At the September annual general meeting (AGM) of Mr Price, shareholders were asked to cast a binding vote on the retailer’s remuneration policy, a first under South Africa’s amended Companies Act.
The amendment, which took effect in May, changed advisory votes on executive pay at listed companies into binding shareholder approval requirements. In plain terms, a binding vote means the resolution must be passed for the policy to stand, rather than merely gauging shareholder sentiment.
Mr Price, the Durban-based fashion retailer, engaged investors who together held more than 67% of its ordinary shares before the meeting, according to the company. While the remuneration resolutions were approved, 34% of ordinary votes opposed the policy, up from about 26% a year earlier.
What the new rules require
Under the revised Companies Act, public and state-owned companies must secure shareholder approval for their remuneration policies by an ordinary resolution, a simple majority of votes cast. If investors reject a company’s annual remuneration report, any non-executive remuneration committee members who are eligible must stand for re-election at the next AGM. A second consecutive rejection bars those members from serving on the committee for two years.
Zwelakhe Mnguni, chief investment officer at Benguela Global Fund Managers, said the 34% vote against the policy provides an early data point under the new rules. “Engagement is no longer a substitute for substance,” he noted, adding that while boards are holding earlier and more structured discussions with investors, many of those talks remain defensive, more meetings and disclosures without substantial changes to incentive targets.
The legislation also demands greater disclosure of the gap between a company’s highest and lowest earners, giving shareholders more data to scrutinise executive rewards. Mnguni expects the initial effect to be increased shareholder engagement, followed by adjustments to pay structures where boards face persistent opposition. “Binding votes will not automatically produce that alignment,” he warned, “they will, however, make it more costly for boards to pretend the conversation is only about engagement.”
For companies like Mr Price, the shift means that executive compensation packages will need to be justified more rigorously to a broader investor base. While the retailer says its remuneration committee sought to balance feedback, the higher level of dissent signals that boards can no longer rely on informal engagement alone to secure approval.
Why “say on pay” became binding rather than advisory
South Africa’s shift from an advisory to a binding shareholder vote on executive remuneration follows a pattern several other markets went through earlier. The United Kingdom’s own Enterprise and Regulatory Reform Act 2013 introduced a binding vote on remuneration policy after a wave of shareholder anger, dubbed a shareholder spring at the time, over executive pay rising while company performance lagged. The logic is straightforward: an advisory vote a board can note and ignore changes nothing by itself, while a binding one forces the board back to the negotiating table if shareholders reject the policy.
The distinction that matters for any listed company reader here is between the remuneration policy vote, which sets the framework going forward and is now binding under the amended Companies Act, and the remuneration implementation report vote, which looks backward at what was actually paid and remains advisory in most cases. A company can lose the second vote and still have a validly approved policy, which is a nuance that gets lost in headlines about a company “failing” its pay vote.
Mr Price engaging holders of more than 67% of its ordinary shares before the meeting is itself a sign of how seriously listed boards are now taking this consultation step, since a board blindsided by a binding vote it did not canvass in advance risks a policy being rejected outright rather than merely criticised. For a related look at how South African companies are navigating annual general meeting season this year, see this site’s report on Omnia Holdings’ AGM outcomes.
