We Discuss Why The CEO Of Shoprite Holdings Ltd (JSE:SHP) Is Due For A Pay Rise

The solid performance at Shoprite Holdings Ltd (JSE:SHP) has been impressive and shareholders will probably be pleased to know that CEO Pieter Engelbrecht has delivered. This would be kept in mind at the upcoming AGM on 14 November 2022 which will be a chance for them to hear the board review the financial results, discuss future company strategy and vote on resolutions such as executive remuneration and other matters. Here we will show why we think CEO compensation is appropriate and discuss the case for a pay rise.

Check out the opportunities and risks within the ZA Consumer Retailing industry.

How Does Total Compensation For Pieter Engelbrecht Compare With Other Companies In The Industry?

Our data indicates that Shoprite Holdings Ltd has a market capitalization of R129b, and total annual CEO compensation was reported as R48m for the year to July 2022. Notably, that's an increase of 21% over the year before. We think total compensation is more important but our data shows that the CEO salary is lower, at R17m.

On comparing similar companies from the same industry with market caps ranging from R71b to R213b, we found that the median CEO total compensation was R70m. This suggests that Pieter Engelbrecht is paid below the industry median. Moreover, Pieter Engelbrecht also holds R199m worth of Shoprite Holdings stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2022	2021	Proportion (2022)
Salary	R17m	R16m	34%
Other	R32m	R24m	66%
Total Compensation	R48m	R40m	100%

Talking in terms of the industry, salary represented approximately 36% of total compensation out of all the companies we analyzed, while other remuneration made up 64% of the pie. Although there is a difference in how total compensation is set, Shoprite Holdings more or less reflects the market in terms of setting the salary. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

A Look at Shoprite Holdings Ltd's Growth Numbers

Shoprite Holdings Ltd has seen its earnings per share (EPS) increase by 15% a year over the past three years. Its revenue is up 9.6% over the last year.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's also good to see modest revenue growth, suggesting the underlying business is healthy. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.

Has Shoprite Holdings Ltd Been A Good Investment?

Most shareholders would probably be pleased with Shoprite Holdings Ltd for providing a total return of 93% over three years. This strong performance might mean some shareholders don't mind if the CEO were to be paid more than is normal for a company of its size.

To Conclude...

The company's solid performance might have made most shareholders happy, possibly making CEO remuneration the least of the matters to be discussed in the AGM. In fact, strategic decisions that could impact the future of the business might be a far more interesting topic for investors as it would help them set their longer-term expectations.

CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. We've identified 1 warning sign for Shoprite Holdings that investors should be aware of in a dynamic business environment.

Important note: Shoprite Holdings is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.