Woolworths board faces grilling

Woolworths’ annual meeting is expected to feature some tough questions for the retailer’s chairman and directors.

Woolworths shareholders are expected to pitch tough questions to the retailer’s chairman and directors at the supermarket giant’s annual meeting in Sydney tomorrow, demanding more details on the failure of its hardware chain Masters as well as the shock departure of Big W boss Sally Macdonald last week after only 10 months in the role.

There could also be pressure on the board to claw back millions of dollars in bonuses and options from key executives if the Australian Competition and Consumer Commission’s case against the company over allegations of misconduct towards supermarket suppliers is proved.

However, Woolworths chairman Gordon Cairns and chief executive Brad Banducci should also receive some bouquets from shareholders following recent improving sales from the company’s flagship supermarkets division that has started to narrow the performance gap with rival Coles.

While most proxy advisers and the Australian Shareholders Association have recommended voting in favour of all resolutions put at the Woolworths AGM, advisory group ISS has raised the issue of retrieving bonuses from executives where there is proof of improper conduct.

“The company is presently defending in court allegations of unconscionable conduct in dealings with a large number of its supermarket suppliers, brought by the ACCC,” ISS analyst Vas Kolesnikoff wrote in his report for clients. “Given the pending decision of the court and potential penalties, shareholders may be interested in engaging with the company regarding ‘malus’ (bonus) and clawback provisions which are designed to apply to remuneration of executives responsible for the conduct at the heart of the legal action.”

Mr Kolesnikoff also noted in his report that former Woolworths CEO Grant O’Brien, who presided over the creation and rollout of Masters that ultimately proved a failure and cost shareholders billions of dollars as well as a worsening of earnings in the supermarkets arm, was paid a significant retirement payment.

“Importantly, Mr O’Brien also received significant cash short term incentives leading up to his announcement of retirement. Given the deterioration of the company’s affairs and current legal action, shareholders may question the benefits which they derived from the bonuses paid to Mr O’Brien and senior executives, including the former CFO.”

However, Mr Kolesnikoff has recommended a qualified vote for the remuneration report.

“No STIs (short-term incentives) have been paid for the second year in succession, no long-term incentives have vested, no increases in directors’ fees were passed and changes planned for fiscal 2017 appear to be, on balance, appropriate to reflect appropriate alignment of shareholder interests with reasonable business targets.”