Shoprite CEO’s mega pay day package faces investor backlash

Shoprite Holdings’ proposed new incentive plan for chief executive Pieter Engelbrecht is facing opposition from shareholder advisers and major investors ahead of the retailer’s annual general meeting on Friday, 6 November.

Institutional Shareholder Services (ISS) and Glass Lewis, two leading proxy advisory firms, have recommended that shareholders reject the proposed long-term incentive for Engelbrecht.

Incentive programmes

According to Bloomberg, they have also questioned the repeated use of exceptional awards alongside Shoprite’s existing incentive programmes.

ISS said Shoprite had not provided a sufficiently compelling rationale for the additional incentive.

It also recommended that shareholders vote against the company’s remuneration implementation report, citing a special adjustment that resulted in a full short-term incentive payout despite performance falling below the target threshold.

Major investors signal opposition

Several large institutional investors have indicated that they will vote against the new incentive plan.

They include the California Public Employees’ Retirement System, the California State Teachers Retirement System, the Florida Retirement System’s State Board of Administration and Canada’s British Columbia Investment Management Corp.

Funds overseen by the New York City Comptroller and Norway’s KLP have also signalled opposition to the remuneration proposals.

The institutions collectively oversee almost $2 trillion, although they hold relatively small stakes in Shoprite.

The vote will be an early test of changes to South Africa’s Companies Act that made shareholder votes on remuneration binding and increased the potential consequences for directors responsible for pay decisions.

CEO remuneration rises 35%

Engelbrecht’s total earned remuneration rose 35% to R117.8 million in Shoprite’s latest financial year.

That figure included a one-off executive incentive valued at R36.4 million.

Chief financial officer Anton de Bruyn received R14.2 million under the same plan.

Shareholders are now being asked to approve a separate, bespoke long-term incentive for Engelbrecht.

Shoprite declined to comment beyond its published remuneration report and AGM notice.

Strong results, but scrutiny over pay

Shoprite reported that its dividend and earnings per share, excluding once-off costs, each rose about 12% in the year to June.

Its shares have gained 26% this year, making it the strongest performer on the seven-member FTSE/JSE Personal Care, Drug and Grocery Stores Index.

At last year’s AGM, 95.61% of ordinary votes cast supported the remuneration implementation report.

The 2024 report received 74.3% support, below the 75% threshold that triggers shareholder engagement.

The Public Investment Corporation is Shoprite’s largest shareholder.

However, Christo Wiese, a director who has served on the board for 35 years, controls about 41% of voting rights through ordinary and deferred shares, according to ISS.

Wiese, who sits on the remuneration committee, defended the proposed award, saying it had been carefully considered by the committee and its advisers.

He compared Engelbrecht with former CEO Whitey Basson, saying he believed executives of that calibre were worth substantial remuneration.