In the world of corporate compensation, there is a phenomenon that sometimes leaves shareholders bewildered and disheartened: the golden handshake.
Pieter Boone, the former CEO of Pick n Pay, received such a parting gift — a staggering R16m — despite his disastrous tenure. But what does this windfall mean for the investors who have weathered the storm of value destruction?
Boone’s legacy at Pick n Pay is etched in red ink. His ill-fated Ekuseni strategy, unveiled in 2022, divided the retail giant into two factions — the core Pick n Pay brand and Qualisave, which was meant to serve the middle to lower-income market. The cornerstone of the plan was Boxer, the discounter founded in 1977 whose outlets are located at taxi ranks and rural shopping malls, the heartland of the vast budget conscious customer base.
In fairness, the bottom-of-the-pyramid plan to grow the business is brilliant in a country where the middle class is shrinking. The grocery market is expected to soar to R850bn in 2026, and most of that money will come from low-income earners and welfare recipients, according to Pick n Pay’s own calculations.
Imagine being a Pick n Pay shareholder.. Your investment, once robust, now languishes at half its value of five years ago
To grab a bigger piece of that market, Pick n Pay had to expand its Boxer outlets. And it has done so impressively. Boxer, which opens five new stores every month on average, was growing its top-line faster that Pick n Pay and Qualisave.
But Qualisave was a resounding flop. Customers rejected its limited ranges. Boone took his eye off the mainstay Pick n Pay or Qualisave, which accounts for about 60% of the company’s sales and serves the long-standing middle to upper-income customer base. Inevitably, the company’s profit margin took a knock. Pick n Pay barely makes 3% after paying for its costs, about half what its closest rival, Shoprite, grinds out every year, painfully illustrating the point that it’s easy to sell discounted goods but it’s hard to make money from it.
Imagine being a Pick n Pay shareholder during these tumultuous years. Your investment, once robust, now languishes at half its value of five years ago. The Ackerman family, synonymous with the company’s history, has watched as its influence dwindles, and as the market cap between Pick n Pay and crosstown rival Shoprite widens. It’s a bitter pill to swallow — a kick in the teeth, if you will.
And then comes Boone’s golden handshake — a princely sum for a CEO who steered the ship into treacherous waters. Nearly R16m to leave early, plus total remuneration of R25m. To be sure, some executives might scoff at a mere R16m payout. Even so, for Pick n Pay shareholders witnessing their investment erode, seeing a golden handshake at all is painful.
Meanwhile, Sean Summers, the new CEO tasked with restoring Pick n Pay’s fortunes, received R10m. But the main attraction? Four-million performance-based shares, potentially worth R100m. A tantalising carrot dangled before Summers, urging him to execute a turnaround plan. Yet the success of such a strategic play hinges on his successor. As Summers’ contract aligns with the three-year timeline to find a new CEO, the ticking clock underlines the urgency of finding a successor who can seamlessly continue the journey. Put differently: Summers and the board would be wise to choose the next CEO from the executives already involved in mapping out of the revival plan.
Boone’s exit package raises troubling questions. Should failure be rewarded so generously? Shareholders grapple with this paradox: a leader who presided over value erosion walks away with a fortune. The golden handshake, while legally binding, underscores the need to reform executive compensation practices.
Pick n Pay’s market value hovers at just more than R10bn, a dramatic fall from grace of the company that was worth R41bn in 2016. Meanwhile, Shoprite thrives, its market cap soaring to nearly R170bn — a stark contrast. The Ackermans must wonder how their legacy crumbled so swiftly. Yet, they can’t escape the blame. For years, the family dictated matters in the company, using the controlling stake to nominate CEOs and CFOs. Boone’s golden handshake, in this context, feels like salt rubbed into a gaping wound.
Shareholders demand stewardship that safeguards their investments. Boone’s departure serves as a wake-up call — a reminder that leadership decisions reverberate far beyond boardrooms. Shareholders deserve better. Accountability and fairness should guide executive compensation. Boone’s exit package sends a disconcerting message: failure pays handsomely.
Let us hope that Summers, armed with those performance-based shares, can steer the company back to profitability. For now, though, the golden handshake remains a bitter reminder of value lost and trust betrayed.
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