The Human Capital Committee of the Board approves the remuneration philosophy, strategy and policy of the Group. The Group’s remuneration philosophy is anchored in the World at Work total rewards approach, which aims to attract, motivate and retain competent and committed managers who provide strategic direction and drive sustainable shareholder value.
Our remuneration strategy therefore rewards employees at market-related levels according to their contribution to the Group’s operating and financial performance. This covers basic pay and short- and long-term incentives, which include share incentives – a critical element of executive incentive pay.
Remuneration policy
The remuneration policy codifies the remuneration principles, processes, practices and procedures to give effect to the company’s remuneration philosophy and strategy.
The pay mix may comprise a combination of guaranteed pay (total cost to company) and variable pay (short- and long-term incentives), depending on the level of seniority in the organisational hierarchy.
Guaranteed pay
Guaranteed pay is generally referenced to the job family market median.
Short-term incentives
Short-term incentives are essentially performance bonuses designed to incentivise management to drive business performance and increase shareholder value.
Annual performance bonuses are based on a combination of performance achieved for growth in profit above CPI and growth in economic value added above the company’s weighted average cost of capital. Depending on seniority, this is limited to an amount that varies between 8.33% and 100% of a year’s remuneration package.
Long-term incentives
The purpose of the long-term incentive scheme is to align management and shareholder interests, and to enable attraction and retention of key managers over the long-term (at least five years).
A proportion of the shares vest to employees annually to ensure that the long-term incentive keeps employees productively engaged for the duration of this period.
The human capital committee determines the share allocation to qualifying managers annually for the share appreciation rights (“SARs”) scheme. The number of SARs allocated is based on a multiple of the total remuneration package per year. The cumulative value of the allocations of SARs to qualifying employees varies from 50% to 300% of a year’s remuneration package. The total value of share appreciation rights allocated takes into account the value of share options and share appreciation rights allocated in any past five years.
The last allocation under this scheme was made in February 2012 at R61.85. Share options and share appreciation rights that have been accepted may be traded at 20% per annum within a maximum period of 10 years.
An additional allocation was made to senior black management in February 2012. These allocations may only be exercised five years from the date of allocation. Depending on seniority, the cumulative value of these additional allocations ranges between 75% and 100% of a year’s remuneration package.
In addition to the above, a further allocation of 150% of a year’s remuneration package will be available to the CEO, CFO and the four divisional operational executives on achieving agreed hurdle rates of growth in the headline earnings. The hurdle rate is defined as growth in headline earnings before tax of CPI plus 5% on a year-on-year basis.
The total number of ordinary shares that may be transferred to employees under the SAR scheme is limited to 14.5 million shares and represents approximately 7.5% of the issued ordinary shares at the date of approval of the scheme by shareholders, granted in 2006.