Aligned with shareholders’ expectations, Nampak’s remuneration is designed to facilitate delivery of the group’s strategy.
Report from the remuneration committee chairman
This year we have followed the same approach as we did last year in presenting a shortened version of our remuneration report within the integrated report, with the full, detailed report available online .
Within this report, we have provided a summary of the remuneration policy in the form of a detailed elements table, which sets out our policy regarding the different elements of executive and prescribed officer remuneration, including applicable performance conditions and targets, the target levels of pay and the maximum opportunity. To illustrate what remuneration is payable in different performance scenarios, remuneration mix graphs are provided which indicate the levels of pay at threshold and stretch performance.
How did we perform in 2016?
Modest salary increases to guaranteed packages were approved in lie with company performance which amounted to increases of 3.7% for the executive directors and prescribed officers, compared to an average of 7.7% for the rest of the company.
Short-term incentive (STI)
The STI bonuses payable during the year reflect the decline in headline earnings per share, which was negatively impacted by the lack of liquidity in Nigeria and the significant currency movements against the US dollar. The emoluments table sets out the actual STI bonuses and LTI outcomes for the year under review, and more detail can be found in the full remuneration report. Details of the individual key performance indicators and achievement against these indicators are included here.
Long-term incentives (LTI)
The remuneration committee reviewed performance against the LTI targets at 30 September 2016 which will result in only partial awards vesting to executive directors and prescribed officers in December 2016.
No vesting will take place for the December 2013 allocations in respect of the Performance Share Plan (PSP) and Share Appreciation Plan (SAP) for two of the three performance elements namely for the headline earnings per share and total shareholder return performance targets. The third element of the PSP linked namely the return on equity target was exceeded and therefore the award will vest for this component in December 2016. This will constitute 30% of the PSP award. Shares purchased by participants in the DBP in December 2013, as a result of STI bonus payments earned for the financial performance in 2013, will receive the matching award in December 2016.
Proposed change for 2017
STI performance target for operational executives
The financial target for operational executives for 2016 was based on trading income. In order to ensure that the operations consider the implications of unnecessary expenditure and yet retain their line of sight on trading performance, the remuneration committee has approved a change to the financial performance target for 2017. The operational executive targets will be based on EBITDA adjusted for interest.
LTI performance target for the Performance Share Plan allocations
The financial performance conditions linked to the PSP, where the bulk of awards are made to the executive directors, prescribed officers and divisional managing directors require a real growth in headline earnings per share and a cumulative growth in total shareholder return for 70% of the awards. Up until 2016, 30% of the share awards vested against achievement of performance against return on equity targets.
The remuneration committee has approved a change to the return on equity performance targets for the December 2016 allocations and to replace this target with return on net asset targets. Equity positions can move significantly as a result of events which are outside the control of management and therefore share awards may vest or not vest based on external factors, whereas return on net assets is directly aligned with company performance.
We continue to engage with shareholders and welcome their inputs and contributions towards the remuneration philosophy and implementation.
In terms of King III and best practise principles the full remuneration policy as contained in the full remuneration report, published online, will be put to a non-binding shareholders’ vote at the annual general meeting of shareholders .
Chairman of the remuneration committee
21 November 2016
During the year, the remuneration committee (the committee) performed the following activities:
- reviewed the remuneration structure after considering advice from external advisers (PwC) to ensure that it remains appropriate in terms of current best market practice
- reviewed the guaranteed packages of the executive directors, group executive and divisional managing directors
- reviewed performance targets applicable to the short and long-term incentives
- established the future performance targets applicable to the short and long-term incentives
- considered management’s recommendations for non-executive directors’ fees and the fees for the board sub-committees before recommending to the board and then to shareholders for approval
- reviewed vesting of long-term incentives
- reviewed salary increases for all employees
Further details of committee membership and attendance can be found here
Our remuneration philosophy remains unchanged from previous years, and continues to balance the delivery of financial and non-financial measures that underpin the group’s strategy. It supports the attraction and retention of high calibre, experienced individuals who are able to deliver under challenging conditions.
How do we pay?
The balance of remuneration is more heavily weighted to at-risk pay elements linked to financial and
non-financial performance criteria.
More at-risk pay aligns behaviours of the individuals and teams to deliver value in line with shareholder expectations.
Generally set below the median for the executive directors and group executive committee members as well as the divisional managing directors.
Structured to encourage superior growth in earnings, divisional trading performance after deducting interest charges , divisional inventory management, employment equity and return on net assets (RONA) through the achievement of challenging performance criteria that are designed to align longer-term remuneration directly to growth in shareholder wealth. Individual performance indicators are linked to cash awards to ensure that initiatives that drive long-term sustainability are implemented.