|Mr IN Matthews
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|Ms ZBM Bassa
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|Mr PL Campher
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|Mr MV Moosa
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|Independent non-executive director||Independent non-executive director||Independent non-executive director||Non-executive director|
|Meeting attendance: 4/4||Meeting attendance: 4/4||Meeting attendance: 4/4||Meeting attendance 4/4|
Last year’s remuneration report set out the myriad of changes that the remuneration committee (“remco”) dealt with and the revision to the Group’s executive remuneration principles. By contrast, the emphasis this year has been to embed the revised remuneration principles and, more importantly, assess whether these changes have been successful and effective in delivering the anticipated results. We have engaged with many of our shareholders to obtain their views on the Group’s remuneration structures and we extend our appreciation to those shareholders who have taken the time to engage with the remco and management on their views on executive remuneration.
As the Group is refining its approach to implementing the revised remuneration model, further learnings have emerged. This has led to further foundational steps being implemented, such as the regrading of all management employees and the subsequent realignment of their award levels.
Management has been thorough in its review of employee benefits and much like the Group’s customer management system, which has been developed to provide a single view of the customer, a great deal of time and effort has been dedicated to provide a single view of each of our executive team and the Group’s top 160 managers. This will shortly be cascaded down to all levels of management, and will provide the remco and management with a snapshot of the individual’s talent profile, performance, development aspirations, flight risk, succession and other relevant factors to allow deeper insight into the rationale for remuneration decisions.
As a remco, we consider the interests of all employees and as you will appreciate, the most significant event for our employees (whether affected directly or not) has been the implementation of the section 189A restructuring process. Careful consideration was given to the decision to implement the process, which was not taken lightly by executive management and the board. However, it was considered necessary for positioning the Group for a new era. As a remco, we are continuously monitoring the implementation of the process by management and are satisfied that it is being concluded as fairly as possible with due respect afforded to our employees. Once the restructuring process is completed, each employee will have a clear understanding of the Group’s expectations for their role and the Group will be right-sized to ensure sustainable growth.
For the first time last year, we introduced an individual performance component to the Group’s executive bonus scheme, which is based on personal effort and success in meeting (and as we hoped, exceeding) performance objectives set against the Group’s five strategic pillars. The pay for performance methodology has elevated the importance of a performance culture and empowered our managers to determine a component of their bonus based on their individual contributions. The actual results attained are set out in the body of this report.
The remainder of this report sets out the Group’s remuneration policy and principles, and provides stakeholders with an understanding of the Group’s remuneration components. This is followed by the remuneration disclosures of the executive directorate and the proposed fees for non-executive directors for the year ahead.
From a governance reporting perspective, the Committee’s 2014 assessment indicated that the remco was effective in performing its functions and supporting the board appropriately. Our board mandate and terms of reference remain available for perusal, and were reviewed for relevancy and alignment to best practice in the year under review.
This report has been approved by the board on the recommendation of the remco. Stakeholders are invited to submit comments on the Group’s remuneration policy by emailing firstname.lastname@example.org
Chairman of the remuneration committee
The Group is guided by the following key remuneration principles to align employee behaviour with the Group’s strategic objectives:
These principles inform a holistic view in setting the Group’s remuneration policy, which is underpinned by leading remuneration and governance practices.
These remuneration principles are attained through the appropriate mix of guaranteed fixed remuneration and variable performance-related remuneration. At management level, this further comprises a short-term incentive (over a one-year performance period) and long-term incentives (over a minimum three-year performance period).
The remco reviews the total remuneration mix of executives on an annual basis. This review entails an analysis of the combination and proportion of the total remuneration paid as part of the guaranteed package against both the short-term and long-term incentives. The appropriate mix and combination of each of these remuneration components at executive level is imperative as each component is linked to promote the creation of shareholder value.
To retain a competitive edge in the industry and ensure we remain an employer of choice, our remuneration philosophy is to remunerate our executives equitably, competitively and in line with shareholder expectations and leading remuneration practices. In light of this, we use niche market industry and country benchmarks to ensure that we are constantly informed of market trends. In an effort to ensure employees are paid equitably, irrespective of their gender, the Group also analyses pay at various levels of management and addresses these as may be appropriate.
Consideration of our JSE-listed peers and comparator market salary data of organisations of similar market capitalisation and revenue is taken into account in making executive remuneration decisions.
Executive remuneration is further informed by utilising an integrated view of executive remuneration, talent and performance management. This provides detailed and consolidated information for each executive in the Group with regard to:
Our remuneration policy seeks to remunerate all employees with a guaranteed package that is anchored at the median market position. Performance remains one of the most important factors in determining total guaranteed pay, and therefore the Group differentiates between average and outstanding performance, and remunerates individuals based on their contribution to the Group’s strategic objectives.
Middle, senior and top management employees participate in an annual short-term incentive plan, otherwise referred to as the Executive Bonus Scheme (EBS). The EBS is structured to reward accomplishment of annual financial and non-financial performance targets that are aligned to the delivery of Group and unit performance together with individual performance against agreed strategic priorities. Business performance remains the most weighted driver in calculating EBS, contributing two-thirds to the total EBS amount, with individual performance weighted at one-third of the formulae.
EBS is calculated as a percentage (target incentive percentage) of an employee’s qualifying guaranteed package and is determined by attaining both Group and unit business performance targets, as well as individual performance over the most recent financial year, as follows:
The target incentive percentage is dependent on the employee’s grade and will be determined by remco from time to time based on prevailing market trends.
The Unit and Group Factor is dependent on budgeted financial performance as follows:
|Targets||% of budgeted financial
| Group or
Earnings before interest, taxes, depreciation and amortisation (EBITDA) is the financial performance metric for both unit and Group performance. For employees based at units, EBITDA performance is equally weighted between Group and the applicable unit. For Group employees, EBITDA performance is based on the Group result. Linear interpolation is used to determine the unit or Group Factor between Threshold, Target and Stretch performance.
The personal factor, which comprises one-third of the EBS, ranges between 0 – 200% and is dependent on the employee’s performance rating results for the relevant financial year.
No EBS will be payable to an employee who is rated as a weak performer in terms of their most recent performance assessment.
To ensure effective integration of the performance ratings with unit and Group performance, the Group applies calibration of performance ratings results across the Group. This includes assessing the individual performance ratings at unit level against the actual unit business performance results and against the envisaged on-target bonus to be paid in accordance with the rating provided. Executive leadership, functional heads and unit general managers are all involved in open and honest discussions regarding their performance rating to ensure that a common performance benchmark is applied across the Group.
The main objective of the Group’s long-term incentive plans is to motivate and retain management on a long-term basis while promoting long-term wealth creation for both executives and shareholders. The Group operates two long-term incentive plans with annual awards – the Equity Growth Plan (EGP) and Bonus Share Matching Plan (BSMP).
The EGP operates as follows:
The BSMP operateS as depicted below:
In addition to the annual awards illustrated above, the Group further utilises the BSMP as a retention mechanism in certain instances by permitting the remco to make retention or attraction awards for new employees. These awards have a vesting period of either three years or five years depending on the quantum of the award (which is determined by a formulae). If an employee receives such an award but leaves the employment of the Group before the vesting period, they forfeit the award and repay the dividends received as a result of the award.
This concludes the summary of the Group’s remuneration policy and remuneration practices as first implemented in 2013/14, and which are now in the second year of implementation. The principle of pay for performance will further evolve as the Group continues to embed a high-performance culture with long-term strategic objectives as the driving factor behind rewards and incentives.
The Group’s remuneration policy as outlined above will be submitted to shareholders for a non-binding vote at the annual general meeting to be held on 21 November 2014.
Based on the remuneration policy and principles summarised above, the Group discloses the actual remuneration paid to executives and prescribed officers as well as details regarding their long-term incentive awards for the year under review. Having considered the matter, the Group is of the opinion that its executive directors are the only prescribed officers of the Group.
|Other benefits||Payment in
terms of mutual
|GE Stephens||5 287 325||6 912 951||713 115||94 560||13 007 951|
|AM Leeming||3 293 314||3 202 448||576 000||130 686||7 202 448|
|KH Mazwai||2 041 744||1 640 018||455 058||312 198||4 449 018|
|RP Becker*||555 155||-||124 584||12 392||692 131|
|TOTAL||11 177 538||11 755 417||1 868 757||549 836||25 351 548|
|GE Stephens||3 847 080||3 862 083||519 051||335 200||8 563 414#|
|AM Leeming||2 079 931||1 898 347||366 977||611 685||4 956 940#|
|KH Mazwai||1 911 148||1 212 640||429 300||402 137||3 955 225|
|G Collins||3 438 310||3 432 000||542 028||2 361 158||9 773 496|
|RP Becker||3 332 403||2 491 671||747 501||487 058||8 941 271||15 999 904|
|TOTAL||14 608 872||12 896 741||2 604 857||4 197 238||8 941 271||43 248 979|
* Resigned on 28 February 2013, effective 31 August 2013.
# This disclosure is for the full financial year, notwithstanding that their appointments to the board were made on 1 February and 1 March 2013 respectively.
For the year under review, the EBS earned and attributable to the percentage of predetermined targets achieved are:
30 June 2014
|GE Stephens||6 912 951||5 180 750||10 361 500||133.44%|
|AM Leeming||3 202 448||2 400 000||4 800 000||133.44%|
|KH Mazwai||1 640 018||1 404 500||2 809 000||116.77%|
The EBS comprised the three EBS components as achieved and is disclosed for the aforementioned executive director’s as:
Based on the EBS explanation provided above, the table above reflects the combined unit’s overall higher than budgeted financial performance as the Group achieved slightly below the board approved budgeted EBITDA. The unit and Group factor are objectively applied, based on the audited results of the units and Group. Individual performance is based on the remco’s performance assessment of the executives against the Group’s strategic objectives as translated into each executive’s performance contract.
Having duly conducted the performance assessments, the Remco is of the view that the aforesaid executives have not only met, but exceeded their key performance indicators under each of the five strategic pillars through their individual contributions and performance. This is despite an extremely challenging year with difficult trading conditions. The management team has accomplished many of the changes they set out to attain in the year under review and they have been rewarded accordingly. However, more remains to be done and the actual EBS achieved still fell short of the maximum potential EBS that management could have earned should all three EBS components have met the stretch targets set by the board.
SHARE-BASED PAYMENTS EXPENSE
The table below sets out the amount expensed for share-based payments in the statement of comprehensive income for the year:
|GE Stephens||6 779 747||3 844 200|
|AM Leeming||3 446 517||2 660 786|
|KH Mazwai||2 663 071||2 714 627|
|TOTAL||12 889 335||9 219 613|
The Group’s share plans are equity settled. Accordingly the total number of shares allocated under the Group’s share plans amount to approximately 1.15% in aggregate of the Group’s issued share capital based on an assumed 100% vesting.
Awards made to executive directors/prescribed officers under share plans at 30 June 2014
|Date of grant||Grant
30 June 2013
30 June 2014
|Gains on the
|EGP||29 964||216 986||–||246 950||–||8 466 939|
|29.06.2011**||89.46||12 099||12 099||398 904|
|27.06.2012||90.07||17 865||17 865||612 055|
|02.09.2013||94.87||–||114 923||114 923||4 188 943|
|27.06.2014||109.65||102 063||102 063||3 267 037|
|CSP||35 630||–||–||35 630||–||1 404 262|
|29.06.2011**||n/a||15 826||15 826||–|
|27.06.2012||n/a||19 804||19 804||1 404 262|
|DBP||6 241||6 241||685 610|
|03.09.2012||n/a||6 241||–||6 241||685 610|
|RSP#||147 329||–||–||147 329||–||16 206 190|
|01.10.2011||n/a||62 161||62 161||6 837 710|
|01.02.2013||n/a||85 168||85 168||9 368 480|
|BSMP||28 358||28 358||3 119 380|
|02.09.2013||95.00||–||28 358||28 358||3 119 380|
|TOTAL||464 508||–||29 883 281|
|EGP||45 296||89 415||–||134 711||–||4 314 633|
|30.06.2009*||77.25||8 767||8 767||–|
|29.06.2010||84.12||10 398||10 398||360 707|
|29.06.2011**||89.46||10 667||10 667||351 691|
|27.06.2012||90.07||15 464||15 464||529 797|
|02.09.2013||94.87||–||47 357||47 357||1 726 163|
|27.06.2014||109.65||42 058||42 058||1 346 277|
|CSP||30 975||–||–||30 975||–||1 207 280|
|29.06.2011**||n/a||13 949||13 949||–|
|27.06.2012||n/a||17 026||17 026||1 207 280|
|DBP||7 238||–||(1 463)||5 775||143 506||635 250|
|30.09.2010||n/a||1 463||(1 463)||–||143 506||–|
|27.09.2011||n/a||2 255||2 255||248 050|
|03.09.2012||n/a||3 520||3 520||387 200|
|RSP#||65 118||–||(6 019)||59 099||596 122||6 500 890|
|01.12.2008||n/a||6 019||(6 019)||–||596 122||–|
|27.06.2012||n/a||33 925||33 925||3 731 750|
|01.03.2013||n/a||25 174||25 174||2 769 140|
|BSMP||13 137||13 137||1 445 070|
|02.09.2013||95.00||–||13 137||13 137||1 445 070|
|TOTAL||243 697||739 628||14 103 123|
* Performance conditions not met, EGP rights lapsed
** Performance conditions met
# Vests in three tranches
|Date of grant||Grant
30 June 2013
30 June 2014
|Gains on the
|EGP||46 508||62 792||–||109 300||–||3 393 181|
|30.06.2009*||77.25||10 156||10 156||–|
|29.06.2010||84.12||11 374||11 374||394 564|
|29.06.2011**||89.46||11 444||11 444||377 309|
|27.06.2012||90.07||13 534||13 534||463 675|
|02.09.2013||94.87||–||33 257||33 257||1 212 218|
|27.06.2014||109.65||29 535||29 535||945 415|
|CSP||30 262||–||–||30 262||–||1 063 833|
|29.06.2011**||n/a||15 259||15 259||–|
|27.06.2012||n/a||15 003||15 003||1 063 833|
|DBP||3 774||–||–||3 774||–||415 140|
|03.09.2012||n/a||2 973||–||2 973||327 030|
|RSP#||54 792||–||(10 254)||44 538||984 396||4 899 180|
|01.12.2008||n/a||10 254||(10 254)||–||984 396||–|
|27.06.2012||n/a||44 538||44 538||4 899 180|
|BSMP||7 688||7 688||845 680|
|02.09.2013||95.00||–||7 688||7 688||845 680|
|TOTAL||195 562||984 396||10 617 013|
The following awards were made and exercised by executive directors/prescribed officers subsequent to 30 June 2014:
|Individual||Date of grant||Grants
|BSMP||11.09.2014||30 771||3 456 506|
|CSP||29.06.2011||6 867||0||8 959^|
|TOTAL||30 771||37 948||0||8 959||3 456 506|
|BSMP||11.09.2014||14 255||1 601 264|
|CSP||29.06.2011||6 052||0||7 897^|
|TOTAL||14 255||8 277||0||7 897||1 601 264|
|BSMP||11.09.2014||7 300||820 009|
|CSP||29.06.2011||6 621||6 621||8 638^|
|TOTAL||7 300||7 422||7 422||8 638||820 009|
^ A portion forfeited due to the relevant performance condition not being met.
The aforesaid disclosures conclude the remuneration paid to the executive directors in the year under review.
Fees payable to non-executive directors for their services as directors and for their participation in the activities of the committees are recommended by the executive directors to the remco for consideration. Thereafter the fees are considered by the board for submission to shareholders, if applicable, for a special resolution in accordance with the Companies Act.
Non-executive director fees are determined on the basis of a base annual fee and an attendance fee per meeting as advocated by King III. This practice is extended to non-executive directors of the Group’s various subsidiary boards. The executive directors and other executive management that serve on the Group’s subsidiary boards do not receive any fees in their personal capacities for this role and, to the extent applicable, any fees payable as a result of this office are waived in favour of the Group.
Proposed fees for the next financial year are determined by the end of the previous financial year and are payable quarterly in arrears, after approval by members at the annual general meeting. In the case of new appointments or resignations from the board or committees during a financial year, the annual fees are pro-rated in line with the period of tenure of office.
Fees paid to non-executive directors by the Company during 2014 financial year.
and trust fees
|PDS Bacon||-||258 900||110 800||369 700||134 500|
|ZBM Bassa||-||258 900||193 675||452 575||393 400|
|PL Campher||10 000||258 900||340 992||609 892||534 150|
|NN Gwagwa||-||234 800||55 500||290 300||260 000|
|BLM Makgabo-Fiskerstrand||-||234 800||36 300||271 100||264 200|
|IN Matthews||30 000||421 200||239 608||690 808||711 850|
|B Modise||-||234 800||89 000||323 800||317 900|
|LM Mojela||17 921*||258 900||73 208||350 029||237 413|
|MV Moosa||-||974 100||245 000||1 219 100||1 120 400|
|GR Rosenthal||-||258 900||305 500||564 400||486 750|
|57 921||3 394 200||1 689 583||5 141 704||4 597 663|
* Fee is for the period up until 22 August 2013 when Ms Mojela resigned from the board of Afrisun Gauteng (Pty) Ltd and Emfuleni Resorts (Pty) Ltd
Given increasing regulatory and governance demands on the Group, management recommended that non-executive director fees be increased to the extent that that some of the aforementioned fees were out of kilter with the market. Having considered the challenging operating environment, the remco elected to restrict the increase in non-executive director fees to the increase applied to executive management salaries of 6.75% with two exceptions:
The remainder of the board and committee fees, escalated at 6.75% for the forthcoming financial year. Increases will be presented to shareholders for approval, together with a resolution that permits director fee increases of no more than 10% for the following two years, and applicable fees for additional/ad hoc meetings.
|Non-executive directors||Base fee||Attendance
fee per meeting
fee per meeting
|Services as directors|
|– Chairman of the board||770 200||44 900||721 500||42 100|
|– directors||122 000||25 700||114 300||24 100|
|Lead independent director||295 300||25 700||276 600||24 100|
|– Chairman||102 700||28 900||96 200||27 100|
|– members||51 500||14 500||48 200||13 600|
|– Chairman||56 600||30 900||53 000||28 900|
|– members||28 300||15 500||26 500||14 500|
|– Chairman||46 300||28 300||43 400||26 500|
|– members||23 300||14 200||21 800||13 300|
|– Chairman||38 500||19 300||36 100||18 100|
|– members||19 400||9 700||18 200||9 100|
The proposed non-executive director fees for 2014/2015 are set out below for perusal and approval of shareholders.
fee per meeting
fee per meeting
|– Chairman||42 600||24 500||*3 700|
|– members||21 300||12 300||*2 700|
|Social and ethics committee|
|– Chairman||42 600||24 500||36 100||18 100|
|– members||21 300||12 300||18 100||9 100|
* Members will continue to receive an hourly fee for any teleconferences that may be necessary.
In line with best governance practice, the non-executive directors do not participate in any of the Group’s short- or long-term incentive schemes, nor do they earn any consultancy fees.