Johannesburg – Spar has become the latest JSE-listed company whose shareholders objected to executive pay policy and implementation.
A substantial 61% voted against how executives were paid at the 2025 Annual General Meeting (AGM).
“The AGM backlash means shareholders are paying attention and legitimately using their voice to show discontent,” said Ray Harraway, Institute of Directors in South Africa (IoDSA) Remuneration Committee Forum Member.
Shareholders and proxy advisers typically regard payments that can’t be attributed to performance and aren’t catered for in the remuneration policy as red flags, he said, and this is aggravated in a year with reduced Headline Earnings Per Share (HEPS).
Voting is a mechanism for holding company boards accountable and challenging decisions that seem misaligned with the King Report on Corporate Governance.
Remuneration votes
In South Africa, companies are required to hold two pay-related votes at the AGM: the remuneration policy and the remuneration implementation report.
About 70% of Spar shareholders approved the group’s remuneration policy, but only 39% agreed with the implementation of how executives were effectively paid.
“The policy is forward-looking; it sets the design parameters for fair, transparent, and responsible pay outcomes for the forthcoming years,” said Harraway.
“Together with an independent and effective Remco, the policy is the primary governance tool to ensure that pay outcomes are fair, transparent, and responsible and fall within its ambit.”
He explains that the pay outcomes, as presented in the implementation report, should align with the policy without any material deviation. Importantly, both votes deal with different time periods.
The discrepancy in Spar’s votes indicates that while investors were more comfortable with the pay framework, they were unhappy with how it was applied in practice, finding executive remuneration excessive when compared to the company’s performance.
‘The dissent on the implementation report likely stems from a ‘lump sum payment’ of R9.5 million paid to the outgoing CFO who resigned on 31 December 2024,” said Harraway.
“The remuneration policy doesn’t seem to cater for such payments, and hence it is a deviation from the policy.
“The remuneration report also doesn’t explain the rationale for this payment, even though no performance bonus was paid to the outgoing CFO, not even a pro-rated one.”
Non-binding advisory
Both Spar’s votes for the remuneration policy and the implementation report fall below the 75% threshold of shareholder support required in the JSE Listings Requirements.
“However, the AGM remuneration vote is currently not legally binding but rather acts as a signal to a company when they are unhappy with remuneration,” says Harraway.
“The board can still implement a policy that hasn’t received 75% or more votes in favour by shareholders, but will face reputational and even sustainability risk, especially if repeated over longer periods.”
In accordance with both King IV and V, the company should ensure ongoing engagement with shareholders to find legitimate areas of concern to be addressed and to disclose the outcomes of those concerns.
“In my experience, this procedure has proven quite effective at identifying and resolving the major areas of dissent between the board and shareholders,” said Harraway.
King IV vs King V
While Spar’s reporting cycle fell under King IV, Harraway believes that applying the new King V wouldn’t change anything materially.
“The thrust under both codes (principle 14 under King IV and principle 11 under King V) is fair, responsible, and transparent remuneration,” he said, noting that Spar broadly followed these recommendations – except for the lump sum payment.
This payment wasn’t provided for in the policy and doesn’t comply with recommended practice 117 of principle 11 of King V, which states,
“The governing body should ensure that the implementation of the remuneration policy achieves its set objectives and that there is transparent and meaningful disclosure on remuneration decisions and outcomes arising from the implementation of the policy.”
Better engagement
In Spar’s case, the board has asked dissenting shareholders to submit their comments or recommendations, and will follow up with a virtual meeting.
“There will always be divergent views from the shareholder base, and so not all conflict can always be fully resolved,“ said Harraway.
“Sometimes the perception of unfair pay is rooted in poorly communicated remuneration decisions.
“At other times, shareholder discontent on broader governance or management issues can flow over into their remuneration policy or implementation vote.”
Many such clashes could be avoided if boards engaged better with their shareholders, clearly explained the linkage between executive pay and value creation, and listened better to legitimate shareholder concerns – in short, truly applied King’s recommendations.
*This article first appeared in our sister publication techfinancials.co.za
