Pick n Pay shareholders push back against R16m golden handshake

Pick n Pay shareholders have expressed dissent with the R16m termination payout to former CEO Pieter Boone, triggering a JSE rule that requires the retailer to address their concern.

At the AGM on Tuesday the group failed to secure the required 75% majority to implement its pay policy in a nonbinding vote.

Under JSE listing rules, publicly traded companies such as Pick n Pay are required to table nonbinding advisory votes on pay policy for the top rank at their AGMs, and if 25% or more vote against it, companies are forced to approach dissenting shareholders to address their concern.

This outcome indicates shareholder discontent, particularly given Pick n Pay’s recent financial struggles.

Shareholders questioned the board’s decision to award Boone such a substantial payout, especially considering the company’s financial losses and falling share price, which dropped more than 50% over the past five years.

The shareholders called for transparency on the criteria used to determine executive payouts, as well as assurances that future executive remuneration would be tied more closely to company performance and shareholder value.

In response, Pick n Pay’s board defended the payout, stating it was a legal obligation under Boone’s contract.

The board noted that though Boone received the payments, all shares awarded to him under the restricted share plan were forfeited. It assured shareholders that future executive remuneration, including long-term incentives, would be more closely aligned with the company’s strategic goals.

The shareholders were also unimpressed with the disclosure practices surrounding executive pay rates, particularly the omission of the lowest-paid employee’s salary.

While the board acknowledged the concern, it emphasised its commitment to leading in disclosure practices, and noted that it was already working on adopting best practices for transparency, including the disclosure of income differentials.

Problems

Chris Logan, owner and chief investment officer at Opportune Investments, weighed in on the issue, stating that Pick n Pay’s problems were “deep-seated and protracted”.

Logan argued that it would be unfair to blame Boone solely for the group’s shortcomings, and suggested that the board should take more responsibility for continuing issues.

He also commented on the 4-million shares awarded to the newly reappointed CEO, Sean Summers, saying it was not a big concern but underlined the need for the board to step up its role.

Boone’s payout came after the failure of his Ekuseni strategy, which was designed to revitalise the retailer but instead led it to the first loss in its 57-year history and contributed to its debt pile of more than R6.3bn.

Summers, who returned to the CEO role in late 2023, has the task of turning the company around, and is expected to lead the group for the next three years.

He has already begun implementing a new strategy aimed at reversing the damage caused by the Ekuseni strategy, including converting QualiSave stores into either Pick n Pay or Boxer outlets.

Nonetheless, Pick n Pay shareholders are bracing for tough times as the retail group expects a decrease of more than 20% in earnings for the six months to August 25.

This forecast highlights the scale of the task ahead for Summers, who has been charged with the group’s turnaround within three years.

goban@businesslive.co.za