REMUNERATION REPORT
The major principles of the company’s remuneration philosophy and policies are set out below together with the relevant details of the remuneration of directors, officers and executives.
EXECUTIVE REMUNERATION
The remuneration of senior management is determined by taking into consideration market comparisons and an assessment of performance related to the achievement of documented measurable performance targets. Strategic and business objectives, which are reviewed periodically, as well as a general assessment of performance, are taken into account. The remuneration structure at senior management level consists of guaranteed pay, variable pay in the form of incentive bonus schemes and long term incentives in the form of employee share incentive schemes.
Basic Salary
The cash package of senior management is subject to annual review by the Remuneration committee and the board and is set with reference to relevant external market data as well as the assessment of individual performance.
Incentive Bonus Scheme
The incentive bonus scheme is based on a combination of the achievement of pre-determined targets, and an assessment of the individual’s overall performance. These targets include measures of corporate and, where applicable, operational performance as well as the achievement of individual performance against predetermined objectives related to key business strategies and requirements.
Share Incentive Schemes
The objective of the share incentive schemes is to strengthen the alignment of shareholder and management interests and assist in the attraction, retention and appropriate reward of management.
The Share Appreciation Right Scheme 2005 (SARS), Long Term Incentive Plan 2005 (LTIP) and Deferred Bonus Plan 2005 (DBP) (collectively referred to as “the Plans”) were amended at the AGM on 27 July 2010 to ensure compliance with the Schedule 14 of the JSE Listing Requirements and, where appropriate King III. Under these share incentive schemes, senior management and employees of the company are awarded rights to receive shares in the company based on the value of these awards (after the deduction of employees’ tax) when performance conditions have been met, the awards have vested and, in the case of the SARS, when the share appreciation rights have been exercised. The amendment to the LTIP scheme also included the introduction of retention shares that may be awarded on the condition that the employee remains in the service of the company. The purpose of such awards of unconditional LTIPs is to assist with targeted key and high potential employee retention.
The accounting charges to the income statement required by IFRS 2 Share-based Payment are accounted for as equity-settled instruments. The costs associated with the settlement of awards under the share schemes qualify for a tax deduction by the company.
Details of the schemes and awards made from 2005 to 31 March 2012, after approval by the Remuneration committee and the board, are detailed in the notes to the annual financial statements. The share incentive scheme in operation prior to 2005 was discontinued in 2005, with the previous awards continuing to run their course and no new awards being made.
Performance conditions governing the vesting of the scheme instruments are set at the time of each annual award and currently relate to growth in earnings per share, total shareholder return, share price, return on capital employed, sugar production and a regulatory framework for electricity generation in South Africa, relative to targets that are intended to be challenging but achievable. Targets are linked, where applicable, to the company’s medium term business plan, over three year performance periods, with actual grants being set each year considering the job level and cash package of the participating employee, their individual performance, and appropriate benchmarks of the expected combined value of the awards. King III refers to the application of company performance conditions to govern the vesting of awards under the Plans, and precludes the application of retesting. The application of company performance conditions has been applied since the approval of the Plans. New awards thus have relevant performance conditions, do not provide for retesting, and apply the principle of graduated vesting as recommended by King III.
Other Benefits
Membership of an approved company pension fund is compulsory for all senior management and pension and life insurance benefits are provided. Other benefits constitute the provision of medical aid, gratuity at retirement and death and disability insurance.
NON-EXECUTIVE DIRECTORS’ REMUNERATION
Non-executive directors receive fees for their services as directors on the company board and board committees, on the basis of a fixed retainer fee and an attendance fee. Directors’ fees are recommended by the Remuneration committee taking into considering market data, considered by the board, and proposed to the shareholders for approval at each AGM.
As required by the Companies Act, the remuneration of non-executive directors will be authorized by special resolution at the AGM and is set out here.
Further details of remuneration, share schemes and interest in share capital
THIRD-PARTY MANAGEMENT
No part of the company’s business was managed during the year by any third party in which any director had an interest.
RELATED PARTY TRANSACTIONS
The company has a process in place whereby the directors and key management have confirmed that, to the best of their knowledge, the information disclosed in Tongaat Hulett Limited’s annual financial statements fairly represents their shareholding in the company, both beneficial and indirect, interest in share options of the company and the compensation earned from the company for the financial year. In addition, the directors and key management have confirmed that all interests have been declared.
INSIDER TRADING
No director, officer or employee may deal either directly or indirectly in the company’s shares on the basis of unpublished price-sensitive information regarding its business or a airs. In addition, no director, officer or employee may trade in the company’s shares during closed periods. Closed periods are from the end of the interim and annual reporting periods to the announcement of financial and operating results for the respective periods, and while the company is under a cautionary announcement.
GOING CONCERN ASSERTION
The directors confirm that they are satisfied that the company has adequate strategic, financial and operational resources to continue in business for the foreseeable future. The basis upon which this assessment is made is recorded at the time of approval of the annual financial statements. The Board continues to adopt the going concern basis for preparing the financial statements.
RELATIONSHIP WITH SHAREHOLDERS
The Chief Executive Officer, Chief Financial Officer and the Investor Relations and Communications Executive interface regularly with institutional investors on key strategic themes and the performance of the company, through various presentations and scheduled meetings as per the company’s investor relations programme. The current programme includes management conducting roadshows in South Africa, the United Kingdom and the United States of America, in addition to its participation in selected national and international conferences. Through the company’s website, a wide range of information is available to all shareholders and other stakeholders, including the integrated annual report, information on investor relations, and updates of the company’s activities and its many initiatives to promote stakeholder value creation and sustainability. Tongaat Hulett remains committed to principles of transparency, and copies of presentations given to the investment community are available on the company’s website. The company encourages the attendance of shareholders at AGMs and welcomes fruitful discussions and questions arising from the agenda and any additional issues of interest or concern to the shareholders.
