Ten unhappy BEE retailers who either owned or own 27 Spar stores say they have reached an agreement in principle after one of the retailers, Amaan Sayed, sat down with Mike Bosman, acting group CEO and chair.
The retailers fell out with the wholesaler after their stores, bought in 2018, went bust, and they felt they had been misled by Spar on how much the outlets were likely to earn.
Their complaints were detailed in a lengthy report by law firm Harris Nupen Molebatsi, which did not uphold the findings of racial discrimination and found in favour of Spar in many cases. It concluded, however, that the stores were sold with inaccurate estimates of future earnings.
Sayed wrote an email to Public Investment Corporation officials on Tuesday saying the group has reached an agreement “in principle” and is happy to have engaged with Bosman. It said “any and all complaints have been placed on hold in the interest of protecting the Spar brand and shareholder value”.
The retailers’ email reads that Bosman taking on the role of group CEO has allowed him to take “immediate and decisive” action.
But Spar was a little more cautious.
Bosman told the Spar annual meeting it is in a mediation process with the retailers and that he will meet the CFO, company secretary and SA CEO on Tuesday afternoon to hammer out the finer details.
Public feud
“It does seem there may be a shortcut process to resolving this. We are working aggressively to see if it can be resolved,” Bosman said. If it is not resolved, it will go to mediation, he said.
Bosman said Spar is also in mediation with the Giannacopoulos brothers, who own a group of about 48 Spars, after a bitter public feud and numerous court battles.
Bosman faced questions at the AGM about negative media headlines, mounting losses in Poland, the low level of shareholding required by executives, as well as the pay gap between executives and the lowest-paid employees.
Strangely, the required votes for pay of nonexecutive directors failed to pass, meaning directors, who can earn up to millions a year, will not get paid for their work for the next financial year.
Non-binding remuneration votes on executive pay also failed to reach the required 75%, meaning Spar has to meet shareholders who are unhappy with the CFO and CEO pay. Spar is halfway through a two-year process of looking at how it structures senior remuneration and bonuses.
Shareholding
To align the interests of executives who run the company with investors, there is growing expectation that top leaders own a significant portion of shares.
Investor Chris Logan asked questions about the low level of shareholding required by CFO and CEO. “Why are your minimum shareholding requirements so abysmally low and in essence window dressing?”
Bosman said it is looking at whether there is a way to ensure long-term incentive pay for executives includes shareholding.
“As a board, we’d like to see a real commitment to the business, by the way of holding shares as part of them working here.”
Logan also asked what Spar will do about its failing business venture in Poland that has lost almost R1.5bn in three years. Spar bought the wholesaler in 2019 for €1, taking on debt, and failing to break even as planned.
The Polish business has only R2bn in assets and almost R3bn in debt.
Bosman, CFO Mark Godfrey, and the new independent director retailers Pedro Da Silva, who lived in Poland for 10 years will be meeting in the East European country in two weeks with the CEO of the European region.
Full understanding
“We need to come to some sharp and decisive conclusions regarding Poland,” Bosman said. Spar will give its best shot fixing Poland, he said. It will exit the country if it has to but this is not an option it wants to take.
Bosman said his “gut feeling is Poland is an incredible country with lots of potential. But it relies on a full understanding of the nuances of the market ... because it is not a “straightforward market”.
Da Silva is an experienced retailer who has an understanding of the market, said Bosman.
Asked about its share price that has drifted down in recent years since its investments abroad led to rising debt, Bosman said they have moved from being a business with high cash reserves and low debt and should return to that model.
At the 2022 AGM, then chair Graham O’Connor committed to disclosing the pay gap between the highest and lowest-paid employee.
Activist group Just Share asked in the AGM why the disclosure has not been made and when cashiers employed by privately owned stores will be included in this disclosure.
Spar sells to 2,500 independently owned stores in SA.
Bosman said its lowest earners take home 37% above the minimum wage and the company is committed to paying a reasonable living wage.
To complete the exercise it needs stores to voluntarily hand over information on cashier pay.
“I can’t think of any reason independent retailers wouldn’t provide us with this information.”
UPDATE: February 14 2023
This article has been updated throughout with additional information.
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