Investors in South African equities face an early test of their new power to cast binding votes over pay when Shoprite Holdings asks shareholders to approve another multimillion-rand incentive plan for its chief executive officer.

The world’s two-biggest shareholder proxy adviser services, Institutional Shareholder Services and Glass Lewis & Co, are urging investors in Africa’s biggest supermarket retailer to reject the new plan for CEO Pieter Engelbrecht at its November 6 annual general meeting, questioning the repeated use of exceptional awards on top of Shoprite’s existing incentive programs.

And some of North America’s biggest investors have said they will take their advice.

ISS said Shoprite hadn’t provided a sufficiently compelling rationale for adding another substantial incentive and raised concerns about “the repeated use of exceptional remuneration arrangements.” It is also recommending investors reject this year’s implementation report after the remuneration committee applied a special modifier that resulted in a short-term incentive metric paying out in full even though actual performance fell below the threshold target.

The challenge comes during the first AGM season since changes to South Africa’s Companies Act made shareholder votes on remuneration binding and increased the potential consequences for directors overseeing pay.

Until now, investors have shown little inclination to rebel.

Average support for remuneration implementation reports among the 200 largest Johannesburg-listed companies increased to 89.6% in the latest year, even as median CEO remuneration climbed 9%, according to PwC.

That’s almost three times the inflation rate.

Read: How Checkers keeps cranking trading margins higher Shoprite declined to comment beyond its published remuneration report and AGM notice.

At Shoprite’s AGM last year, 95.61% of ordinary votes cast supported the implementation report.

The 2024 version received only 74.3% support, below the 75% support level that triggers shareholder engagement.

Investors are now being asked to approve a bespoke long-term incentive for Engelbrecht after another one-time plan — a so-called executive super stretch incentive — was valued at R36.4 million....