Remuneration Report
Clover’s Group Remuneration Committee (‘the Remuneration Committee’) is a sub-committee of the Board and oversees the approach to and governance of remuneration matters. It also determines the remuneration of Executive DirectClover’s Group Remuneration Committee (‘the Remuneration Committee’) is a sub-committee of the Board and oversees the approach to and governance of remuneration matters. It also determines the remuneration of Executive Directors, other executives as well as the remuneration of Non-executive Directors, which is ultimately approved by shareholders.
This Remuneration Report (‘the Report’) primarily deals with the remuneration of Clover’s Executive Directors, Non- executive Directors and other executives.
Details on Remuneration Committee members, meetings and attendance are set out in the Corporate Governance section of this integrated annual report. The Group’s Remuneration Policy is set out here
Remuneration approach – executives
In order to attract, retain, motivate and incentivise the industry’s best and most suitable candidates, the Group acknowledges that it is obliged to offer nationally and internationally competitive remuneration packages.
The Remuneration Committee utilises external market surveys and benchmarks in order to determine Executive remuneration and benefits as well as the 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 the delivery of an acceptable return on shareholders’ equity whilst ensuring the sustainability of the Company. Remuneration packages are therefore linked to the achievement of these objectives.
Executive remuneration structures (including those of Executive Directors) comprise both guaranteed and variable components as set out and explained below:
| Guaranteed package | Monthly base salary and benefits such as motor vehicle allowance, retirement funding and medical aid assistance. |
|---|---|
| Variable package consist of: |
|
| Short-term incentives | All cash-based payments that are paid to an individual based on the Group’s financial performance and individual performance respectively over the preceding financial year. |
| Long-term incentives | All cash- and equity-based awards that accrue to an individual based on the Group’s financial performance individual performance respectively over a financial period. |
Guaranteed package (GP)
Executive GP is benchmarked regularly using market data for individual salary levels for similar positions in the market place. This information, together with individual performance assessments, forms the base for annual salary reviews.
Although Clover endeavours to remunerate its entire workforce at a level ranging in the median to upper quartile compared to its peers, it has no restriction on Executive GP. The Remuneration Committee has the requisite discretion to determine Executive GP and takes cognisance of factors such as retention, contribution and skill levels.
Executives are able to participate in a defined contribution retirement fund and other benefits include vehicle allowances, medical insurance, death and disability insurance, leave and recognition for service.
Variable package
The variable package consist of the:
1. short-term incentives.
2. long-term incentives.
Short-term incentives (STIs)
Executives’ participation in STIs is linked to the achievement of profit growth targets and personal performance measures.
The complete workings of the STIs is set out in the Remuneration Policy more specifically the table set out here.
Long-term incentives (LTIs)
Clover’s Management Participated Capital Restructuring Exercise (MPCRE) which was approved by shareholders on 31 May 2010, changed the nature of the Group’s preference shares from profit-sharing instruments to pure debt instruments carrying rights to a guaranteed dividend only.
This impacted on the value of the preference shares by eliminating any value upside. Consequently, an award of preference shares to Clover’s employees in terms of its preference share incentive scheme no longer incentivised employees or aligned their interests with those of ordinary shareholders.
As a result, shareholders approved the adoption of the Clover Share Appreciation Rights Plan (2010) (SAR Scheme) on 31May 2010. The SAR Scheme was subsequently amended on 4 November 2010 and 10 November 2011.
The initial allocation referred to below, formed part of the MPCRE.
Under the SAR Scheme, the aggregate number of ordinary shares which may be acquired by the Executives may not exceed 16 million ordinary shares. At 30 June 2013, a total of 3 366 722 ordinary shares have been issued to Executives, with the balance of 12 633 278 ordinary shares remaining available for issue.
The salient features of the SAR Scheme, which complies with the JSE Listings Requirements, are set out in the Remuneration Policy, which can be found here of this integrated annual report.
Allocations made in terms of the SAR Scheme
Initial Allocation (MPCRE)
Second Allocation
A second allocation of SARs under the SAR Scheme took place in lieu of bonus payments during the 2010 financial year as indicated below:
| Total number of SARs allocated |
Allocation date |
Allocation price |
Total number of SARs vested as at 30 June 2013 |
Total number of SARs exercised as at 30 June 2013 |
|
| Executive Directors | |||||
| JH Vorster | 800 000 | 18 August 2010 | R0,00 | 533 333 | 533 333 |
|---|---|---|---|---|---|
| HB Roode | 400 000 | 18 August 2010 | R0,00 | 266 667 | 266 667 |
| LJ Botha | 400 000 | 18 August 2010 | R0,00 | 266 667 | 133 333 |
| CP Lerm (Dr) | 133 336 | 18 August 2010 | R0,00 | 88 890 | 88 890 |
| Other Executives | |||||
| H Lubbe | 133 332 | 18 August 2010 | R0,00 | 88 888 | 88 888 |
| JHF Botes (Dr) | 133 332 | 18 August 2010 | R0,00 | 88 888 | 88 888 |
Third Allocation
| Number of SARs allocated |
Allocation date |
Allocation price |
|
| Executive Directors | |||
| JH Vorster | 821 256 | 1 July 2011 | R11,00 |
|---|---|---|---|
| LJ Botha | 404 063 | 1 July 2011 | R11,00 |
| CP Lerm (Dr) | 1 119 | 1 July 2011 | R11,00 |
| Other Executives | |||
| H Lubbe | 57 778 | 1 July 2011 | R11,00 |
| JHF Botes (Dr) | 330 723 | 1 July 2011 | R11,00 |
 |
Over a four-year cycle the total normalised attributable profit must exceed that of the previous four-year cycle. |
Allocation to newly appointed executives
An allocation was made to ER Bosch and MM Palmeiro who were appointed by the Group as Executives with effect from 1 June 2012 and 1 October 2012, respectively.
| Executive | Number of SARs allocated |
Allocation date |
Allocation price |
| ER Bosch | 953 620 | 1 June 2012 | R13,50 |
| MM Palmeiro | 925 500 | 1 October 2012 | R15,15 |
|---|---|---|---|
Fourth Allocation
| Number of SARs allocated |
Allocation date |
Allocation price |
|
| Executive Directors | |||
| JH Vorster | 1 036 716 | 1 July 2012 | R13,73 |
| LJ Botha | 533 657 | 1 July 2012 | R13,73 |
| CP Lerm (Dr) | 389 123 | 1 July 2012 | R13,73 |
| Other executives | |||
| H Lubbe | 389 123 | 1 July 2012 | R13,73 |
| JHF Botes (Dr) | 389 123 | 1 July 2012 | R13,73 |
|
|
|
Hedging of SARs
The Third Allocation of SARs has been hedged. Refer to note14.2 of the annual financial statements for further details.
Employment contracts for Executives
The notice period for termination of the contract of employment of Executives is six months.
Loans to Executives
As part of the MPCRE on 31 May 2010 (and on 4 November 2010 with regard to Dr JHF Botes), respectively, the Executives subscribed and shareholders of the Company approved the allotment and issue to the Executives of 9350 000 (on 31 May 2010) and 250 000 (on 4 November 2010 with regard to DrJHF Botes) ordinary shares at a subscription price of R9.34 per share, with a portion of the subscription price being lent to the Executives. However, the aforementioned allotment and issue sets out the position prior to the subdivision of shares approved on 4 November 2010.
Full details relating to the MPCRE are available on www.clover.co.za.
The salient features of the loan and cession agreements entered into between the executives and the Company are set out below:
- As security for the indebtedness, the Executives have ceded to the Company the ceded rights (defined as being all rights, title and interest in and to the proceeds) in respect of the ordinary shares (issued to them as referred to above) and the preference shares acquired through the Clover preference shares scheme in respect of the proceeds thereof (defined as being dividends, special distributions, redemption proceeds and any proceeds as a result of a disposal or sale of either the ordinary and/or preference shares referred to above, or any part thereof).
- Interest shall accrue on the outstanding balance of the loan amount at an interest rate equal to 90% of the prevailing prime interest rate charged by Absa Bank Limited.
- If an Executive leaves the employ of the Company for any reason whatsoever, he shall be obliged to repay the loan amount and interest or the balance thereof, within two months after termination of his employment.
- If an Executive dies, the loan amount and interest or the balance thereof, shall be repaid to the Company within six months after his death.
It should be noted that the aforementioned loan agreements have been amended to make provision for a final repayment date of the respective loans linked to the normal retirement date for each of the Executives.
The table below reflects the outstanding balances of the loans on 30 June 2011, 30 June 2012 and 30 June 2013 respectively:
| Loan | |||
| Executive Director/Other Executives | 30 June 2011 | 30 June 2012 | 30 June 2013 |
| Executive Directors | |||
| JH Vorster | R26 509 496 | R25 822 256 | R25 537 461 |
|---|---|---|---|
| HB Roode | R19 176 720 | R11 620 942 | Nil |
| CP Lerm (Dr) | R12 037 292 | R11 717 994 | R6 773 944 |
| LJ Botha | R5 635 941 | R5 330 249 | Nil |
| Other executives | |||
| H Lubbe | R1 000 606 | R929 989 | Nil |
| JHF Botes (Dr) | R2 411 574 | R2 452 661 | R2 536 148 |
| Total | R66 771 629 | R57 874 091 | R34 847 553 |
Remuneration approach for Non-executive Directors
It is the Group’s policy to identify, attract and retain Non-executive Directors who can add significant value to Clover. For this reason, non-executive fees are competitive and in the upper quartile. Attendance fees are only paid for actual committee meetings attended.
The Chairman of the Board, Werner Büchner, and the Lead Independent Director, Tom Wixley will not receive additional remuneration should they serve on any sub-committee of the Board, since they receive a fixed annual fee.
The fees payable to Non-executive Directors for the 2014 financial year will be proposed for consideration and approval at the 2013 Annual General Meeting.
Total remuneration and benefits payable to Directors and prescribed officers
The Board considered the requirements of the Companies Act with regard to the disclosure of the remuneration of Directors and prescribed officers. After careful consideration it was concluded that all members of the Executive Committee are deemed to be prescribed officers.
A complete table setting out the total remuneration of directors and prescribe officer can be found in note 33.1 to the Annual Financial Statements.
Interest of Directors and other Executives of the company in ordinary share capital
A complete table setting out the interest of directors and prescribed officers of the Company in the ordinary share capital can be found in note 33.3 to the Annual Financial Statements of this Integrated Report.
Dr Steve Booysen