The remuneration policy of the group aims to ensure that all staff are remunerated fairly and in accordance with the levels of responsibility they assume in performing their duties. In applying the policy the following factors are taken into account:
- Both mining and the marketing and selling of commodities, whether locally or internationally, are long-term businesses and certain essential skills are required to ensure the sustainability of the group’s operations through the various international commodity and economic cycles to which the group is exposed.
- The sustainability of the group’s business depends on it being able to attract and retain individuals with appropriate skills, knowledge and experience in all aspects of the group’s activities, particularly where long-term contracts are involved.
- The group’s products are sold locally and internationally and the customer base has to be managed carefully to ensure profitability and sustainability.
Determination of remuneration
The remuneration of the group executive directors is determined by the Remuneration Committee (refer below), applying the group’s policy on remuneration. The executive directors in turn determine the remuneration of the group’s employees in conjunction with the Human Resources department and the relevant departmental heads. Independent remuneration consultants are employed when considered necessary.
The levels of remuneration are benchmarked annually against remuneration paid to executives in other listed companies in the resources sector and, where appropriate, against levels of remuneration paid within the relevant professions of individual employees. The remuneration of directors and senior staff depends on the size and complexity of the operations of the group and the level of professional input required within the business environment concerned, and has due regard to the calibre, expertise and seniority of the person required for the position.
All employees are remunerated on the basis of a fixed salary and variable bonus awards. Bonus awards are made to all staff and are based on the performance of the group and the successful achievement of its long-term strategic objectives. Limited reliance is placed on the achievement of short-term performance indicators in determining group and individual levels of remuneration, with emphasis being placed rather on contribution to group effort and achievement in the long term. Bonuses are determined on the basis of the results and performance of the group for the year in question, taking into account conditions applicable in the particular commodity cycle, and are reviewed and approved by the Remuneration Committee. The impact on earnings per share for the year of the bonuses after the tax effect paid to executive directors of Assore was 21 cents (2015: 29 cents), amounting to 1,41% (2015: 2,13%) of earnings per share. The group does not operate a share incentive scheme or share option scheme for executive directors or senior staff. However, these members of staff are the beneficiaries of certain performance bonus arrangements and incentive schemes.
In order to incentivise and create value for all the group’s employees, the group operates a dividend and equity participation scheme through the Assore Employee Trust (refer “Black economic empowerment status report”), whereby non-managerial staff who do not participate in pre-existing incentive schemes or performance bonus arrangements, participate in dividends declared by Assore as well as in the growth in Assore’s share price over a predetermined vesting period. Directors and senior staff do not participate in this scheme.
Since salaries and bonuses are reviewed on an annual basis, the committee meets formally at least once a year, in addition to ad hoc meetings that may be necessary from time to time. The Chief Executive Officer attends meetings of the committee by invitation but is not entitled to vote. The committee met once in the year under review and attendance was as follows:
|EM Southey (Chair)||1||1|
The Remuneration Committee is chaired by the lead independent director and consists of a majority of independent non-executive directors. Group Chairman Desmond Sacco is appointed as a member of this committee, based on his interest as controlling shareholder of the company, which the board believes adds to the overall appropriateness of the decisions and policies of the committee. Its terms of reference have been approved by the board and are reviewed annually by the board.
Recommendations on the broad framework and cost of executive remuneration are made annually to the committee for approval. To do so, the committee is required to determine:
- the group’s general policy on executive remuneration;
- specific remuneration packages for executive directors;
- where necessary, criteria to assess the required performance of executive directors; and
- the necessity to take independent professional advice on remuneration issues.
Due to the sensitivity of individual remuneration levels, the remuneration of senior employees, other than directors, is not disclosed. However, the total cost of the remuneration of senior employees is disclosed in the consolidated financial statements (refer note 34.1), and directors’ remuneration of the holding company directors for the current and previous financial year is set out here.
None of the executive directors has signed a service agreement with the group. Accordingly, there are no contractual or financial obligations on the group in the event of premature termination of employment.
Non-executive directors are remunerated by means of annual fees, payable quarterly, which are not dependent on attendance at meetings. Fees for nonexecutive directors are reviewed regularly and are adjusted whenever necessary taking into account the remuneration of non-executive directors of companies with similar complexity profiles in the South African resources sector, and the degree of skill, time and experience required to discharge their duties.
The board acknowledges the requirements of King III for shareholders annually to pass a non-binding advisory vote on the company’s remuneration policy. Directors’ fees are approved by means of special resolution as required by section 66(9) of the Companies Act, No 71 of 2008, as amended (the Companies Act). Details of these procedures and relevant information are set out in the notice of Annual General Meeting (AGM).