The online fashion retailer, ASOS has made a strategic decision to revise its executive bonus scheme. The company, which had been known for its commitment to diversity and inclusion, is now placing a stronger emphasis on profitability over diversity targets when it comes to rewarding its top management.
On November 25th, Asos announced that its annual bonus scheme for executives would no longer include diversity targets as a criterion. This move comes after the company reported substantial losses amounting to nearly £300 million, a stark contrast to the £32 million loss from the previous year. The decline in sales was particularly pronounced in the UK, with a 10% drop overall.
The revised bonus structure will focus on financial metrics such as revenue targets, adjusted pre-tax profits, adjusted free cash flow, and strategic/ESG initiatives. Specifically, the breakdown for the 2023 bonus was 15% based on revenue targets, 25% on adjusted pre-tax profits, 35% on adjusted free cash flow, and the remaining 25% on strategic/ESG factors.
This shift in focus reflects Asos's urgent need to prioritize financial recovery and growth. The company's leadership has expressed that the coming year will be about taking necessary actions to steer Asos back to a path of growth. Despite this change, Asos maintains its wider diversity goals, aiming for 50% female and 15% ethnic minority representation at all levels of leadership by 2030.
The decision to remove diversity targets from the annual bonus scheme has raised questions about the implications for the company's commitment to diversity and inclusion. While Asos has made progress in increasing gender representation at senior levels, with women holding 42% of combined leadership positions, the removal of these targets from the bonus criteria could potentially slow further advancements.
Asos's challenges are not solely internal, as they face external pressures as well. The post-pandemic shift away from online shopping, fierce competition from fast-fashion specialists like Shein, and traditional retailers with both physical and online presence have all contributed to Asos's current predicament.
Looking forward, Asos has opted to include a diversity measure in its longer-term incentive scheme, suggesting that while immediate financial performance is paramount, diversity and inclusion remain important to the company's ethos. Executives may see fewer shares vesting if appropriate progress on diversity is not made over the next three years.
The company's ability to balance profitability with its social objectives will be a test of its adaptability and commitment to its stated values. Asos's journey ahead will be one to follow, as it attempts to reclaim its status as an iconic brand while adapting to the evolving retail landscape.
