Shoprite’s inappropriately named executive super stretch incentive (ESSI) has its origin not in anything the Shoprite executives did but in the dismal value-destroying performance of one man, Ian Moir. And that’s thanks to the art of benchmarking.
Moir, whose decision-making and strategic execution over 10 long years resulted in the wiping out of tens of billions of rands of Woolworths’ value, was finally replaced in February 2020.
Desperate to shore up the sinking ship, the Woolworths board had searched the world for a replacement. They found him at Levi Strauss, and in February 2020 announced that former Levi’s former VP for the Americas, Roy Bagattini, was taking over as CEO. So desperate were they to secure his appointment, they allocated him 1, 432, 537 shares that would vest over five years.
The only performance condition was the achievement of “strategic non-financial targets”. At the Covid-low price of R37.87 — when issued — they were worth R54.25m.
By financial 2023 this award, combined with a share price rebound from Covid, helped bump Bagattini’s remuneration package to R122.5m.
In the world of benchmarking, that figure became the Shoprite board’s target. Understandably, it made no sense that the CEO of the best performing grocery retailer on the JSE should not be getting the largest remuneration. It was down to the remuneration consultants to come up with a solution. That solution was one-off bonus boosts, and the first one was the ESSI.
Super stretched
This kicked into play in October 2023, during financial 2024, when the Shoprite share price was R235.63. “ESSI is a once-off reward for superior out-performance, above and beyond business as usual, over a three-year performance period being FY 2024, FY 2025 and FY 2026. The targets set for this three-year period are super-stretched,” said the remuneration committee. It was intended to strengthen the alignment with shareholders by “retaining and motivating a select group of senior executives who are key to the delivery of the group’s long-term strategy”.
There was minimal information about the performance metrics in the 2024 annual report other than that half related to market share growth and half was total shareholder return versus a peer group. Also, there were no details of the peer group.
Then, in 2025, their names were disclosed: Pick n Pay, Woolworths, Spar, Clicks, Dischem and Pepkor. Pretty much the walking wounded of the JSE, although Pepkor did kick into life for a brief period. Even had the Shoprite executive team parked off for an extended period, it’s difficult to imagine how meeting these performance metrics wouldn’t be a walk-in-the-park. Certainly, not a stretch.
As it happens neither the market share advance nor the total shareholder return were standout performances, either. The market share gain target was 2.6% over the three years, and the gain realized was 3.2% — which is impressive until you consider the two main competitors, Pick n Pay and Spar, have been in intensive care for a few years.
Baked-in benefits
The total shareholder return of 49.9% again looks reasonable against the 8.9% achieved by the peers but strip out dividends and it’s a far more modest 24%.
For this CEO Pieter Engelbrecht got an additional R36.4m taking his total earned remuneration in 2026 to R117.8m, enticingly close to Bagattini’s R122m. (Another ‘once-off bonus’ has been launched.)
Of course, Engelbrecht should be paid more than Bagattini. As one analyst told the FM, his team has done amazing things although the share price performance doesn’t entirely reflect it.
But, as Just Share’s Kwanele Ngogela tells the FM, “All these big payments, the sign-on bonus, the generous exit package, the so-called one-offs, get baked into remuneration levels and benchmarking does the rest.” There’s no consideration of the context, says Ngogela who believes remuneration consultants do nothing other than appease executives.
Still, it’s great news for the executives in every retail group, no matter how grim their performance they benefit from the much-increased levels of remuneration. Thanks again to benchmarking.
In fact, allowing for size, it turns out Engelbrecht is about the highest paid retail CEO in the world. Where is he going to go, even if there was a cultural fit? And why would shareholders approve unnecessarily generous payments?
Meeting the bar
The institutional fund managers who are taking care of the hard-earned money of pensioners and savers, seem not to care. Allan Gray and Coronation, two of the largest Shoprite shareholders refused to respond to queries from the FM. The single largest, the PIC, acknowledged FM’s query but did not respond to it.
Christo Wiese, who built Shoprite with Whitey Basson and is still the second largest shareholder, tells the FM he doesn’t think the ESSI bonus is excessive. “Reward for exceptional performance should be a pleasure for all stakeholders. I do think that by far most people agree that the Shoprite executive have met the bar, I certainly do.”
A second large investor with a Shoprite exposure was more circumspect. “Doing better than Spar or Pick n Pay is not an achievement,” he told the FM, but added, “Christo doesn’t easily part with money and he could block it if he was unhappy with it.”
One thing seems certain: the recently introduced Sections 30A and 30B of the Companies Act, intended to introduce some restraint, will have little to no impact. Executives’ sense of entitlement is far more powerful than their social concerns about the ever-widening pay gap. Engelbrecht’s remuneration was between 1,840 times and 1,140 times (depending on whether cash paid or total earned remuneration is used) that of the lowest paid employee.
And nobody really cares because it is benchmarking, ultimately, that trumps everything.
