SA retail sector characterised by massive pay disparities and lack of diversity - activist group

To earn what the CEO of Woolworths earns in a single day, the lowest-paid worker in the company has to work for 1,308 days, or three-and-a-half years. This is the highest pay gap of nine JSE-listed wholesale and retail companies analysed by Just Share, a non-profit shareholder activism organisation. The wholesale and retail sector is SA’s second-largest employer after government. More than 346,000 people are employed by the nine companies in the survey, which have a total reported revenue of R721.4-billion. Woolworths and Shoprite are the only two companies to make their minimum wage public. For the other companies, the salaries of the lowest-paid workers were based on 2023 or 2024’s minimum wage. Note: CEO remuneration includes incentives and other benefits. Credit: The Outlier

By Georgina Crouth

15 Sep 2024

The average lowest-paid worker needs to work for 21 months to earn what a CEO earns in a day.

As the second-largest employer in South Africa after the government, the retail sector employs about 17% of the country’s workforce. It contributes about 20% to GDP.

Just Share, a shareholder activist group, said there are massive vertical wage gaps in the sector. On average, the unweighted ratio between CEO total remuneration and the lowest earner’s total remuneration is 597, which means chief executives earn on average 597 times more than the lowest-paid workers in their companies.

The average lowest-paid worker would need to work for 21 months to earn what a CEO in this sector earns in a single day.

Woolworths pays its top executive the best in the industry. Roy Bagattini earns a total annual package of R122,468,000 compared with the lowest-paid staff member, who earns R93,600. That’s a vertical pay gap of 1,308.

Shoprite, the next highest remunerator, pays its CEO, Pieter Engelbrecht, R64,666,000 a year, compared with the lowest earner, who brings home R65,263. That’s a vertical pay gap of 991.

At the lowest end, Pick n Pay’s CEO, Sean Summers, earns R10-million compared with the R66,162 that the lowest-paid earner takes home a year – a pay gap of 155.

Woolworths’ minimum wage is 57% higher than the sectoral-determined annual minimum wage, and Shoprite’s is 10% higher.

In terms of the Companies Amendment Act 16 of 2024, which was signed into law on 26 July but has not yet been implemented, all public and state-owned companies will have to disclose total remuneration in their annual reports.

This year, only Dis-Chem has disclosed a gender pay ratio. The company reports a male-to-female average compensation ratio of 1.11, which indicates that, on average, men earn 11% more than women.

Last year, Clicks and Pick n Pay were the only companies to disclose gender pay-gap ratios: the former reported a 1:1 gender pay ratio, indicating equal pay for men and women, whereas Pick n Pay, using the Gini index, found no evidence of bias or discrimination – despite a 12% disparity suggested by the index.

Pepkor is the only company with equitable gender representation at the board level, whereas The Foschini Group (TFG) is the only one with equal gender representation at the top management level.

From a transformation perspective, Clicks is the only company in the sector where black people constitute the majority (60%) of the board, whereas Spar has 50% black representation.

Pick n Pay and Woolworths have not disclosed the breakdown of race and gender representation for top management, instead providing an average representation of designated groups across various management levels.

Pick n Pay reported an average of 32% female representation at top and senior management levels. Woolworths said designated groups constitute 96% of its permanent employees, with 65% being women and 68% holding middle to top management positions.

Just Share said the underrepresentation of women and black people in top positions and senior management roles suggests that achieving equitable representation in the workplace “may not be a priority for many of these companies”.

“The disclosure of employment equity data remains sporadic, inconsistent and difficult to compare, as some companies disregard legislative guidelines on reporting,” it said.

Just Share said the prevalence of excessively high executive pay is rooted in a lack of transparency and accountability in determining executive remuneration, conflicts of interest among those responsible for setting executive pay, a misalignment between management and shareholder interests and inadequate protection of shareholder rights.

The lone retailer that did respond to queries about the report, but refused to go on record, told Daily Maverick that the information is publicly available and it has been “very transparent” about the wage differential, which is in line with the industry, as retailers operate with a large unskilled workforce.

Commenting on the report, Alec Abraham, retail analyst at Sasfin, said companies will hire the best candidate for a role, regardless of gender or race. “The reality is in retail, there’s a very wide range of skills. The pay that is attached to those skills, paired with demand for those skills and the available pool of talent to fill those roles, will result in a huge divergence between the lowest- and the highest-paid people.”

The need for skilled candidates

Unfortunately, given the country’s history, gaps remain in terms of available, highly skilled candidates for directorship roles. “The reality is there may not be sufficient candidates with the required skills for those roles,” Abraham said.

CEOs are also tough negotiators who often thrash out packages with boards when the latter are desperate. “Bagattini was the CEO of Levi’s before he joined Woolworths. They were in a lot of trouble. They had made some really, really poor strategic decisions and they were in panic mode, and he happened to come along when they needed him most.”

Most retailers, with the exception of Woolworths and Shoprite, do not publicly disclose their internal minimum wage. Where internal minimum wages were not available, Just Share relied on the prescribed 2023 and 2024 minimum wage, as per the sectoral determinations, to calculate vertical wage gaps. These were measured as a ratio of the CEO’s total remuneration compared with the lowest earner’s total remuneration.

CEO remuneration packages include guaranteed pay, incentives (both short-term and long-term) and other benefits. Just Share notes that these incentives make up a significant portion of CEO remuneration. For example, long-term incentives comprise 60% of the Woolworths CEO’s remuneration, 49% of The Foschini Group’s and 41% of Shoprite’s.

Pepkor’s vertical wage gap was omitted because the company’s CEO, Pieter Erasmus, did not draw a salary for the 2023 financial year. DM

This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R35.

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