Governance, risk and compliance, and remuneration reports
APPROACH TO EXECUTIVE REMUNERATION
In order to attract, retain, motivate and incentivise the industry's best and most suitable candidates, Clover is obliged to offer competitive remuneration packages. The Remuneration Committee utilises external market surveys and benchmarks to determine executive remuneration and benefits, as well as base and attendance fees for Non-Executive Directors. Clover's remuneration philosophy seeks to align and link both short- and long-term incentives to the achievement of business objectives and delivering an acceptable return on shareholders' equity, while ensuring Clover's sustainability. Remuneration packages are therefore linked to achieving these objectives.
Executive remuneration structures (including those of Executive Directors) comprise both guaranteed and variable components as set out below:
| Component | Type | Comprises | Objective |
|---|---|---|---|
| Guaranteed | Guaranteed Fixed Income | Base salary, benefits (car allowance, retirement and medical aid contributions). | Commensurate with scope of position, experience and level of responsibility. |
| Variable | Short-term incentive | Cash-based payments to an individual based on Group financial performance and individual performances over the preceding financial year. | Rewards individual and corporate performance. Eligible staff are those on Paterson band C1 to F. Refer to STI table (here) |
| Variable | Long-term incentive | All cash and equity based awards that accrue to and individual over time, based on the Group's financial and individual performance over a financial period. | Attract, retain and incentivise key incumbents to deliver exceptional individual and corporate performance over time, in line with shareholder interests. |
Guaranteed Fixed Income
Executive guaranteed fixed income packages are benchmarked regularly against similar positions in the market. This information, together with individual performance assessments, form the basis for annual salary reviews.
The Remuneration Committee has the discretion to determine executive guaranteed fixed income packages, being mindful of factors such as retention, contribution and skill levels. Executives may participate in a defined contribution retirement fund and other benefits. These include vehicle allowances, medical insurance, death and disability insurance, leave and recognition for service.
Variable package
Short-term Incentives (STIs)
Executives' participation in STIs are linked to the achievement of profit growth targets and personal performance measures. The complete workings of the STIs are set out in Clover's Remuneration Policy here and more specifically in the table set out here.
Long-term Incentives (LTIs)
Clover's LTIs aligned to executives comprises equity based awards that serve as a retention mechanism. Refer to the Remuneration Policy here in this report for more information on the salient features of the cash and equity measures and targets, in particular the Share Appreciation Rights Scheme (SARs), which complies with the JSE Listings Requirements.
SARs stipulates that the aggregate number of ordinary shares which may be acquired by the executives may not exceed 16 million ordinary shares. At 30 June 2016, a total of 11 202 483 (30 June 2015: 8 619 271 ordinary shares) had been issued to executives, with the balance of 4 797 517 ordinary shares remaining available for issue. The salient features of the SAR Scheme, which complies with the JSE Listings Requirements, are set out in Clover's Remuneration Policy.
Allocations made in terms of the SAR Scheme
The First and Second Allocations were Management Participated Capital Restructuring Exercise (MPCRE) legacy scheme issues. All SARs relating to the MPCRE have vested and exercised. For more detail on SARs allocated and exercised during the year under review, refer to note 32.2 in the financial statements section.
Hedging of SARs
Clover has entered into a forward contract to purchase 2 132 695 Clover Industries shares to hedge a portion of the share appreciation rights issued to management. Refer to note 14.2 of the Annual Financial Statements here for further details.
Employment contracts for executives
A six months' notice period is required for terminating the contract of employment for Executive Directors.
