Page 92 - Capricorn IAR 2020

RISK REPORT REMUNERATION REPORT
REMUNERATION REPORT
BOARD SUSTAINABILITY AND ETHICS REPORT
This report reflects our continuing journey towards the full application of remuneration disclosures as required by King IVTM.
Part one: Background statement
Introduction
This report reflects our continuing journey towards the full application of remuneration disclosures as required by King IVTM. We are committed to remuneration that contributes to the four outcomes, which are ethical culture, good performance, effective control and legitimacy, and will continue to align our practices and enhance our disclosure accordingly. In particular, we have implemented the following enhancements this year:
• The performance development process was automated and we moved from a numeric rating scale to descriptors. Consistency checks were embedded and individual ratings are now used in the calculation of remuneration elements. Performance development indicators align to the strategic choices and were translated into individual performance objectives.
• A detailed market comparison was done using Remchannel, managed by PricewaterhouseCoopers (“PwC”) in Namibia, South Africa and Botswana, and by Mercer in Zambia. This ensured a solid understanding of our market position based on detailed roles.
• The principles around short-term incentive (“STI”) participation ratios were revised to ensure that the differentiation between job levels are market related. A further enhancement was made to ensure that STI quantum takes Group and business unit performance into consideration.
• A review was done on the long-term incentive (“LTI”) instruments to ensure that it aligns to the Group strategy, performance objectives and retention of key talent.
Our approach
This report sets out the Capricorn Group Remuneration Philosophy and Policy (“the policy”) and its implementation during the 2020 financial year. The policy has been consistently applied in all entities and markets except Zambia, due to the significantly different market remuneration structure.
We continue to ensure that our remuneration practices and policy adhere to global best practice and align executive interest strongly to those of our shareholders. PwC and Bowmans, whom the Group board remuneration committee (“Remco”) considers to be independent and objective, annually reviews and advises Capricorn Group on remuneration. Remuneration principles are applied across the Group and for country specific elements we do benchmarking within each of the countries.
We focused on setting performance conditions for the LTIs and, consistent with the previous year, we disclose the performance conditions in this report. We are confident that the targets we have set for our performance conditions will stretch management, requiring strong company performance to unlock rewards for participants. The Remco also considers the qualitative measures associated with the strategies of the various entities as part of the overall performance conditions.
We continue to strive for appropriate transparency and again present a three-part report. The three-part report contains the background and context to our remuneration approach and governance in part one, our forward-looking Remuneration Policy in part two and the
implementation of our policy for the year under review in part three. This allows shareholders to observe the way our stated policy translates into actual outcomes for senior management and executives.
The impact of COVID-19 is covered in detail in the Group CEO’s report from page 23 and the financial director’s review from page 31.
The impact of the pandemic resulted in a rethink at several levels with regard to remuneration and underlying principles. We are reviewing
a number of remuneration matters – benchmarking is an example
– and this will require a reframing of our position on total reward. Key to delivering on the strategic choices of the Group will be to ensure the health and safety of all our employees, retaining key talent, protecting jobs and reviewing the business model to ensure that its sustainable. Our performance development practices and in turn our Remuneration Philosophy will incorporate these elements in future.
The Remco is comfortable that the policy achieved its objectives.
Governance of remuneration
Remuneration is governed by the Remco. Details about the committee’s roles and responsibilities are available in the governance report from page 55. Executive directors attend committee meetings by invitation but are requested to recuse themselves when matters concerning them are discussed.
The Remco confirms that it has discharged the functions and complied with its terms of reference for the year ended 30 June 2020.
The key activities and recommendations of the Remco regarding remuneration during 2020 included the following:
• Benchmarking of executive directors’ and executive management’s total reward using the annual PwC survey that primarily covers JSE-listed entities with the regional view as a subset
• Benchmarking of non-executive directors’ (“NED”) fees and the approval of fees for recommendation to the board and shareholders
• Consideration of the outcome of the annual performance assessment of the committee
• Consideration of annual total guaranteed pay increases
• Consideration of the impact of COVID-19 on STI allocations
• Approval of STI and LTI allocations to management
Future focus areas for the committee include a review of the Remuneration Policy in August 2020 as well as:
• Ensuring the alignment of performance and remuneration given the impact of COVID-19. This includes reviewing the measures and weighting of financial vs other performance development objectives.
• Consider bringing in COVID-19 agility as this will be with us for the foreseeable future.
• Emphasising total reward vs focusing on increases, bonus and LTIs as separate elements.
• Emphasising the link between company performance, business unit performance and individual performance.
• Consider structuring the STIs to pay out in tranches based on mid-year and year-end financial results. This will drive motivation and retention. It will further ensure that we take the external impact of an event such as COVID-19 into consideration.
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