In a significant move, ASOS - the online fashion giant - has decided to alter its executive bonus criteria, shifting the focus away from diversity targets and placing a stronger emphasis on profits.

ASOS executives will no longer be required to meet diversity targets to receive their annual bonuses. Instead, the criteria will be centred around driving profits, improving share prices and enhancing profit margins.

This change reflects a broader industry trend where companies face increasing pressure to prioritise financial performance and signals a departure from the environmental, social and governance (ESG) movement that has gained momentum in recent years.

The decision to remove diversity targets from annual bonuses aligns with ASOS's commitment to a turnaround strategy, with management emphasising profitability in the year ahead. The company's executives will now have to steer the online retailer toward achieving specific financial milestones to secure their annual payouts.

This shift in ASOS's bonus structure comes at a time when various companies are facing investor demands to deprioritise ESG targets and refocus on profitability. Last year, ASOS did not meet its diversity targets, resulting in executives not receiving their annual bonuses. The company has clarified that its wider diversity initiatives remain intact, with a goal of achieving 50% female and 15% ethnic minority representation at every leadership level by 2030.

The change in bonus criteria is evident in the adjustments made to the structure for the current financial year. Previously, ASOS's annual bonus was allocated based on revenue, adjusted pre-tax profit, adjusted free cash flow and strategic and ESG measures. The strategic and ESG component included diversity, equity and inclusion measures, emphasising female and ethnic minority leadership targets.

For the current financial year, ASOS has recalibrated its bonus allocation, with 75% now based on adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization), and the remaining 25% tied to targets for closing stock, adjusted gross margin and cost to serve. This adjustment highlights the company's renewed focus on financial metrics.

ASOS, which experienced a near-£300 million full-year loss in its last financial year, is positioning itself for a return to growth in 2025. The company has underlined its commitment to longer-term diversity goals by instead incorporating a diversity measure into its incentive scheme.

While this move by ASOS mirrors broader industry trends, it also raises questions about the balance between financial performance and ESG considerations. Companies are increasingly grappling with the need to navigate this delicate balance, ensuring they address both shareholder expectations for profits and societal demands for responsible business practices.