Governance report
 

Remuneration committee report

 
 

The remuneration committee is responsible for the group’s remuneration philosophy, overseeing performance-based criteria and incentives for executive directors and senior executives, and recommending to the board grants made in terms of the Reunert share option schemes.

The committee is tasked with ensuring that individual awards are linked to performance and aligned with the interests of shareholders.

Composition and meetings

NDB Orleyn (chairman), SD Jagoe, TS Munday, JC van der Horst

The remuneration committee consists of at least three independent non-executive directors. The chairman of the Reunert board may not act as chairman of this committee. The committee meets at least twice a year to make recommendations to the board on compensation and conditions of service for executives, and to approve salaries and bonuses for employees who earn more than R700 000 per year. The chief executive attends meetings by invitation.

With the exception of the chairman, all members are independent non-executive directors. The board is satisfied that Thandi Orleyn is the most suitable chairman for the remuneration committee given her relevant experience. The board is confident that her non-independence, according to King III, does not impede her ability to chair the committee.

The table below records attendance at the committee’s meetings:  
    16 Nov 2010     17 Feb 2011     17 May 2011*     30 Aug 2011*     6 Sep 2011*     6 Oct 2011*     14 Nov 2011  
            Special     Special     Special     Special      
NDB Orleyn                                     
TS Munday                                     
JC van der Horst                                     
SD Jagoe                                     
* The special meetings held by the committee were convened primarily to deliberate various changes proposed by management to the remuneration philosophy and structures of Reunert.  

Remuneration activities
The committee dealt with the following matters in the year:

  • Reviewed the base salary and other compensation elements for executive directors and group executives
  • Approved the bonuses earned in respect of the 2011 financial year
  • Approved the performance measures, targets and allocation guidelines for short-term incentives for the 2012 financial year
  • Approved the performance criteria for the award of share options to executive directors and group executives in the 2012 financial year
  • Conducted a comprehensive review of the group’s remuneration philosophy
  • Approved the overall salary increases for all employees in the group.

Executive remuneration

The remuneration structure at senior management level consists of fixed pay, variable pay in the form of incentive bonus schemes, and long-term incentives in the form of employee share incentive schemes. Senior management remuneration is determined by considering market comparisons and assessing performance against pre-determined targets. Strategic and business objectives, which are reviewed periodically, as well as a general assessment of performance, are taken into account.

The remuneration committee and the board conduct an annual review of the fixed salary (cash package) earned by senior management. Packages are set with due consideration of relevant external market data and an assessment of individual experience. Diversity is also considered given the group’s commitment to transformation at senior management level.

The variable (cash incentive) component of senior executive pay, which includes executive directors, is linked to performance and capped at 140% of the fixed salary, including all cost-to-company items. The performance criteria for determining variable pay is the same for all executive directors and is set annually.

The group’s current philosophy is to pay a lower fixed salary with a higher cash-incentive component.

Incentive bonus scheme
The incentive bonus scheme is based on the achievement of pre-determined targets and an assessment of the individual’s overall performance. The targets include corporate and, where applicable, operational performance measures, as well as individual performance against pre-determined objectives related to key business strategies and requirements.

Share incentive schemes
The objective of the group’s share incentive schemes is to align shareholder and management interests, and assist in attracting, retaining and rewarding management appropriately.

Reunert currently operates a share incentive scheme in terms of which the vesting of options depends on remaining in the employ of the group. The purpose of the scheme is to assist in retaining key employees and those with high potential.

In 2012, as recommended by King III, Reunert will amend the scheme’s criteria to include the introduction of performance shares, which will vest only if certain performance conditions are met. Performance conditions will be related to the company’s medium-term business plan. Targets will include growth in earnings per share, total shareholder return and return on capital employed. The targets set will be challenging, but realistic.

Actual awards each year will be made considering the job level and cash package of the participating employee, individual performance and the combined value of the awards in relation to appropriate benchmarks.

Reunert accounts for share option awards as equity settled instruments in terms of IFRS 2 Share-based Payments. The costs associated with the settlement of awards under the share schemes do not qualify for a tax deduction.

Details of the awards made during the year, as approved by the remuneration committee and the board, are detailed in note 19.

Other benefits
Membership of an approved company pension fund is compulsory for all senior management and life insurance benefits are provided. Other benefits include the provision of medical aid.

Executive directors’ remuneration

R’000   Salary   Bonus  
and  
perfor-  
mance  
related  
payments  
Travel  
allow-  
ances  
Retire-  
ment  
contri-  
butions  
Medical  
contri-  
butions  
Leave  
payment  
Other   Sub  
total  
Gains  
options  
exercised  
  Total  
2011                        
NC Wentzel1   3 839   1 800   126   389   58   –   12 000   18 212   –     18 212  
BP Gallagher   2 159   875   –   217   24   –   –   2 400   1 120     4 395  
MC Krog2   451   300   16   35   –   –   –   502   –     802  
GJ Oosthuizen   1 805   –   108   189   23   –   –   2 125   1 130     3 255  
DJ Rawlinson   2 029   875   60   209   52   –   –   2 350   1 344     4 569  
   10 283   3 850   310   1 039   157   –   12 000   25 589   3 594     31 233  
                       
2010                        
NC Wentzel   655   500   21   65   9   –   –   1 250   –     1 250  
G Pretorius   2 828   2 887   50   313   17   3 065   7 113   16 273   –     16 273  
BP Gallagher   1 877   825   120   201   22   –   –   3 045   –     3 045  
GJ Oosthuizen   1 648   875   108   173   21   –   –   2 825   –     2 825  
DJ Rawlinson   1 799   1 175   102   191   58   –   –   3 325   –     3 325  
   8 807   6 262   401   943   127   3 065   7 113   26 718   –     26 718  
1 NC Wentzel and the company reached a mutual separation agreement on 21 September 2011, in terms of which severance benefits of R12 million were paid.
2 MC Krog was appointed to the board on 21 September 2011 and her remuneration includes that earned as a prescribed officer from 15 July 2011 as well as a director from appointment date.  

Prescribed officers’ remuneration  
  Salary  
R’000  
Bonus and  
performance  
related  
payments  
R’000  
Travel  
allow-  
ances  
R’000  
Retire-  
ment  
contri-  
butions  
R’000  
Medical  
contri-  
butions  
R’000  
Leave  
payment  
R’000  
Other  
R’000  
Sub  
total  
R’000  
Gains on  
options  
exercised  
R’000  
Total  
R’000  
2011                      
Officer A   1 031   –   80   151   34   271   1 456   3 023   6 951   9 974  
Officer B   1 506   1 728   24   143   49   –   6   3 456   1 244   4 700  
Officer C   1 226   2 200   38   120   68   –   6   3 658   –   3 658  
Officer D   1 153   1 400   60   123   58   –   6   2 800   –   2 800  
Officer E   930   1 262   120   167   70   –   –   2 549   –   2 549  
Officer F   887   1 165   111   154   36   –   –   2 353   –   2 353  
  6 733   7 755   433   858   315   271   1 474   17 839   8 195   26 034  

Top three executives’ remuneration  
King III recommends that the remuneration of the top three executives, excluding executive directors and prescribed officers, be disclosed. Due to their specialised skills and the competition for top skills in South Africa, Reunert does not wish to disclose the names of these individuals. However, their remuneration is tabled below:  
   
2011   R’ 000  
Employee A   4 903  
Employee B   2 684  
Employee C   2 573  

 

Share options of executive directors              
  Balance of  
unexercised  
share options  
as at 1 October  
2010  
Number of  
options  
granted  
during the  
year  
Number of  
options  
exercised  
during the  
year  
Balance of  
unexercised  
share options  
at 30 Sep  
2011  
Option  
price  
R  
Market  
price on  
exercising  
R  
Date of  
allocation  
Date of  
exercising  
Date from  
which  
exercisable  
BP Gallagher   50 000     (50 000)  –   41,90   64,30   29/8/2005   18/11/2010   29/8/2008  
  50 000       50 000   39,30     18/6/2009     18/6/2012  
    48 000     48 000   59,55     17/2/2011     17/2/2014  
GJ Oosthuizen   50 000     (50 000)  –   41,90   64,50   29/8/2005   25/11/2010   29/8/2008  
  50 000       50 000   39,30     18/6/2009     14/10/2011  
    42 000     42 000   59,55     17/2/2011     14/10/2011  
DJ Rawlinson   60 000     (60 000)  –   41,90   64,30   29/8/2005   18/11/2010   29/8/2008  
  50 000       50 000   39,30     18/6/2009     18/6/2012  
    47 000     47 000   59,55     17/2/2011     17/2/2014  
  310 000   137 000   (160 000)  287 000            
The share options above do not include the 200 000 share options at R59,06 and the 110 000 share options at R59,55 shares of NC Wentzel as he resigned from the board on 21 September 2011. In terms of the mutual separation agreement with the company, he had until 23 October 2011 to early exercise his options, which he did not and therefore the options were forfeited on that date.

Non-executive directors’ remuneration

Non-executive directors receive fees for their services as members of the Reunert board and committees. Directors’ fees are recommended by the remuneration committee and the board, and proposed by the chief executive to the shareholders for approval at each AGM.

As required by the Companies Act, the remuneration of non-executive directors will be authorised by special resolution at the AGM. Remuneration for the period 1 March 2011 to 28 February 2012 was approved by special resolution at a general meeting held on 1 July 2011.

The non-executive directors’ fees paid for 2011, as well as the proposed fee structure for the financial year ending
30 September 2012 are set out below:

     2011  
R’000  
  2010  
R’000  
TS Munday     643     506  
BP Connellan (retired 8 February 2011)    64     193  
YZ Cuba (appointed 1 January 2011)    206     –  
KS Fuller (retired 2 February 2010)    –     75  
SD Jagoe     377     244  
KJ Makwetla (retired 8 February 2011)    55     150  
TJ Motsohi     154     117  
KW Mzondeki (appointed 1 November 2009)    237     177  
NDB Orleyn     252     154  
SG Pretorius (appointed 22 February 2011)    181     –  
MJ Shaw (retired 2 February 2010)    –     96  
JC van der Horst     250     166  
R van Rooyen (appointed 1 November 2009)    334     198  
    2 753     2 076  


Thandi Orleyn

Chairman
14 November 2011
Sandton