Various components are involved in the remuneration packages for senior management and employees. These include the following:
All permanent employees not employed in a sales function receive a guaranteed remuneration, based on their position, the 50th percentile of the market and the skills of the specific employee. This guaranteed portion is based on cost to Company and comprises a fixed basic salary and compulsory benefits (as per executive directors). Market movements and individual performance determine the level of increases to the guaranteed component.
Sales employees receive a guaranteed component and a variable bi-annual reward linked directly to the achievement of specific targets.
Short-term incentives are paid annually and are used to encourage achievement of annual objectives at management level. This ensures that this significant and variable portion of pay is linked to performance. Short-term incentives for senior management are based on both Company financial and non-financial KPIs and individual performance. Short-term incentives are typically up to 30% of base salary. The split between Company and individual performance is typically 90% and 10%.
The primary bonus pools are approved by the NGMR Committee, which also oversees principles applied in allocating said pools to business segments and individuals.
Both senior management and executive directors participate in the Company’s share-based incentive scheme. The NGMR Committee decides on allocation after Company and individual performance is taken into account.
The committee is of the view that the incentive scheme is a direct link to the Company performance through the share price. The Company’s Share Appreciation Rights (SARs) scheme and Forfeitable Share Plan (FSP) are equity-settled long-term incentive schemes. These schemes are utilised as a mechanism to attract and retain competent employees.
Share Appreciation Rights scheme
According to the rules of the various share schemes, no one individual may hold in excess of the equivalent of 1% of the Company’s issued share capital and the aggregate number of SARs shall not exceed the equivalent of 10% of the Company’s issued ordinary share capital. At the date of exercising the option, the SARs are converted into ordinary shares (providing performance conditions are met by the vesting date) using this formula:
The total interest of executive directors who held office on 31 December 2016 is 56 000 SARs. This is granted at an average price of R13.55 per share
Forfeitable Share Plan
Executive directors who held office on 31 December 2016 had an indirect interest in 214 000 forfeitable shares. The vesting of certain shares is conditional only upon the employee being employed by the Company at the vesting date and for other shares granted both on continued employment and on reaching predetermined performance conditions. All dividends paid accrue to the employee during the vesting period.
Review of long-term incentives
The NGMR Committee reviews the long-term incentive scheme regularly, considering relevant changes in tax legislation while ensuring alignment with our long-term objectives.
Executive directors receive a guaranteed element of remuneration based on cost to company. This comprises a fixed-base salary and benefits such as medical aid, retirement fund membership, travel and life cover and disability cover. The remuneration considers market-related levels as well as the position and responsibilities of the individual.
A significant portion of executive directors’ cost is variable as a result of exercising short-term incentives to promote performance that attains stipulated strategic annual objectives.
The base used for executive directors’ short-term incentives are Company financial and non-financial KPIs and individual performance. This is typically a 90% Company, 10% individual performance. Short-term incentives are typically between 30% and 50% of base salary.
Long-term incentives are used as mechanism to encourage executive directors to successfully execute the Company’s long-term strategy. Executive directors take part in the share-based incentive scheme. Refer here for details of executive director remuneration.
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