Two of Woolworths’ top five shareholders — the PIC and Allan Gray — are backing its directors’ new pay scheme, despite an accounting quirk that could result in executives scoring big on the back of a R7bn impairment hit. Last month, Woolworths decided to write down the value of its Australian asset David Jones by almost R7bn, not long after its remuneration committee decided to review the weighting of performance conditions for its executives’ share plan allocations. It proposed, among other things, that return on capital employed be increased to 30%; that its total shareholder return weighting be cut to 20%; and that the weighting of headline earnings per share remain at 50%. In any other year, the decision to make return on capital a bigger chunk of your executive pay scheme would hardly raise eyebrows. In fact, says RECM chairman Piet Viljoen, "I can’t think of any other reason why you would run a business." Return on capital as a metric for sizing up management teams "should be ...
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