Corporate Governance

Report on Remuneration

The Board of Directors of Clover Industries Limited acknowledges the need for a board charter as recommended in the Code of Governance Principles for South Africa (“King III”). This Charter is subject to the provisions of the Companies Act no 71 of 2008.

Clover's Group Remuneration Policy (the “Remuneration Policy”) is aimed at attracting and retaining key, specialist skills in order to generate a return on investment for shareholders that is sustainable in the long term.

Our approach to remuneration: structure follows strategy


Clover’s business strategy, as set by the board, informs the Group’s executive remuneration policy. The endgoal is to achieve the Group’s growth objectives by retaining skilled, key talent and attracting new talent to deliver on these growth objectives.

The executive remuneration policy is based on the principles of the Company and individual performance driven remuneration which is fair and reasonable for shareholders and aligned to shareholder value creation.

Despite regulation, industry benchmarking and stakeholder engagement initiatives, finding a balance between attracting the right calibre leadership to evolve the business and appropriately incentivising them is very difficult.

Managing for long-term growth

Following market feedback some time ago, we engaged extensively with our major shareholders and subsequently appointed PricewaterhouseCoopers (PWC) over a 24-month period to review and benchmark executive emoluments. The board has assurance that the Group’s remuneration policy strongly aligns the interests of management with those of shareholders and intends to maintain its focus on balancing the Group’s longterm growth objectives with generating a sustainable, healthy return on investment for shareholders.

In the previous financial year, following the outcome of the PWC benchmarking exercise, we introduced certain new financial performance measures discussed later on in this report relating to the long-term incentive plan applicable to Executives.

Profit share bonuses in a record year

The 2015 financial year will enter the record books as Clover’s best performance in its 117 year history. I therefore believe it only to be fair to compensate management for a record performance in line with this policy.

As part of the Company’s short-term incentive plans (or STI plans) management qualifies for profit share bonuses once a pre-set profit target is reached or exceeded.

Participation in these profit share bonuses vary according to employment grade and level of seniority within the Company. (Refer to Remuneration mix: annual shortterm incentive component on page 65 of this report for further information.)

It should be noted that short-term incentives are selffunded since all bonuses are budgeted for in full before the profit target is approved by the Remuneration Committee annually. The final profit figure is confirmed by the Remuneration Committee and approved by the Board following completion of the annual audit and is not necessarily linked to the budget approved by the Board.

Group profitability is the biggest factor when determining short-term incentives and for this reason profit share bonuses payable to qualifying individuals for the year under review increased considerably on those for the prior year. (Reflected in Administrative Expenses in the Consolidated Statement of Comprehensive Income on page 140 of this report).

It must be that noted that in the prior year, results were below par due to external factors including a national raw milk shortage and no profit share bonuses were paid to the Company’s management.

Vesting of legacy share appreciation right scheme

The bulk of share appreciation rights (SARS) that vested during the year under review relate to legacy allocations.

For the benefit of those new to the Company, the capital restructuring of the Group was approved by shareholders on 31 May 2010 and changed the nature of the preference shares from profit sharing instruments to pure debt instruments carrying a right to guaranteed dividends only.

This affected the value of the preference shares by eliminating any value upside. Accordingly, an award of preference shares to employees of the Group in terms of Clover’s preference share incentive scheme at the time no longer incentivised those employees or aligned their interests with the interests of ordinary shareholders.

As a result, on 31 May 2010 (which was subsequently amended on 4 November 2010) the shareholders of the Company approved the adoption of the Clover Share Appreciation Rights Plan (2010) (“SAR Scheme”).

A subsequent Second Allocation of Share Appreciation Rights was made in lieu of bonuses payable to the executives relating to the disposal of Clover’s 45% shareholding in Danone Clover (Proprietary) Limited (refer note 31 to the annual financial statements on page 210 of this report).

This legacy 2010 SAR Scheme and Second Allocation of Share Appreciation Rights vested in full during the reporting year.


Consumers and producers remain under pressure in a low-growth economy, upwards inflationary pressure and expected incremental increases in interest rates. It is our opinion as a committee and the board that the Group’s remuneration policy should continue to incentivise innovative thinking and initiatives that benefit Clover and shareholders sustainably.