New Pick n Pay CEO Pieter Boone, who started in the role at the end of April, will be awarded a total of one million shares as a sign-on bonus. The group says it awarded the “restricted share plan (RSP) shares as part of his sign-on remuneration package, and to further align his interests with shareholders”.
Boone was awarded 500 000 shares in June, which vest in June 2024, and will get a further 500 000 shares in June 2023. The second tranche will vest in 2026. At current prices, these shares are worth over R52 million.
The remuneration committee says “the shares are in addition to the group’s annual programme of incentivisation”.
Incentive schemes ‘effective’
Pick n Pay says its “long-term share incentive schemes have been effective to date in aligning the interests of executive directors with those of shareholders”.
It adds: “An MSR [minimum shareholding requirement] has been included in the CEO contract for Pieter Boone, requiring Pieter to retain 50% of the shares delivered to him under the group’s share incentive schemes, after the settlement of tax. The group is currently considering an appropriate MSR policy for its broader executive team”.
Boone was appointed as CEO-designate in January, following what the group describes as a “comprehensive local and international search”.
It says the “remuneration committee has set Pieter Boone’s base salary at R10.8 million for the FY22 financial year and is confident that this is an appropriate market-related salary and a fair reflection of the extensive skill and experience that Pieter brings to the board and to the group”.
Former CEO Richard Brasher’s base salary for the past year was also R10.8 million.
Brasher delayed his exit by a year to help steer the group through the Covid-19 pandemic and retired after eight years as CEO.
Given the pandemic, the committee established an adjusted stretch target for its short-term incentives of a 45% decline in profit before tax and exceptional items. The group reported a 16.5% decrease, which means executive directors were paid full bonuses as per stretch targets.
Brasher received a R20 million bonus, equivalent to 24 times his monthly salary.
The committee also awarded Brasher and chief information systems officer Richard van Rensburg (a former deputy CEO of the group), who retired on March 31, a retirement gratuity of R5 million each.
This means Brasher was paid a total of R37 million for the year.
Van Rensburg received R14.1 million, which includes a base salary of R5 million.
‘Unwavering commitment’ rewarded
Because Brasher did not participate in the previous year’s forfeitable share plan (FSP) because he was due to retire, the remuneration committee made the decision to award him 1.2 million FSP shares in 2020.
This, it says, is because of “Richard’s unwavering commitment to the group in the postponement of his retirement, and his exceptional leadership throughout the Covid-19 crisis”.
Not only did it award the additional shares, but it also “accelerated the vesting of FSP 2020″, saying that the shares will vest in full in June 2021”. Brasher started the financial year with 1.4 million shares.
The group did not meet the hurdle for the 2017 FSP award to vest, being “three-year cumulative growth rate of 10% set for … headline earnings per share”.
The committee says “in line with the discretion provided with the scheme rules, the remuneration committee allowed approximately 30% of the allocation to vest in recognition of the South African division’s market leading performance over the past three years”. Brasher only forfeited 280 000 shares from the 2017 award during the year. He ended the year with 2.2 million shares.
Pick n Pay says the value of long-term share awards awarded to Brasher in the 2021 financial year totalled R74.6 million. The value of his long-term share awards accelerated on retirement totalled R41.2 million.
Performance hurdles altered
The committee also altered the three-year headline earnings per share performance hurdles for 2018, 2019 and 2020 FSP “to reflect the group’s changed circumstances as a result of the Covid-19 pandemic”.
As a result, the earnings achieved in FY2021 exceeded the stretch target for the 2018 award. These were delivered to participants (including Brasher) in June.
This is not the first time the group’s remuneration committee has altered remuneration targets linked to long-term share awards. In the 2018 financial year, it took the unusual step of extending a long-term share option scheme for Brasher, following a “special meeting” in September 2017.
The group’s implementation of its remuneration policy drew criticism from shareholders at its AGM in June, with 36.85% of ordinary shareholders (excluding the higher voting shares held by the founding family) voting against the non-binding resolution.