An unprecedented 82.24% of shareholders voted against Woolworths’s remuneration implementation report at the group’s annual general meeting on Wednesday, in what was largely seen as a protest against a generous exit package granted to former CEO Ian Moir.
The two resolutions on remuneration – one on the policy, the other on the implementation of that policy – are non-binding advisory votes. Thus they have no legal effect; the votes are intended just to send a message to the board, and the board is not bound by the vote.
Moir championed the R21.4 billion acquisition of Australia-based retailer David Jones in 2014, which required a hefty rights issue as well as the taking on of substantial debt. By 2019 the group had been forced to write off R13 billion of the David Jones balance sheet value, as the Moir-led management team failed to turn around the struggling Australian retailer.
In Moir’s defence the ambitious plan did receive overwhelming shareholder support back in 2014.
The share price shot up to an all-time high of R108 in 2015 on the back of bullish expectations for what was then the largest retailer in the southern hemisphere. In his 2016 report, former chair Simon Susman told shareholders that having a large Australian business (Country Road as well as David Jones) had helped to cushion the group from the shock of former finance minister Nhlanhla Nene’s dramatic firing in December 2015.
Since that 2015 peak the share price has slumped 66% to a current R37.
In February this year, after almost two years of market speculation, Woolworths announced Moir was stepping down as CEO of the group.
His exit had been flagged by the board during financial 2019.
However shareholders were outraged when it emerged that Woolworths had committed to paying its retiring CEO R77 million.
Slightly over half of that sum – R43 million – is payment for 2020, but the more shocking portion is a R34.3 million restraint of trade payment. This will be paid to Moir in 2023 if he adheres to the terms of the restraint.
At Wednesday’s AGM, remuneration committee chair Zarina Bassa said the R44 million “exit arrangement” had allowed for a thorough and seamless transition between Moir and new CEO Roy Bagattini. She pointed out that Moir had not received any bonuses or salary increases for the last four years.
Disgruntled shareholders told Moneyweb that in the context of the value-destruction wreaked over the period it was bizarre to talk in terms of bonuses.
As for the restraint payment, Bassa said this covers employment in any capacity and extends for two years after Moir’s last day at the office – believed to be November 27.
“The board deliberated and concluded that the Australian businesses, and consequently the group, would be significantly disadvantaged if Ian had to work in retail and related industries in Australia, given the highly competitive nature of retail and as the business was undertaking certain key strategic changes,” Bassa told shareholders attending the AGM. The related industries are thought to include property.
Payment of the R34.3 million is expected to take place during financial 2023 “provided Ian abides by the terms of the restraint”.
“Should he breach the restraint, the payment is forfeited in its entirety,” said Bassa.
One shareholder who attended the meeting said while the hefty opposition to the remuneration was largely attributable to Moir, there was also concern about the R15.7 million Bagattini received for the four months he was CEO.
Woolworths told Moneyweb after the meeting that the group needed to ensure it selected the most appropriate candidate for the role. “The group CEO role is a complex and challenging role and the retail landscape is currently undergoing structural change. Furthermore the group is currently facing a unique set of challenges,” said a spokesperson for the group.
They added that they had looked for an individual who was not only an experienced retailer with an apparel background, but also someone who was active in international businesses and had a proven track record of business turnarounds.
At Wednesday’s AGM the remuneration policy resolution scored 25.24% opposition and Bassa’s reappointment to the board as well as the audit committee was opposed by 13.59% of shareholders.