into a online “marketplace” model; and the more upmarket Karen Millen operation. Since Ashley tends to be interested in every loose piece in UK retail-land (and Debenhams, note, was an obsession in the old days), how could he credibly perform the roles of both auctioneer and bidder?
At this point, the Ashley/Frasers camp might argue that Boohoo has merely committed itself to “a review of options for each division to unlock and maximise shareholder value” and that a break-up is not yet ordained. The priority, it could say, is to get a grip on day-to-day operations. It would be a reasonable point: Boohoo might be better off attempting self-help before it tries to flog its core operation to the online fashion giant Shein, or whoever, or tries to merge with rival Asos – another idea doing the retail rounds.
The trouble, of course, is that Ashley is not ruling out a break-up, or offering not to participate as a bidder in one. So the potential for a conflict of interest is clear. But, to complicate matters further, one can make a parallel point about the Kamani family, with 19% of the shares. Is it interested in taking any bits private – for example, the PrettyLittleThing business started by Mahmud’s son, Umar? Or is Umar a candidate for chief executive? We don’t know.
One can, though, say definitely that Boohoo would benefit from an independent chair. Mahmud Kamani shouldn’t be in the post, which was true even before the family ceased to be the largest shareholder. The result is a fine governance mess now that Ashley is hammering on the boardroom door.
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The smart move by Kamani would be to step aside and allow an independent figure to oversee proceedings and respond to Ashley’s demand. If outside shareholders – the swing voters in this entertaining saga – end up with the final say, it wouldn’t be the worst way to resolve matters.