REPORT ON REMUNERATION

Clover’s Group Remuneration Policy (“the Remuneration Policy”) provides a consolidated overview of the board’s progressive approach to aligning the attraction and retention of key or specialised skills with optimal investor returns. The policy is compliant with employment legislation, including the Labour Relations Act and the Basic Conditions of Employment Act.

The Remuneration Committee assists with setting Clover’s Remuneration Policy and remuneration for directors and prescribed officers according to its terms of reference, which are available here.

This Report aims to provide all stakeholders with enough information to make informed decisions when casting their non-binding vote on Clover’s Remuneration Policy, as set out here in this integrated report.

As required by the Companies Act, non-executive directors’ fees for the coming year will be put to shareholders by way of a special resolution at the upcoming 2018 annual general meeting.

King IV™ Background statement

Internal and external factors that influenced remuneration

Clover’s Remuneration Policy underscores the Group’s vision of being the most admired branded consumer goods company in emerging markets by attracting and retaining the right talent. Remuneration is in direct correlation to the Group’s growth plans and financial performance of the underlying operations.

Although external, independent benchmarking and reviews are conducted bi-annually to ensure Clover remains competitive in the diverse markets in which it operates, percentiles are not applied rigidly. Industry type, skills scarcity, performance and legislative structure and requirements are some of the factors considered.

Remuneration is structured to motivate and allow for differentiation in a culture where high-performers are rewarded.

External advice to the Committee

During the year under review, the Remuneration Committee commissioned PricewaterhouseCoopers to conduct several remuneration benchmarking studies as elaborated on in the Remuneration Committee Chairman’s letter to shareholders above. The Remuneration Committee has satisfied itself of the independence and objectivity of the PWC report.

The most recent results of voting on the remuneration policy and the measures taken in response thereto

Results of voting at the 2016 and 2017 annual general meeting are indicated in the table below:

Key areas of focus and key decisions

The Remuneration Committee noted with concern the decline in votes in favour of approving the Remuneration Policy at the annual general meeting held on 28 November 2017, despite the fact that the 2017 report has not changed from the one approved by more than 99.84% of shareholders in 2016.

Engagement with all dissenting shareholders was sought by means of a telephone conference on 11 December 2017. One shareholder, holding approximately 17% of the voteable shares (on behalf of its clients) in Clover participated in the call. (This shareholder voted in favour of the Company’s Remuneration Policy at the preceding annual general meeting) The Clover Milk Producers Trust (who holds approximately 12.4% of voteable shares in Clover) voted against Clover’s Remuneration Policy was not able to partake in the telephone conference and requested to engage with the Company early in 2018.

Concerns raised by these participating shareholders relate to disclosure of the implementation of the Remuneration Policy (specifically relating to the short-term incentive scheme) and the quantum relating to the base pay of certain executives.

These concerns were formally tabled and considered at the Remuneration Committee meetings held on 14 February 2018 and 15 May 2018 respectively. In view of the independent benchmark study conducted by PricewaterhouseCoopers (referenced above in the Remuneration Committee Chairman’s letter to shareholders) the Remuneration Committee concluded that executive remuneration to be fair and reasonable and in line with the Company’s peer group.

Apart from the above, the Remuneration Committee conducted the following activities during the year:

• reviewed the remuneration packages of the executive directors and other executives;
• reviewed performance targets applicable to the short-term incentives;
• established the future performance targets applicable to the short-term incentives;
• considered management’s recommendations for non-executive directors’ fees and the fees for the board sub-committees before recommending to the board and then to shareholders for approval;
• reviewed vesting of long-term incentives; and
• reviewed salary increases for executive directors and other executives.

Delivery against objectives

In the context of historic and ongoing engagement with shareholders and the resolution of legacy issues that resulted amendments to Clover’s Remuneration Policy in 2015, the Remuneration Committee is satisfied that the current Remuneration Policy delivers against the Group’s objectives of attracting and retaining scarce or specialist skills whilst optimising shareholder returns.

Notwithstanding functionality and compliance, the Remuneration Committee reiterates that its approach to remuneration is progressive and it will continue to further enhance the balance through best practice.

Future focus areas

The Remuneration Committee, in consultation with PricewaterhouseCoopers is currently developing a new long-term incentive scheme that will replace the current SARs scheme. This scheme will be presented to shareholders for input and approval in due course.