Woolworths’ board has defended the R122m total pay of CEO Roy Bagattini, saying it is in line with industry standards for similarly sized JSE companies, adding its executive pay was “not too high”.
Speaking at the group’s AGM in Cape Town, non-executive director David Kneale, who chairs the remuneration and talent management committee, said salaries were benchmarked and “based on the JSE-listed retailers and other JSE-listed companies of a comparable size. We use similar Australian listed retailers, specifically, to determine Australian salaries”.
Bagattini’s 2023 salary was almost double that of the CEO of Shoprite group, Pieter Engelbrecht, who earned R64.6m in its 2023 financial year. Checkers is thought to be winning market share from Woolworths as it grows its volumes of food sold.
The Woolworths CEO’s 2023 base pay of R20.4m is, however, in line with industry standards and is comparable to to the Shoprite CEO’s R18.7m in guaranteed pay.
During the AGM, the Woolworths board faced three questions on pay from activists and an investment analyst, suggesting some interest in the remuneration of the CEO and COO.
In 2023, Woolworths COO Sam Ngumeni earned R97.1m as he took home long-term share awards.
Shareholder activist Mehluli Ncube, who represents a variety of pension funds, said the overall 2023 pay of the CEO, COO and CFO was “too high compared to peers” and asked which retailer it had been benchmarked against.
Kneale responded: “I don’t actually accept the overall quantum is too high compared to peers. We undertake benchmarking and if salaries are in excess of that benchmark, then those salaries do get capped.”
Bagattini’s salary was more than three times higher than what he took home in 2022 as he met three-year targets, allowing him to earn his long-term bonus of more than R66m.
In its 2023 financial year, Woolworths increased its lowest-earning workers’ pay from R33.40 an hour to R41.25. Activist shareholder organisation Just Share said in the AGM the 23.5% increase was “commendable”.
However, it pointed out that Woolworths had said in its annual report that it wanted to reduce the wage gap between workers and management. If the lowest-paid staff member works 22 days a month for eight hours a day, their salary would be about 1,400 times lower than the CEO’s.
Just Share’s Ayabulula Quzu said: “It is crucial to note that in its [remuneration] implementation report, the company emphasises the importance of a ‘just wage’, which involves addressing and reducing the pay gap between management and staff. How is the CEO’s single figure remuneration deemed as fair and responsible in the broader context of overall employees?”
Kneale conceded Bagattini earned “a significant sum of money” with a quarter of the shares he was awarded as signing-on bonus vesting in 2023. But he added that the CEO’s pay was “tested against a variety of conditions”.
He explained that growth in Woolworths’ headline earnings per share, (Heps), a common profit measure that strips out exceptional items, exceeded consumer price inflation over a three-year period. Heps growth was also higher than some other listed SA retailers, he said. The company boasted an increased cash flow, which was helped by the sale of Australian department store David Jones. Kneale said the returns on capital employed also grew over three years.
Two non-binding votes on pay by shareholders failed to garner the required 75% approval at the AGM, triggering a rule that Woolworths must meet or speak to unhappy voters.
The implementation report on the 2023 pay levels was a fraction short of the requirement, with 74.26% of the votes cast in favour. The vote on the pay policy, which discusses future pay levels, garnered only 46.5% support.
This was “disappointing” and followed extensive consultation with shareholders, said chair Hubert Brody. He said concerns raised before the meeting were about company growth targets being sufficiently reflected in long-term bonus performance targets. He said Woolworths would resume discussions with dissenting voters.
The Companies Amendment Bill now before a parliamentary portfolio committee has proposed that if a company’s pay vote fails for two successive years, the remuneration committee must step down, though members can remain on the board as directors. The bill would make that a binding consequence rather than the current situation whereby shareholder remuneration votes are advisory.
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