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Remuneration report

This spread supplements the discussion from the chairperson of the remuneration committee on page 67 with detailed information around remuneration practices and board and senior management remuneration.

Introduction

As outlined on pages 36 to 41, the performance of the board and our team is appraised against a set of clear objectives. Executive and senior management are measured and remunerated against a balanced scorecard aligned to people, the environment and group and individual performance.

  • Remuneration policy

    Group Five believes in rewarding performance. Its remuneration policy therefore aims to attract, reward, motivate and retain skilled employees to execute current strategies and deliverables and to create long term organisational growth. It provides an integrated remuneration and reward model which is compared to the market from which it attracts and recruits employees with the skills required by the organisation. Our approach is to pay on the market or above. We offer an integrated approach to remuneration.

    Remuneration practices

    Below is a summary of the group’s remuneration practices.

    GROUP FIVE INTEGRATED APPROACH
               
    Elements   GROUP FIVE   Strategic intent
               
    Long term Incentive   Share options   Long term company performance
    Attraction/retention
               
    Short term Incentive   Annual bonus scheme   Company performance
    Individual performance
    Attraction/retention
               
    Base pay   Monthly salary
    Hourly wage
      Skills
    Knowledge
    Competencies
    Experience
    Attraction/retention
    Individual performance
    Benefits   Medical aid
    Pension fund/provident fund
    Death benefit
    Car allowance
     
               
         Tools       Company cars
        Computers/laptops
        Cellphones
          Job requirement
               
  • Variable pay

    Long term incentives

    The group has long term incentive share schemes in place.

    Management share scheme

    Share appreciation rights (SARs) are allocated to executive and business unit directors. The intention of this scheme is to attract, retain and reward participants who are able to influence the group’s performance. The allocations are based on seniority in accordance to an annual multiple of individual guaranteed earnings.

    Employee category   Annual multiple of
    guaranteed earnings
    (AMOGE)*
     
    CEO   1.5  
    Executive committee members   1.2  
    Managing directors of business units   0.9  
    Business unit directors (other than managing directors)   0.6  
    * The SARs issued are based on AMOGE, which is the value of the shares based on the 30-day volume adjusted weighted average price in the 30 days prior to the issue, expressed as a multiple of the employee’s annual cost to company package.

    No specific performance criteria are stipulated, although it is expected that employees who are granted these shares are employees who have and will continue to meet or exceed expectations.

    The SARs scheme has been in existence for the last five years. A key issue for the scheme has been the slow appreciation of share value especially in tough market conditions. This lack of share appreciation limits the scheme’s intent of motivating and retaining the participants of the scheme. To address this, a number of alternatives have been reviewed to address the current shortcomings of the scheme. These will be discussed further in F2012. Should a conclusion be reached on a new scheme, a circular will be issued to shareholders for their consideration.

    Black management share scheme

    The black management share scheme formed part of the group’s initial BBBEE empowerment transaction in 2005. Allocations in terms of this scheme are made to black (Black, Indian and Coloured) managers in Peromnes grades 8 and higher, which represents middle management and above.

    The scheme serves as an attraction to black managers to join and remain with the group. The shares are allocated in accordance with the trust rules set up at the time of launching the scheme. The allocation is based on a targeted annual multiple of guaranteed earnings, which may be adjusted by the remuneration committee based on the availability of shares for allocation and the number of participants.

    Peromnes grade   Annual multiple of
    guaranteed earnings
    (AMOGE)*
     
    Grade 5   2.0  
    Grade 6   1.5  
    Grade 7   1  
    Grade 8   0.75  
    * The shares issued are based on AMOGE, which is the value of the shares based on the 30-day volume adjusted weighted average price in the 30 days prior to the issue, expressed as a multiple of the employee’s annual cost to company package.

    As the black management share scheme was part of the group’s BBBEE empowerment transaction in 2005, no specific performance criteria was required. However, it is accepted that employees who are granted these shares are employees who have and will continue to meet or exceed expectations. Refer to page 228 of the annual financial statements for additional information.

    The scheme terminates in calendar 2012 by which time all shares in the trust need to be allocated to black managers. At that time the board will be required to establish whether to renew the scheme or to create a new programme as part of a future transaction.

    Short term incentives

    The group grants employees annual performance bonuses. These are based on group, business unit, project and individual performance over the financial year of the company. See pages 40 to 41 for the key performance areas used to assess senior management’s incentive bonus entitlement. Employees are measured against a set of individual, job or site-specific criteria. When these are met or exceeded, a bonus is paid. Executives can earn up to three times their cost to company should they exceed their performance targets.

  • Cost to company

    Base pay

    Group Five benchmarks its remuneration practices against both the market from which it recruits and the most relevant markets where employees regularly seek alternative employment. We utilise a number of benchmark remuneration surveys to ensure our remuneration packages are both competitive and fair. We aim to pay our executives at the median of the market and employees at the 62th percentile.

    The group follows a job grading system, which includes paying salaried employees at a level which meets market expectations for the particular job category. Our wage-based employees are paid either in line with a sectoral determination set out by the Department of Labour or in line with a union-negotiated wage.

    Benefits

    Group Five offers a number of employee benefits, as approved by the remuneration committee. These include medical aid, pension, provident fund and death benefits. These are also based on market trends and competitiveness.

  • Director and senior management remuneration

    Non-executive directors’ fees

      Fees, services and expenses Fees
    30 June 2011
    (R’000)
      Expenses
    30 June 2011
    (R’000)
      Total
    30 June 2011
    (R’000)
      Fees
    30 June 2010
    (R’000)
      Expenses
    30 June 2010
    (R’000)
      Total
    30 June 2010
    (R’000)
     
      Name                        
      P Buthelezi 740     740   719     719  
      L Chalker 550   223   773   510   214   724  
      SG Morris 944     944   547     547  
      KK Mpinga 494     494   383     383  
      MSV Gantsho#       91     91  
      LE Bakoro 394     394   318     318  
      JL Job 524     524   353     353  
      Z Motshotshisa~       200     200  
        3 646   223   3 869   3 121   214   3 335  

    # Resigned in January 2010.
    ~ Appointed in June 2009.
    †† Resigned in May 2010.

    Non-executive directors’ proposed fees F2012, subject to shareholder approval

    Position F2012 proposed fees
    (R per annum)
        Comment   F2011 approved fees
    (R per annum)
    Main board – chairperson 739 450     Includes all board and committee   697 600
            attendances    
    Lead independent non-executive director 318 000     Includes basic fee plus attendance   300 000#
            fee for four meetings    
    Main board – non-executive director 184 440     Includes basic fee plus attendance   174 000
            fee for four meetings    
    Audit committee – chairperson 184 440     Four meetings   174 400
    Audit committee – member and attendee 92 430     Four meetings   87 200
    Remuneration committee – chairperson 92 430     Four meetings   87 200
    Remuneration committee – member and attendee 64 660     Four meetings   46 000
    Risk committee – chairperson 122 960     Four meetings   116 000
    Risk committee – member and attendee 64 660     Four meetings   61 000
    Nominations committee – chairperson* 92 430     Two meetings   87 200
    Nominations committee – member and attendee 48 760     Two meetings   46 000
    SED committee – chairperson 122 960     Four meetings   116 000
    SED committee – member and attendee 64 660     Four meetings   61 000
    Extraordinary services – per hour 2 650     Applied for ad hoc and/or   2 500
            non-scheduled meetings.    
            Capped at daily rate of R21 200    

    A deduction of R12 000 per meeting will apply for non-attendance at a scheduled meeting and R25 000 will be payable for attendance at a special board meeting.

    * Included in chairperson’s fee.
    # A lead independent non-executive director was appointed in F2011.

    Executive directors

        Salaries
    (R’000)
      Performance and
    equity incentives
    (R’000)
      Total
    (R’000)
     
      Name 30 June
    2011
      30 June
    2010
      30 June
    2011
      30 June
    2010
      30 June
    2011
      30 June
    2010
     
      MR Upton 3 109   2 974   7 323   8 527   10 432   11 501  
      CMF Teixeira 1 840   1 745   3 326   3 010   5 166   4 755  
        4 949   4 719   10 649   11 537   15 599   16 256  

    In line with the requirements of the new Companies Act, the group discloses the remuneration paid to prescribed officers who are defined as the group’s executive committee. The three highest paid members of management are also reflected in the table below as per the recommended practice suggested in 2.26.2 of King III.

    Executive committee exco members

        Salaries
    (R’000)
      Performance and
    equity incentives
    (R’000)
      Total
    (R’000)
     
      Name 30 June 2011
      30 June 2010   30 June 2011
      30 June 2010   30 June 2011
      30 June 2010  
      Prescribed officer 1 2 639   2 734   6 052   4 896   8 691   7 630  
      Prescribed officer 2 2 363   2 086   3 399   4 026   5 761   6 112  
      Prescribed officer 3 2 156   1 900   3 545   3 926   5 701   5 827  
      Prescribed officer 4 1 934   1 690   3 364   3 012   5 298   4 702  
      Prescribed officer 5 1 625   1 516   3 081   3 898   4 707   5 415  
      Prescribed officer 6 1 756   1 496   2 778   2 800   4 534   4 297  
      Prescribed officer 7 1 546   1 441   2 766   2 875   4 312   4 316  
        14 018   12 863   24 986   25 435   39 004   38 298  

    Management committee members (excluding CEO, CFO and exco)

        Salaries
    (R’000)
      Performance and
    equity incentives
    (R’000)
      Total
    (R’000)
     
      Name 30 June 2011
      30 June 2010   30 June 2011
      30 June 2010   30 June 2011
      30 June 2010  
      Total earnings 25 536   22 304   25 121   26 582   50 658   48 886  

    Details of executive directors’ share options and share appreciation rights

      Name of director Options
    granted –
    opening
    balance
      Options
    granted
    during the
    current year
      Strike
    price
      Options
    exercised
    and paid
      Options
    lapsed
      Options
    granted –
    closing
    balance
      Strike
    price
      Options
    vested –
    closing
    balance
     
      MR Upton                                
      2010                                
        400 000     30,44       400 000   30,44   300 000  
        71 000     54,81       71 000   54,81   23 430  
        100 000     50,20       100 000   50,20   33 333  
        100 000     43,07       100 000   43,07    
        166 000     28,63       166 000   28,63    
          150 484   34,09       150 484   34,09    
        837 000   150 484           987 484       356 763  
                                       
      2011                                
        400 000     30,44       400 000   30,44   400 000  
        71 000     54,81       71 000   54,81   47 333  
        100 000     50,20       100 000   50,20   66 667  
        100 000     43,07       100 000   43,07   33 333  
        166 000     28,63       166 000   28,63   55 333  
        150 484     34,09       150 484   34,09    
          138 154   27,70       138 154   27,70    
        987 484   138 154           1 125 638       602 666  
                                       
      CMF Teixeira                                
      2010                                
        25 000     24,77       25 000   24,77   25 000  
        25 000     54,81       25 000   54,81   8 250  
        25 000     50,80       25 000   50,80   8 250  
        200 000     42,84       200 000   42,84    
        72 000     28,63       72 000   28,63    
          71 740   34,09       71 740   34,09    
        347 000   71 740           418 740       41 500  
                                       
      2011                                
        25 000     24,77       25 000   24,77   25 000  
        25 000     54,81       25 000   54,81   16 667  
        25 000     50,20       25 000   50,20   16 667  
        200 000     42,84       200 000   42,84   66 667  
        72 000     28,63       72 000   28,63   24 000  
        71 740     34,09       71 740   34,09    
          66 175   27,70       66 175   27,70    
        418 740   66 175           484 915       149 001  

    Details of prescribed officers, including three highest paid members of management, share options and share appreciation rights

      Prescibed officer Options
    granted –
    opening
    balance
      Options
    granted
    during the
    current year
      Strike
    price
      Options
    exercised
    and paid
      Options
    lapsed
      Options
    granted –
    closing
    balance
      Strike
    price
      Options
    vested –
    closing
    balance
     
      Prescribed officer 1                                
      2010                                
        18 750     12,55       18 750   12,55   18 750  
        200 000     30,44       200 000   30,44   100 000  
        42 000     54,81       42 000   54,81   13 860  
        53 000     50,20       53 000   50,20   17 490  
        100 000     28,63       100 000   28,63    
          90 818   34,09       90 818   34,09    
        413 750   90 818           504 568       150 100  
                                       
      2011                                
        18 750     12,55       18 750   12,55   18 750  
        200 000     30,44       200 000   30,44   200 000  
        42 000     54,81       42 000   54,81   28 000  
        53 000     50,20       53 000   50,20   35 333  
        100 000     28,63       100 000   28,63   35 333  
        90 818     34,09       90 818   34,09    
          83 377   27,70       83 377   27,70    
        504 568   83 377           587 945       315 416  
                                       
      Prescribed officer 2                                
      2010                                
        18 750     12,55   18 750       12,55    
        400 000     30,44       400 000   30,44   300 000  
        42 000     54,81       42 000   54,81   13 860  
        53 000     50,20       53 000   50,20   17 490  
        99 000     28,63       99 000   28,63    
          89 762   34,09       89 762   34,09    
        612 750   89 762       18 750     683 762       331 350  
                                       
      2011                                
        400 000     30,44   400 000       30,44    
        42 000     54,81       42 000   54,81   28 000  
        53 000     50,20       53 000   50,20   35 333  
        99 000     28,63       99 000   28,63   33 000  
        89 762     34,09       89 762   34,09    
          82 408   27,70       82 408   27,70    
        683 762   82 408       400 000     366 170       96 333  
                                       
      Prescribed officer 3                                
      2010                                
        300 000     30,44   175 000     125 000   30,44   50 000  
        34 000     54,81       34 000   54,81   11 220  
        15 000     50,20       150 000   50,20   49 500  
        91 000     28,63       91 000   28,63    
          81 842   34,09       81 842   34,09    
        575 000   81 842       175 000     481 842       110 720  
                                       
      2011                                
        125 000     30,44       125 000   30,44   125 000  
        34 000     54,81       34 000   54,81   22 667  
        150 000     50,20       150 000   50,20   100 000  
        91 000     28,63       91 000   28,63   30 333  
        81 842     34,09       81 842   34,09    
          75 469   27,70       75 469   27,70    
        481 842   75 469           557 311       278 000  
                                       
      Prescribed officer 4                                
      2010                                
        12 500     12,55       12 500   12,55   12 500  
        25 000     24,77       25 000   24,77   25 000  
        100 000     54,81       100 000   54,81   33 000  
        39 000     50,20       39 000   50,20   12 870  
        75 000     28,63       75 000   28,63    
          72 514   34,09       72 514   34,09    
        251 500   72 514           324 014       83 370  
                                       
      2011                                
        12 500     12,55   12 500       12,55    
        25 000     24,77       25 000   24,77   25 000  
        100 000     54,81       100 000   54,81   66 667  
        39 000     50,20       39 000   50,20   26 000  
        75 000     28,63       75 000   28,63   25 000  
        72 514     34,09       72 514   34,09    
          66 889   27,70       66 889   27,70    
        324 014   66 889       12 500     378 403       142 667  
                                       
      Prescribed officer 5                                
      2010                                
        150 000     51,00       150 000   51,00   49 500  
        50 000     50,20       50 000   50,20   16 500  
        68 000     28,63       68 000   28,63    
          67 938   34,09       67 938   34,09    
        268 000   67 938           335 938       66 000  
                                       
      2011                                
        150 000     51,00       150 000   51,00   100 000  
        50 000     50,20       50 000   50,20   33 333  
        68 000     28,63       68 000   28,63   22 667  
        67 938     34,09       67 938   34,09    
          62 668   27,70       62 668   27,70    
        335 938   62 668           398 606       156 000  
                                       
      Prescribed officer 6                                
      2010                                
        37 500     18,56   37 500       18,56    
        19 000     54,81       19 000   54,81   6 270  
        100 000     50,20       100 000   50,20   33 000  
        70 000     28,63       70 000   28,63    
          63 362   34,09       63 362   34,09    
        226 500   63 362       37 500     252 362       39 270  
                                       
      2011                                
        19 000     54,81       19 000   54,81   12 667  
        100 000     50,20       100 000   50,20   66 667  
        70 000     28,63       70 000   28,63   23 333  
        63 362     34,09       63 362   34,09    
          58 170   27,70       58 170   27,70    
        252 362   58 170           310 532       102 667  
                                       
      Prescribed officer 7                                
      2010                                
        45 000     12,55       45 000       45 000  
        300 000     30,44       300 000   30,44   225 000  
        30 000     54,81       30 000   54,81   9 900  
        37 000     50,20       37 000   50,20   12 210  
        69 000     28,63       69 000   28,63    
          61 672   34,09       61 672   34,09    
        481 000   61 672           542 672       292 110  
                                       
      2011                                
        45 000     12,55       45 000   12,55   45 000  
        300 000     30,44   150 000     150 000   30,44   150 000  
        30 000     54,81       30 000   54,81   20 000  
        37 000     50,20       37 000   50,20   24 667  
        69 000     28,63       69 000   28,63   23 000  
        61 672     34,09       61 672   34,09    
          56 619   27,70       56 619   27,70    
        542 672   56 619       150 000     449 291       262 667  

    Details of share options and share appreciation rights issued to manco (excluding CEO, CFO and exco)

      Manco Options
    granted –
    opening
    balance
      Options
    granted
    during the
    current year
      Strike
    price
      Options
    exercised
    and paid
      Options
    lapsed
      Options
    granted –
    closing
    balance
      Strike
    price
      Options
    vested –
    closing
    balance
     
      2010                                
        12 500     12,55   12 500         12,55    
        50 000     12,28   10 000       40 000   12,28   40 000  
        18 750     18,56   18 750         18,56    
        18 750     20,00             20,00    
        25 000     20,25   18 750       25 000   20,25   25 000  
        262 500     24,77         162 500   24,77   162 500  
        25 000     26,39   100 000       25 000   26,39   25 000  
        75 000     31,87         75 000   31,87   37 500  
        267 000     54,81         267 000   54,81   91 410  
        377 000     50,20         377 000   50,20   124 410  
        32 300   12 089   16,03         44 389   16,03    
        100 000     33,63         100 000   33,63    
        692 000   42 505   28,63         734 505   28,63    
          625 380   34,09         625 380   34,09    
        1 955 800   679 974       160 000       2 475 774       505 820  
                                       
      2011                                
        40 000     12,28       40 000   12,28   40 000  
        75 000     20,00       75 000   20,00   75 000  
        162 500     20,25   75 000     87 500   20,25   87 500  
        350 000     24,77       350 000   24,77   350 000  
        25 000     26,39       25 000   26,39   25 000  
        75 000     31,87       75 000   31,87   75 000  
        277 000     54,81     30 000   247 000   54,81   164 667  
        377 000     50,20     42 000   355 000   50,20   223 333  
        69 389   4 147   16,03       69 389   16,03   27 159  
        100 000     33,63       100 000   33,63   33 333  
        754 505     28,63     98 000   656 505   28,63   14 168  
        714 454     34,09       714 454   34,09    
          577 766   27,70     70 755   507 011   27,70    
        3 019 848   581 913       75 000   240 755   3 281 859       1 115 160  

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