|BLUE LABEL INTEGRATED ANNUAL REPORT 2011|
Remuneration and nomination Committee
The Remuneration Committee has been delegated by the board with responsibility for determining the remuneration of the executive directors and senior managers, as well as for approving the allocation of shares under the company’s forfeitable share plan. The Remuneration Committee also acts as the Nomination Committee. Governance principles applicable to the constitution, composition and function of the Remuneration and Nomination Committee are more fully set out on page 44 of this report.
The committee also makes recommendations in respect of the fee structure for non-executive directors and the fees for members of the board committees, for approval by the shareholders once approved by the board.
The committee consists of three non-executive directors, being NN Lazarus SC (chairperson), GD Harlow and KM Ellerine. The chief executive officers and the financial director attend certain meetings of the committee by invitation but do not vote on committee decisions.
Whilst the majority of the committee members are not categorised as independent, the board is satisfied that it is made up of the board members most suitably qualified to perform the role and that the committee members act impartially and fairly in that role.
The chairperson reports to the board on the committee’s deliberations and decisions.
The committee aims to achieve a balance between shareholders’ interests and attractive and appropriate executive and senior management remuneration packages. The remuneration policy is formulated to attract, retain and motivate top-quality people in the best interests of the group. Remuneration arrangements are designed to support Blue Label’s business strategy, vision and to conform to best practices. Total rewards are set at levels that are competitive in the context of the relevant areas of responsibility and the industry in which the group operates. Total incentive-based rewards are earned through the attainment of demanding targets consistent with shareholder growth expectations.
The remuneration of executive directors and senior management is determined on a total cost-to-company basis and has three components:
Fixed remuneration is reviewed annually to ensure that the executives and senior management who contribute to the success of the group remain remunerated at appropriate levels in accordance with the remuneration philosophy. The variable pay element provided by the short-term bonus scheme is intended to enhance total pay opportunities, should that be merited by corporate and individual performance. Long-term incentives, in the form of forfeitable shares awarded under the share plan, are based on a percentage of total annualised salary packages and are intended to reward sustained long-term performance and to align the interests of the executive and senior management with those of shareholders.
The purpose of the annual performance-related bonus scheme is to reward and motivate the achievement of group and subsidiary financial targets, as well as to motivate strategic and personal performance. The joint chief executive officers may earn an annual incentive bonus of up to 120% of fixed remuneration and other executive directors up to 70%. Senior management may earn up to 50% of their annualised salary package.
In the course of its deliberations, the committee considered the view of the chief executives on the remuneration and performance of the other executive directors and members of senior management.
Independent advice on market information and remuneration trends is provided to the committee by external remuneration consultants from time to time. Blue Label’s human resources department also assists the committee by providing supporting information and documentation relating to matters presented to the committee. The company bears all the expenses relating to the appointment of external remuneration consultants and other appropriate independent professional advisers.
Blue Label applies discretion in all remuneration reviews and there is no minimum across-the-board increase to all employees.
The inflation rate considered for salary increases was 4.2% based on CPI data for April 2011. Salary increases for the forthcoming financial year ranged from 0% to 4.2% in bands of 0%, 2% and 4.2%. Management of each operating company was given the discretion to apply the appropriate increase to each staff member falling under their control within the stipulated range.
The salaries of executive management for the forthcoming year will remain at current levels in accordance with the election by executive management not to take up an increase. Executive management made the election in support of the cost cutting initiatives implemented by the group.
Details of the directors’ emoluments for the year ended 31 May 2011 appear on pages 182 to 183 of this report. King III recommends that the salaries of the top three executives, other than executive directors, should be disclosed. After due consideration of the provisions of King III, the company decided not to disclose the remuneration of these individuals due to their specialised skills, value to Blue Label and the competitive nature of these positions in the market.
It was also concluded that the disclosure in this Integrated Annual Report in respect of Prescribed Officers is adequate.
Incentive Bonus Plan
The executive directors and senior management participate in an annual incentive bonus plan, which is based on the achievement of short-term performance targets. These targets comprise financial and non-financial components. The financial performance component is based on growth in profits, as measured by headline earnings per share. The non-financial elements include the achievement of agreed transformation targets, progress in the company’s growth strategy in the countries in which it operates, the rollout of the group’s transactional footprint and the level of progress made in respect of organisational development issues and succession planning. Each of these elements carried an appropriate weighting.
For the year ended 31 May 2010 the joint chief executive officers and the chief operating officer elected not to take up their bonus allocations as they were not satisfied with the group’s financial performance. In respect of the year ended 31 May 2011 they again elected not to take up their bonus allocations. They are to be commended for leading by example.
The aggregate sum of the bonuses allocated to senior members of staff and executives amounted to R9 million.
Forfeitable Share Plan
Forfeitable shares awarded in September 2010 will vest over a period of three years commencing on 1 September 2010 and ending on 1 September 2013. The element of performance criteria will be based on group results and individual performance for the years ended May 2011 to May 2013.
The criteria for vesting comprises 25% retention, 25% non-financial indicators and group performance makes up 50% determined with reference to growth in CPI plus 15% over the three-year vesting period. Refer to note 32 of the group annual financial statements for details of performance conditions.
The forfeitable shares that were granted to executive directors during the year are as follows:
Executive Service Contracts
The three-year service contracts of the executive directors were renewed in November 2010 for a further three-year period. These contracts include a restraint of trade provision applicable for a period of 12 months from the day that the executive leaves the employ of the company of his own accord. The restraint of trade is not enforceable in the event of the employment contract not being renewed by the company or if the executive’s employment is terminated by the company.
Non-executive directors receive fees for service on the board and board committees, dependent on attendance. Non-executive directors do not receive short-term incentives nor do they participate in the forfeitable share plan of the company. The fees payable to the chairman and non-executive directors are recommended by the Remuneration and Nomination Committee to the board, which in turn proposes the fees for approval by the shareholders at the annual general meeting.
Non-executive directors may be contracted to render services to the group in addition to the aforegoing services from time to time. The remuneration for such additional services is considered by executive management and approved by the chairman of the board and thereafter submitted to the board for its approval. Details of the fees paid to each of the non-executive directors during the year under review are reflected on pages 182 to 183 of this report.
The group intends to continue to use the services of GD Harlow and NN Lazarus SC during the forthcoming 2012 financial year for the provision of legal, corporate, financial and strategic advice, and they shall continue to render those services for market-related fees. The fees shall continue to be considered by executive management, approved by the chairman of the board, who will, in turn, submit the fees to the board from time to time for approval.
The board resolved at its meeting held on 6 July 2011 that non-executive directors’ remuneration not be increased for the 2012 financial year in support of and in solidarity with the cost cutting initiatives implemented by the group. The proposed fees payable to non-executive directors are set out below:
No increase has been applied to the above listed fees and the fees are as per the fees approved by shareholders for the previous year 1 June 2010 to 31 May 2011.
|back to top ^|