June 18 (Bloomberg) -- Pick n Pay Stores Ltd.’s proposal to pay Chairman Gareth Ackerman 3 million rand ($397,000) in the year through February 2011 was criticized by two investors, who said the fee was out of line with that paid by other South African retailers.
“It sets a bad precedent,” shareholder Theo Botha said in an interview in Cape Town today, after the company’s annual meeting. “It’s very difficult to justify. It racks up chairmen’s fees in South Africa. I don’t think that’s a good thing.”
Pick n Pay’s shares have advanced 38 percent in the past year, lagging behind the 55 percent gain posted by Cape Town-based Shoprite Holdings Ltd., which paid its chairman Christo Wiese 160,000 rand in the year through June 2009.
“Remuneration must be aligned to performance,” Chris Logan, chief investment officer at Cape Town-based Opportune Investments (Pty) Ltd., said at the meeting.
The Ackerman family controls Pick n Pay through its majority stake in holding company Pick n Pay Holdings Ltd. Ackerman was appointed chairman on March 1, succeeding his father Raymond, who founded the retailer in 1967.
Criticism of the chairman’s compensation amounted to “nitpicking” and was misplaced, Raymond Ackerman said. “If anything it should be higher.”
The fee was given “very careful consideration” and was appropriate, given that Ackerman was expected to spend about 80 percent of his working hours at the company, said Hugh Herman, chairman of its remuneration committee.
Gareth Ackerman defended Pick n Pay’s ownership structure, saying it was run in the interests of all shareholders.
“I’d like to make it abundantly clear the pyramid structure is not going to change,” he said. “Family control has enabled us to take the long view when devising strategy, considering plans for expansion and assessing the risk of future investment.”
The chairman also backed a decision to award stock options to staff at a 5 percent discount to the market price, a practice Logan said was prejudicial to other shareholders.
“Offering shares to our people at a discount enables them to share in the company’s success, broadens our shareholder base and benefits those who deserve it and have served us well,” he said.
Raymond Ackerman said that, since starting Pick n Pay, he had personally donated more than 300 million rand to charity and retired staff.