Pepkor Holdings, the South African retail group behind brands like Pep and Ackermans, is facing increased scrutiny from shareholders over executive compensation, particularly a report revealing its Chief Operating Officer, Sean Cardinaal, earned approximately R47 million over the past year – significantly more than its CEO, Pieter Erasmus, who took home roughly R16 million less.
The controversy came to a head at the company’s annual general meeting on , where a non-binding vote on the remuneration policy narrowly failed to achieve the 75% approval threshold, signaling substantial investor dissatisfaction. While the vote didn’t trigger an immediate rejection of the policy, it compels Pepkor to engage with dissenting shareholders and potentially revise its approach to executive pay.
The size of Cardinaal’s package, coupled with his London-based location, has fueled concerns about pay disparities within the company and the broader alignment of executive rewards with shareholder returns. The fact that the COO commutes from London and is remunerated in a foreign currency-linked structure has added to the debate, particularly given the challenging economic conditions in South Africa.
Pepkor’s steady revenue growth, supported by resilient demand in the lower-income consumer segment, hasn’t shielded it from this investor backlash. The retailer, which also owns Shoe City, has demonstrated consistent performance, but investors are increasingly focused on ensuring that executive compensation reflects the economic realities faced by consumers and the overall market. South Africa’s retail sector is currently constrained by weak household income growth, high unemployment and elevated interest rates, limiting discretionary spending.
This situation at Pepkor reflects a broader trend of increased shareholder activism around executive pay across the Johannesburg Stock Exchange (JSE). According to governance analysts, remuneration resolutions receiving less than 75% backing now routinely require companies to formally engage with investors and reconsider their policies. Pepkor’s governance framework mandates such engagement following substantial opposition to its remuneration plan.
The debate over executive pay comes as PwC’s Executive Directors’ Remuneration Report indicates a recent rise in total guaranteed pay and long-term incentives for top executives at major JSE-listed retailers, even amidst subdued economic growth. This trend has intensified scrutiny of whether executive compensation is justified in the current economic climate.
The pushback against Pepkor’s executive pay structure isn’t simply about the absolute numbers, but also about the perceived fairness and transparency of the compensation process. Investors are seeking greater alignment between executive rewards and company performance, as well as a more equitable distribution of wealth within the organization. The focus is on ensuring that executives are incentivized to deliver sustainable, long-term value for shareholders, rather than short-term gains.
The outcome of Pepkor’s engagement with shareholders will be closely watched by other listed companies in South Africa. It could set a precedent for future remuneration votes and influence the way companies structure executive pay packages. The pressure to align executive rewards with shareholder returns and economic conditions is likely to continue, as investors become more vocal and active in holding companies accountable for their compensation practices.
While Pepkor has acknowledged the shareholder concerns and committed to engaging in dialogue, the company has not yet indicated any specific changes to its remuneration policy. The next steps will involve understanding the specific concerns of dissenting shareholders and exploring potential adjustments to the compensation structure. The company’s ability to address these concerns effectively will be crucial in restoring investor confidence and maintaining its reputation as a responsible corporate citizen.
The situation highlights the growing importance of environmental, social, and governance (ESG) factors in investment decisions. Executive compensation is increasingly viewed as a key component of the ‘G’ in ESG, and investors are demanding greater transparency and accountability in this area. Companies that fail to address these concerns risk losing the support of investors and facing increased pressure from activist shareholders.
