Remuneration and performance

Mark Bowman Chairman Remuneration committee

Mark Bowman

Chairman

Remuneration committee

   

Section 1: Background statement

Statement from the chairman of the remuneration committee

Dear stakeholder

On behalf of the remuneration committee (the committee), I am pleased to present the 2020 remuneration report which, in compliance with best practice reporting as recommended by the King IV™* Report on Corporate Governance for South Africa (King IV™ Code for Corporate Governance), highlights:

  • Key components of our remuneration policy
  • Alignment of our remuneration policy with the Tiger Brands’ business strategy and priorities
  • Implementation of the policy for the year ending 30 September 2020 (FY20).

During the period under review, the Tiger Brands Executive Leadership Team once again focused its efforts on ramping up the execution of four strategic priorities to enhance the company’s ability to proactively navigate the prevailing market conditions:

1. Drive Growth: In response to the challenging trading conditions and the Covid-19 pandemic, we executed a fit-for-purpose category, channel and customer strategy.
2. Be Efficient: Accelerated measures to deliver cost efficiency and improve our supply chain.
3. Great People: Continued to execute our people strategy and culture transformation to instil a winning mindset in our people and create a great place to work.
4. Sustainable Future: Progressed the implementation of the company’s sustainability strategy with a particular focus on health and nutrition, enhanced livelihoods and environmental stewardship.

As can be expected, the execution of our business priorities and business results were significantly impacted by the Covid-19 pandemic, which warranted a review and re-prioritisation in some instances of our focus areas at our various operations. An executive leadership task team was established to proactively address the impact of the pandemic on our business, people, consumers and communities in which we operate. To demonstrate leadership from the top, members of our board and executive leadership team voluntarily sacrificed up to 30% of their salaries and fees for three months, raising R3,5 million to support our community initiatives. Further, we implemented a special incentive to motivate and reward our frontline employees who continued to work during the first month of lockdown in South Africa.

* Copyright and trademarks are owned by the Institute of Directors in South Africa NPC and all of its rights are reserved.

During the period under review, enhancements were made to the remuneration strategy to improve alignment of critical business key performance indicators (KPIs) to measure and reward performance against our strategy. As such, the remuneration committee approved the implementation of a revised short-term incentive (STI) scorecard that drives the achievement of key performance indicators as well as maintains a balance between the focus on financial, strategic and sustainability measures. The STI group and business unit weightings were also revised to increase focus on delivery of results at the category team level. Further amendments were also made to the group and business unit scorecards, thereby improving line of sight for employees in the frontline of our business.

These changes to the short-term incentive structure further align to our reward framework, which follows a “total reward” approach, consisting of guaranteed pay and variable pay, a range of market relevant benefits and professional growth opportunities that recognise individual and team performance. This holistic approach enables us to attract, motivate and retain talented high-performing people (see further details below).

Shareholder voting outcomes

In line with our commitment to remunerate our people in a fair and equitable manner, we maintain strong relationships with stakeholders, and strive towards high standards of disclosure of our remuneration approach to ensure that there is a clear understanding of our remuneration policy and the practices that have been implemented.

The non-binding advisory votes by shareholders at the 2020 and 2019 annual general meetings (AGM) are summarised as follows:

% vote in favour February
2020
February
2019
Remuneration policy 76,55% 76.33%
Remuneration implementation 78,71% 99,42%
Non-executive directors’ fees 99,01% 97,45%

The following common themes were highlighted by shareholders in 2020:

Shareholder feedback   Remuneration committee action/response

The premium paid to non-resident non-executive directors in terms of fees is deemed excessive

 

Considering the need to have a team of non-executive directors who are both commercially and technically astute, as well as to ensure diversity and independence in strategic decision making, we have appointed an appropriate number of non-resident non-executive directors to our board. Market benchmarking indicates that the current 130% premium is below the market median for non-resident non-executive directors. Generally, market practice for non-resident non-executive directors’ fees is typically between two and three times the fees paid to SA non-executive directors. This has once again been contextualised in the FY20 remuneration report in the outcome of the market survey.

Specific STI targets are not disclosed   We will endeavour to enhance STI target disclosure.

Shareholder engagement

The remuneration committee is committed to shareholder engagement and will take the following steps, if 25% or more of total votes exercised by shareholders at the upcoming AGM are against the remuneration policy or implementation report:

Remuneration committee objectives and activities for FY20

In FY20 the committee undertook the following activities:

Focus areas for FY21

The committee is committed to remaining up to date with the latest remuneration market trends and best practice, business needs, as well as our responsibilities to Tiger Brands’ people, shareholders and communities to ensure that our remuneration practices enable and support the delivery of the business strategy.

Key focus areas will include:

External advice provided to the committee in FY20

In reviewing our remuneration offering to ensure that it is competitive, fair, transparent and responsible, we enlisted the services of PwC South Africa to assist us with design, market practice and survey data. The committee is satisfied that PwC South Africa is independent.

Voting at AGM

As required by the King IV Code on Corporate Governance, the remuneration policy and implementation report which follow, will be tabled for separate non-binding advisory votes by shareholders at the upcoming AGM in February 2021. 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. We encourage all shareholders to provide feedback on their position on the various voting requirements. We are committed to engaging with shareholders as required to discuss issues of concern.

On behalf of the committee, I am confident that our remuneration policy has achieved the desired outcomes for FY20 and is aligned with the company’s strategic goals.

Mark Bowman
Chairman – Remuneration committee

10 November 2020

Section 2: Overview of remuneration policy

Tiger Brands’ people strategy

The remuneration strategy is aligned to the Tiger Brands’ people strategy, which is geared to enable the execution of the business strategy and accelerate business performance. The people strategy is comprised of three pillars: TALENT, LEADERSHIP and GREAT PLACE TO WORK underpinned by the foundation of EXECUTION EXCELLENCE.

Our remuneration principles have been designed to support the execution of the people strategy, and are premised on our belief that great people and great brands are at the core of our success. Our reward framework is holistic, encompassing the monetary elements of reward, as well as non-financial aspects such as growth, development, the work environment and culture.

Rem Framework

The following are the key objectives of our remuneration policy:

The following tables summarise the various remuneration elements (guaranteed package, short-term incentive and long-term incentive) that Tiger Brands offers at different levels of employment:

Guaranteed package (excluding bargaining unit employees)

Description

Guaranteed package (GP) offered to people on a total remuneration package (TRP) comprises base pay, allowances, retirement and medical benefits. It is reviewed annually based on personal performance (KPIs linked to individual performance agreements (IPA) for each TRP employee which is agreed to at the commencement of every year), business performance (linked to budget), behaviours aligned with the company values and market competitiveness (national and sector benchmarks).

Benchmarks

Benchmarking for executive directors is based on a peer group of companies and is reviewed on a bi-annual basis. The peer group is determined using the closeness metric formula, based on:

Companies included in the peer group comprise:

Factor   Executive directors           Rest of exco, senior management and below
Survey type  

Bespoke survey

Public data of South African companies listed on the JSE, based on the closeness metric is used to determine an appropriate peer group

  Exco – Mercer executive survey Remchannel survey – senior management and below
Comparator group*   Aspen Pharmacare Ltd
AVI Ltd
Clicks Group Ltd
Distell Group Ltd
  Imperial Holdings Ltd
Massmart Holdings Ltd
Mr Price Group Ltd
Pick n Pay Stores Ltd
  Pioneer Foods Ltd#
RCL Foods Ltd
The Spar Group Ltd
Woolworths Holdings Ltd
  National and consumer goods circles
* From FY20 the comparator group for executive directors and non-executive directors’ remuneration benchmarking has been merged.
# Although Pioneer Foods delisted, the company was included in the current period benchmarking as the data was still relevant. However, it will be excluded in future.
Anchor point  

Tiger Brands has anchored its current pay position at the 65th percentile of the national market. We aspire to achieve a normal distribution around the anchor point based on individual performance, talent/potential, experience and in certain instances, tenure. It is important to note that guaranteed packages are not automatically adjusted to the anchor point. The performance-based increases granted in the organisation (including those for executive directors and executive committee members) are managed within the overall salary increase budget and the pay progression model as discussed below.

Benefits  

Benefits include retirement fund contributions, funeral cover, permanent health insurance, death-in-service cover, medical aid contributions and travel allowances (where applicable).

Pay progression model  

The intention of the pay progression model is to competitively reward performance and to actively align our remuneration to the market. The pay progression model will, gradually over time and within the confines of our salary increase budget, correct the guaranteed packages for high-performing people to align them closer to the market. The model considers the employee’s salary positioning in relation to the pay scale as well as performance when granting an increase, while ensuring that the company remains within the overall salary budget.

Short-term incentive

Description and link to strategy

The operating model for Tiger Brands enables us to maximise the potential of our people in line with our business goals. To ensure that our reward approach is aligned with our operating model, we have revised and simplified the STI scheme to align the contributions of all our people to a One Team Tiger bottom line, thereby creating greater potential for reward across the board. The STI scheme is summarised below.

The primary intention of the STI is to improve business performance by focusing participants’ attention on annual key financial, strategic, functional and personal performance objectives (KPIs based on a balanced scorecard), which are aligned with the long-term business strategy for sustainable value creation. This drives high performance by explicitly creating line of sight in linking group, business unit and individual performance.

Payment of an STI is subject to the overriding condition that the group/business unit meets or exceeds the agreed entry threshold in respect of its earnings before interest and tax (EBIT).

Calculation

STI = Annual guaranteed package X on target % X {group performance factor (0 to 200%) + business unit performance factor (0 to 200%) + individual performance factor (0 to 200%)}.

Pre-determined weightings will be applied to each of the performance factors. In respect of the Individual Performance Factor, participants will be rated on a rating scale ranging from 1 (poor performer) to 5 (exceptional performer).

Target and maximum

In FY20 the following ranges of STI awards applied to the various categories of people covered by this report:

  On-target
percentage of
guaranteed
package
Maximum
of on-target
percentage
CEO, CFO and executive directors 60 200
Executive committee members 50 200
Other participants (Paterson grades CU to E band) 8,5 to 30 200

Group and business unit performance factors

The underlying values and weightings for each KPI are set and approved by the remuneration committee in advance of each year to determine parameters for the STI in the form of a balanced scorecard. Below is the group STI scorecard for FY20 that applied to the CEO, CFO, executive directors, executive committee members and other participants:

Strategic objective Strategic
objective
weighting
  Key performance indicator Key
performance
indicator
weighting
Threshold
score = 50%
On-target
score = 100%
Stretch
score = 200%
Growth*’ ** 65%   Sales volume growth 7,5% 90% 100% 110%
      Brand health 7,5% 97% 100% 103%
      Absolute gross margin 10% 95% 100% 105%
      EBIT 40% 95% 100% 105%
Efficiency*’ ** 15%   Cost savings initiatives 10% 90% 100% 110%
      Net working capital 5% 105% 100% 95%
People and sustainability* 20%   Quality 10% Reduction in execution-related marketplace
incidents year-on-year by
          10% 15% 20%
      Safety (LTIFR) 5% Reduction in lost time injuries year-on-year by
          10% 15% 20%
      EE – ACI Opportunity Utilisation 5% 50% 70% 90%
* The actual targets have not been provided as they are linked to budget and considered commercially sensitive information.
* For the key performance indicators within the growth and efficiency strategic objectives, the targeted percentages for “threshold”, “on-target” and “stretch” as set out above per key performance indicator represent the targeted percentage achievement of the underlying budgeted amounts.

The group, business unit and individual performance weightings applicable to the various employee categories are detailed below:

Employee category Group Business unit Individual
CEO, CFO and executive directors 80% 0% 20%
Executive committee members 80% 0% 20%
Other participants (Paterson grades CU to E band) 10% to 40% 40% to 70% 20%

Changes for FY21

In order to further align our STI on target percentages with market practice and to motivate winning performance through our categories delivering on our business objectives, the following changes will be applicable from FY21 onwards:

  On-target
percentage of
guaranteed
package
Maximum
of on-target
percentage
Executive committee members 60 200
Other participants (Paterson grades CU to E band) 8,5 to 50 200

The following group, business unit and individual performance weightings will be applicable to the various employee categories:

Employee category Group Business unit Individual
CEO, CFO and executive directors 80% 0% 20%
Executive committee members 80% 0% 20%
Other participants (Paterson grades CU to E band) 0% to 40% 40% to 80% 20%

Long-term incentive – Management (Paterson grade D and above)

Description

We have aligned our LTI to our reward approach and operating model, taking into consideration the following principles:

In FY20, we awarded performance shares to executive directors, executive committee members, senior management and middle management. Grants of specific retention shares were made to selected senior management and key people whose contribution has been identified as being critical to achieving our business strategy.

The table below provides further details regarding the performance and restricted shares:

Instrument   Performance shares       Restricted shares    
    Employee category   Performance shares multiple   Employee category   Restricted shares multiple
Award mechanism   CEO   81,3%   CEO  
  CFO   81,3%   CFO  
  Executive committee members   61,0%   Executive committee members  
  Senior management and below   10,6% – 27,7%   Senior management and below   14,5% – 16,3%
Calculation  
  • (GP x performance share multiple/share price) x performance multiplier
 
  • (GP x restricted share multiple/share price) x performance multiplier
Performance multiplier  
  • The personal performance multiplier is used to modify the standard quantum of performance shares and restricted shares, based on an individual’s personal sustained performance and potential
  • This is a discretionary percentage ranging from 0% to 200%
Vesting  
  • Three-year vesting based on anniversary of award
 
  • Three-year time-based vesting based on anniversary of grant
Performance conditions
applicable to performance shares
 

HEPS growth (weighted at 50%):

  • 0 – less than CPI + GDP
  • 25% vesting (threshold) – CPI + GDP
  • 100% vesting – CPI + GDP +2%
  • 200% vesting (stretch) – CPI + GDP +4%

The HEPS calculation is performed on an annual compound basis over the three-year vesting period

Linear vesting to apply between threshold and stretch

ROIC – (weighted at 50%):

  • 0 – less than WACC +1%
  • 25% vesting (threshold) – WACC +1%
  • 100% vesting – WACC +2%
  • 200% vesting (stretch) – WACC +5% and above

The measurement will be the average ROIC over the three-year vesting period

Linear vesting to apply between threshold and stretch

Share price  
  • Based on the volume-weighted average price (VWAP) for a Tiger Brands share calculated for the 10-trading day period ending immediately prior to the date of award/grant

Historical LTI information

The original Tiger Brands 2013 Share Plan (LTIP) comprised the following instruments:

The allocations of SARs were subject to performance vesting criteria. Apart from a 5% vesting of the third tranche of SARs allocated in FY14, all the tranches of SARs allocated in subsequent financial years that would have vested in FY19 have been forfeited due to performance criteria not having been met. This trend was identified in FY19 as an area of concern to the company as the mechanism was ineffective in providing key people with a vested interest in the company.

In mitigation of this risk, the allocation of SARs was discontinued (the last allocations of SARs were made in June 2019) and, as set out above the company commenced with the award of performance shares, (i.e. full value shares that are subject to performance conditions), and the grant of restricted shares with effect from FY20.

The practice of granting restricted shares in the form of “bonus-matching shares” (which were linked directly to the achievement of an STI in the previous financial year) was also discontinued as from FY20. In addition, the voluntary deferral of a portion (25%, 33% or 50%) of participants’ STI awards into restricted shares (“deferred bonus shares”) which were matched by the company on a 1:1 basis in the form of “company-matching shares” was also discontinued (due to shareholders raising best practice concerns and an historical low uptake from participants). All previous grants of bonus-matching shares, deferred bonus shares and company-matching shares will continue to vest in accordance with the rules of the LTIP.

Below is a description of the share instruments no longer utilised.

Share appreciation rights

The last grant of share appreciation rights was made on 5 June 2019. The vesting and performance conditions of the share appreciation rights are set out hereunder.

Vesting

Vesting is time-based according to the following pattern:

    Year from allocation date  
  0 1 2 3 4 5
Vesting       1/3 1/3 1/3

Performance metrics

The allocations of SARs during the 2019 financial year are subject to the performance criteria as set out in the table below:

Metric   Measurement   Weight   Metric
HEPS growth (real)   Compound annual growth   50%  

Full vesting: HEPS = > CPI + rate of growth in GDP (measured on an annual compound basis over the applicable period)
Pro rata vesting on a linear scale: HEPS growth > CPI but below CPI + GDP rate. No vesting if HEPS < = CPI

ROIC   Average ROIC measured over three, four and five years for each one-third tranche   50%  

ROIC < WACC +1%     No vesting
ROIC = WACC +1%     25% vesting
ROIC > WACC +1%     Pro rata vesting on a linear scale
but < WACC +2%
ROIC => WACC +2%    100% vesting

HEPS: Headline earnings per share.
ROIC: Return on invested capital (after tax).

For SARs allocated in December 2016, September 2017 and December 2017, the performance vesting condition is as follows:

Metric Weight 0% vesting Maximum 100% vesting
HEPS 100% CPI and below CPI +GDP

Pro rata vesting on a linear scale of HEPS growth >CPI but below CPI + GDP rate. Further vesting condition: Average annual return on capital over the relevant performance period must exceed the company’s weighted average cost of capital (WACC).

SARs allocated before December 2016

The SARs performance vesting conditions for previous allocations are based on a targeted rate of 3% per annum real growth in HEPS over three, four and five-year periods. Percentage threshold levels for real HEPS growth and the corresponding percentage of the allocation to vest are as follows:

HEPS growth (real) Vesting outcome
>0% and <0,5% 5%
≥ 0,5% and <1,0% 10%
≥1,0% and <1,5% 16%
≥1,5% and <2,0% 27%
≥2,0% and <2,5% 44%
≥2,5% and <3,0% 75%
≥3,0% 100%

Bonus-matching shares

The last grant of bonus-matching shares was made in December 2018.

Vesting

Vesting takes place on the third anniversary of the date of grant:

    Year from grant date  
  0 1 2 3 4 5
Vesting       100%    

Performance metrics

There are no further performance conditions to determine vesting, which is therefore time-based.

Deferred bonus shares and company-matching shares

Previously the CEO, CFO, executive directors and members of the executive team could voluntarily defer a portion (25%, 33% or 50%) of their STI into deferred bonus shares, which were then matched by the company on a 1:1 basis.

The last grants of deferred bonus shares and company-matching shares were made in December 2017.

Vesting

Vesting of deferred bonus shares and company-matching shares takes place on the third anniversary of the date of grant:

    Year from grant date  
  0 1 2 3 4 5
Vesting       100%    

Performance metrics

There are no further performance conditions to determine vesting.

BEE shares

The following two schemes were established as part of the company’s black empowerment strategy:

Dilution

The maximum aggregate number of shares that may be acquired by participants under the LTIP and any other share plan may not exceed 5,5 million shares, and for any one participant 550 000 shares. In determining these limits, shares acquired through the JSE and transferred to participants are not considered. At 30 September 2020, the aggregate number of shares that may be acquired by participants under the various schemes was 2 728 933 (2019: 2 543 551), which represents approximately 1,4% of the number of issued ordinary shares. This is in line with JSE regulations.

Minimum shareholding policy

We have a minimum shareholding policy, where senior executives are expected to build up their personal shareholding in the company over a specific period of time. In the case of the CEO, the target is 200% of guaranteed package while the target for executive directors and members of the executive committee is 100% of guaranteed package. Senior executives who were in service when the policy was adopted in 2016 have six years to build up their shareholding from date of adoption. Senior executives appointed after adoption have six years to build their shareholding from date of appointment. They may use any vesting LTIs or their own resources to acquire these shares.

Current minimum shareholding summary

Name Date of
engagement
GP* Number
of shares
held
Original
value of
shares
held
Current
value of
shares
held**
% of GP Target
% of GP
Years
remaining to
meet target
NP Doyle 1 July 2012 10 000 000 12 775 4 199 926 2 437 087 42% 200% 2
* GP as at 30 September 2020.
** Value calculated with reference to the closing price of a Tiger Brands share as at 30 September 2020, i.e. R190,77.

Malus and clawback

A malus and clawback policy is in place with the intention to minimise risk.

With respect to malus, if the remuneration committee, in consultation with the board and/or any committee of the board, believes that a trigger event has occurred, it has full discretion to reduce, in part or whole, unvested variable remuneration (i.e. STIs and LTIs) before the end of the vesting or payment period. In the case of clawback, it is the responsibility of the remuneration committee, in consultation with the board and/or any committee of the board, to implement clawback for the whole or portion of vested variable remuneration in the event of a trigger event occurring over a period of three years from the date on which payment was made of such vested variable remuneration. Trigger events include, but are not limited to:

Illustrating potential remuneration outcomes

The variable pay arrangements described above have various potential outcomes. These outcomes could be from zero (minimum) to the expected level of performance outcomes (target) to the maximum potential variable pay outcomes (maximum). In the illustrations presented below, it should be noted that:

Total remuneration potential for members of executive management for the year ended 30 September 2020

CEO (R’000)   CFO (R’000)   Members of executive committee (average) (R’000)
   

Executive service contracts

Senior executives are employed full-time under standard agreements, with a notice period of three months. We strive to bind all senior executives by a restraint-of-trade agreement. To the extent that executives have access to proprietary business insights and intellectual property, Tiger Brands will enforce the agreement should they join a competitor. The restraint comprises a three-month notice period or three months’ special leave (paid as a three-month lump sum (based on guaranteed package) on termination).

Sign on and specific retention payments

In exceptional circumstances (mainly for the recruitment and retention of critical and/or scarce talent), Tiger Brands will award a sign on/retention payment which will be subject to the following conditions:

Payments on termination of employment

Remuneration
policy component
  Voluntary termination
(i.e. resignation)
  Involuntary termination
(retrenchment, retirement, death)
Guaranteed package   Paid up to last day of service   Paid up to last day of service including notice period, where applicable.
Medical aid   Benefit continues to last day of service   Benefit continues up to last day of service. Employees who qualify for post-retirement medical aid funding will continue to receive the employer contribution with effect from their normal retirement date.
Retirement and risk plans   Employer contributions paid until last day of service. Employee is entitled to the value of the investment, but all risk benefits cease on termination of service.
Other benefits   Not applicable   Severance package in respect of retrenchments – one or two weeks for every completed year of service in terms of the relevant rules.
Short-term incentives   No pro rata bonus paid   Pro rata STI payment (based on extent of achieving specified financial and strategic targets for the period and a personal performance agreement being in place at the date of exit).
Long-term incentives   All unvested awards (other than certain deferred bonus shares) will be forfeited   Depending on the nature of the instrument and reasons for termination, a participant may retain all units or a pro rata portion. Accelerated vesting and settlement of retained units may apply in certain circumstances.

External board appointments

Under a formal policy, an executive is limited to one substantive outside directorship. The chairman of the Tiger Brands’ board, chairman of the nominations committee, and chairman of the remuneration committee are required to authorise these appointments based on a recommendation from the CEO. Other than in respect of their appointment to the boards of associate companies, directors’ fees under this policy may be retained by the individual. Other than associate companies, Tiger Brands currently has no executive members serving as non-executive directors on the main board or sub-committees of external companies. Details of executive committee members serving on the boards of associate companies appear here.

Non-executive directors

Fees and approval process

Non-executive directors are paid an annual retainer that reflects their overall contribution and input to the company, and not just for attendance at board and committee meetings. Fees are reviewed annually, and increases are implemented in March after approval at the relevant AGM.

A bespoke survey is conducted every two years to benchmark these fees against South African companies listed on the JSE, based on market capitalisation, turnover and total assets. As these are similar metrics to that of the benchmark group for executive directors it was decided that from FY20, in line with King IV and in terms of the current requirements of the organisation, a single comparator group be adopted for the non-executive directors and executive directors’ remuneration benchmarking. The revised comparator group is detailed here.

Targeted remuneration for the twelve-month period ending 28 February 2021 was based on the 65th percentile of the peer group, which is aligned with our internal anchor point. Non-resident non-executive directors are paid a premium in comparison to resident directors, which is below the market median. The chairman does not receive any additional remuneration for participating in committees of the board. Non-executive directors who perform services outside the scope of their ordinary duties will not receive additional remuneration. Shareholder approval will be sought for increasing non-executive directors’ fees, including fees paid for attending special board meetings. Details of proposed non-executive directors’ fees effective from 1 March 2021 appear in the notice of AGM of shareholders to be held on 17 February 2021. Details of non-executive directors’ fees paid in the review period appear here.

Voting statement

This remuneration policy is subject to a non-binding advisory vote by shareholders at the upcoming AGM.

Section 3: Implementation report

In this section of the remuneration report we explain the implementation of our remuneration policy, providing details of the remuneration paid to our executive directors and members of the executive committee and senior management for the financial year ended 30 September 2020.

Salary adjustments

The remuneration committee approved an overall guaranteed package salary increase budget of 6% for the period 1 December 2019 to 30 November 2020. This included executive management.

An additional budget was ringfenced and is managed centrally to correct pay disparities.

2020 guaranteed package

The following increases to guaranteed packages were implemented in the reporting period for executive directors. New amounts were effective from 1 December 2019:

  1 Dec 2019 to
30 Nov 2020
1 Dec 2018 to
30 Nov 2019
% increase
Executive directors      
LC Mac Dougall* 10 014 615 9 537 728 5,0%
NP Doyle** 10 000 000 6 877 238 45,4%
* Retired on 31 January 2020.
** Promoted to CEO on 1 February 2020. Annual increase 1 December 2019 of 5% to R7 221 100.

An average increase of 5% (2019: 6%) was awarded to executive directors and members of the executive committee in comparison to an average increase of 5,4% (2019: 5,32%) for the rest of the company.

2020 short-term incentive

As indicated in the policy section, the STI for executive directors is based on the combination of a group performance factor and individual performance component.

Executive directors

The group performance factor for executive directors is weighted according to the table below. Results for FY20 were as follows:

                Achievement
Strategic
objective
Strategic
objective
weighting
  Key performance indicator Key
performance
indicator
weighting
Threshold
score = 50%
Target
score = 100%
 Stretch
score = 200%
 Actual result  Weighted result
      Sales volume growth 7,50% 90% 100% 110% Not achieved
Growth 65%   Brand health 7,50% 97% 100% 103% Threshold achieved
      Absolute gross margin 10% 95% 100% 105% Not achieved
      EBIT 40% 95% 100% 105% Not achieved
      Cost savings initiatives 10% 90% 100% 110% Not achieved
Efficiency 15%   Net working capital 5% 105% 100% 95% Threshold achieved
      Quality  10%  Reduction in execution-related marketplace incidents year-on-year by
          10% 15% 20% Stretch achieved
People and sustainability 20%       Reduction in lost time injuries year-on-year by  
      Safety (LTIFR) 5% 10% 15% 20% Target achieved
      EE – ACI Opportunity Utilisation 5% 50% 70% 90% Stretch achieved

The targeted percentages for “threshold”, “target” and “stretch” as set out above per KPI represent the targeted percentage achievement of the underlying budgeted amounts.

Linear vesting will apply if the actual result falls between “threshold” and “target” or between “target” and “stretch”. Note for 2020, the EBIT threshold was not met to trigger payment of the STI. This is an overriding condition of the scheme. Therefore the weighted result for each KPI was zero in FY20.

For the review period, in addition to the financial targets above, the following KPIs as per the balanced scorecard applied to the CEO and CFO. The level of achievement is reflected alongside each KPI in the table below.

The FY20 individual performance factor is the aggregated result of assessing the KPIs for the relevant executive, as follows:

Executive directors

The individual performance factor for executive directors is weighted according to the table below. The results for FY20 were as follows:

    LC Mac Dougall       NP Doyle  
Key performance indicators Not met Partially met Met Exceeded %
achievement
of target
Not met Partially met Met Exceeded %
achievement
of target
Top-tier financial results                    
Revenue       70% – 99%       70% – 99%
Gross margin       70% – 99%       70% – 99%
Cost savings       <70%       <70%
Return on net assets       70% – 99%       70% – 99%
Market performance                    
On-shelf availability       100%       100%
Innovation rate       <70%       <70%
Brand health*       70% – 99%       70% – 99%
Compliance                    
Zero high level audit findings       0%       0%
Reduction in consumer complaints       <70%       <70%
Safety (LTIFR)       >100%       >100%
BBBEE implementation       100%       100%
People                    
Improved employee engagement       70% – 75%       70% – 75%
Percentage of leadership positions filled internally       >100%       >100%
Diversity and inclusion       70% – 75%       70% – 75%
Individual KPIs                

* Brand health is measured on an individual category and not on an aggregated basis.

Name GP*   On-target %   Actual group
performance
factor %
  Actual personal
performance
factor %
2020 STI#
(Rand)
2019 STI#
(Rand)
LC Mac Dougall** 10 014 615 x 60% x +
NP Doyle*** 10 000 000 x 60% x +
* Annual guaranteed package in rand as at 30 September 2020.
** Retired 31 January 2020. Eligible for STI on a pro-rata basis.
*** Promoted to CEO 1 February 2020.
# STI is pro-rated for the number of months the employee participates in the scheme in the case of a no-fault termination.

2020 long-term incentives

Long-term incentive awards made during the year to executive directors are set out below:

Long-term incentive awards to executive directors for FY20

      Performance vesting shares  
Name LTI personal
performance
multiplier**
GP Award % Number Face value Expected value
LC Mac Dougall# 100,0% 10 014 615 81,3% 47 220 8 142 617 10 015 419
NP Doyle* 200,0% 7 221 100 81,3% 65 880 11 741 792 14 442 405
** The personal performance multiplier is used to modify the standard quantum of performance shares and restricted shares, based on an individual’s personal sustained performance and potential. This is a discretionary percentage ranging from 0% to 200%.
# Allocated on 30 March 2020 at VWAP of R172,44.
* Allocated on 7 September 2020 at a VWAP of R178,23.

LTI awards vesting or with a performance period ending in 2020

The outcome for awards due to vest in FY20, and whose performance conditions ended by 30 September 2020, are shown below. This applies to all eligible participants.

  LTI measures Performance
condition result
LTI allocation Real HEPS
growth
% vesting
Company-matching shares granted in FY17 N/A 100% (time-based vesting)
Deferred bonus shares granted in FY17 N/A 100% (time-based vesting)
Bonus-matching shares granted in FY17 N/A 100% (time-based vesting)
Share appreciation rights granted in FY15 – third tranche
Share appreciation rights granted in FY16 – second tranche
Share appreciation rights granted in FY17 – first tranche
Met Partially met Not met

Payments for termination of office

No additional payments were made for executives terminating office.

Compliance with remuneration policy

There were no deviations from the remuneration policy in the financial year.

Single total figure of remuneration

The following tables disclose total remuneration received and receivable by executive directors and executive management for the period 1 October 2019 to 30 September 2020:

Executive directors


  LC Mac Dougall* NP Doyle**
Remuneration element FY2020
(R’000)
FY2019
(R’000)
% FY2020
(R’000)
FY2019
(R’000)
%
Basic salary 3 094 8 973   6 996 5 832  
Retirement funding 109 329   1 270 961  
Other benefits 55 160   30  
Guaranteed package 3 258 9 462   8 266 6 823  
Short-term incentive    
Cash remuneration 3 258 9 462   8 266 6 823  
SARs   4 446  
Bonus matching shares 128   315  
Deferred bonus shares and company matching shares 259   421  
Total remuneration 3 645 9 462 (61,5%) 9 002 11 269 (20,1%)
* Retired on 31 January 2020.
** Promoted to CEO on 1 February 2020.

Member of executive committee

Key FY2020
(R’000)
FY2019
(R’000)
CXO1 3 710 3 598
CXO2 3 841 3 740
CXO3 5 193 4 688
CXO4 5 017 5 052
CXO5 4 056 6 967
CXO6 5 776
CXO7 3 297
CXO8 3 770 1 689
CXO9 1 738 6 680
CXO10 5 274 5 057
CXO11 5 347 6 888
CXO12 2 660
Total 49 679 44 359

Notes:
CXO6 appointed on 6 January 2020.
CXO7 appointed on 15 January 2020.
CXO9 resigned on 31 January 2020.
CXO10 resigned on 31 August 2020.
CXO11 retired on 31 March 2020.
CXO12 acted for the period February 2020 to September 2020.

Number and value of LTI share awards

Disclosure of the quantum and value of awards for the CEO and CFO outstanding at the beginning and end of the reporting period, as well as new awards made in the period, are provided in the tables below, with the cash value of awards settled during the reporting period indicated in the value-based tables.

Name and awards Award date Vesting date Grant price (ZAR) Opening number Granted during the year Forfeited
during
the year
LC Mac Dougall            
2016 Deferred bonus shares 07/12/2016 07/12/2019 699
2016 Company matching shares 07/12/2016 07/12/2019 699
2016 Bonus matching shares 07/12/2016 07/12/2019 699
2020 Performance shares 30/03/2020 30/03/2023 47 220
2016 SARs 24/05/2016 24/05/2020 317,64 12 908 12 908
    24/05/2021 317,64 12 908
2016 SARs 07/12/2016 07/12/2019 368,11 11 774 11 774
    07/12/2020 368,11 11 775
    07/12/2021 368,11 11 776
2017 SARs 11/12/2017 11/12/2020 385,29 3 223
    11/12/2021 385,29 3 224
    11/12/2022 385,29 3 224
2018 SARs 06/12/2018 06/12/2021 254,79 20 588
    06/12/2022 254,79 20 588
    06/12/2023 254,79 20 588
Total       134 673 47 220 24 682
NP Doyle            
2016 Company matching shares 07/12/2016 07/12/2019 1 140
2016 Deferred bonus shares 07/12/2016 07/12/2019 1 140
2016 Bonus matching shares 07/12/2016 07/12/2019 1 710
2020 Performance shares 07/09/2020 07/09/2023 65 880
2014 SARs 28/02/2014 28/02/2017 236,55 6 526 6 526
    28/02/2018 236,55 6 526 6 526
    28/02/2019 236,55 323 323
2015 SARs 04/02/2015 04/02/2018 358,22 1 117
    04/02/2019 358,22 4 138 4 138
2016 SARs 09/02/2016 09/02/2020 271,19 8 200 8 200
    09/02/2021 271,19 8 201
2016 SARs 07/12/2016 07/12/2019 368,11 12 112 12 112
    07/12/2020 368,11 12 112
    07/12/2021 368,11 12 112
2017 SARs 11/12/2017 11/12/2020 385,29 16 432
    11/12/2021 385,29 16 433
    11/12/2022 385,29 16 433
2018 SARs 06/12/2018 06/12/2021 254,79 18 895
    06/12/2022 254,79 18 896
    06/12/2023 254,79 18 897
Total       181 343 65 880 37 825
Name and awards Performance
condition
achieved
Settled
during
the year
Closing
number
Face value
at award
(ZAR)
Cash
received
(ZAR)
Value of
shares
acquired
(ZAR)
Closing fair
value vesting
(ZAR)
LC Mac Dougall              
2016 Deferred bonus shares 699 128 943
2016 Company matching shares 699 128 943
2016 Bonus matching shares 699 128 943
2020 Performance shares 47 220 8 142 616,80 8 244 139,80
2016 SARs
  12 908 4 100 097,12 67 379,76
2016 SARs
  11 775 4 334 495,25 50 161,50
  11 776 4 334 863,36 32 030,72
2017 SARs 3 223 1 241 789,67 11 828,41
  3 224 1 242 174,96 13 121,68
  3 224 1 242 174,96 18 860,40
2018 SARs 20 588 5 245 616,52 377 583,92
  20 588 5 245 616,52 456 641,84
  20 588 5 245 616,52 460 553,56
Total 2 097 155 114 40 375 062 386 829 9 732 302
NP Doyle              
2016 Company matching shares 1 140 95 944 114 261
2016 Deferred bonus shares 1 140 95 944 114 261
2016 Bonus matching shares 1 710 144 839 170 470
2020 Performance shares 65 880 11 741 792,40 11 204 211,60
2014 SARs
 
 
2015 SARs 1 117 400 131,74 33,51
 
2016 SARs
  8 201 2 224 029,19 54 946,70
2016 SARs
  12 112 4 458 548,32 51 597,12
  12 112 4 458 548,32 32 944,64
2017 SARs 16 432 6 331 085,28 60 305,44
  16 433 6 331 470,57 66 882,31
  16 433 6 331 470,57 96 133,05
2018 SARs 18 895 4 814 257,05 346 534,30
  18 896 4 814 511,84 419 113,28
  18 897 4 814 766,63 422 725,89
Total 3 990 205 408 56 720 612 336 727 398 992 12 755 428

Interests of executive directors in BBBEE schemes

No executive directors were awarded shares in terms of the Black Managers Trust Scheme for the year ended 30 September 2020.

Non-executive directors’ remuneration 2020

The non-executive directors’ remuneration paid for the year ended 30 September 2020 is disclosed below, excluding VAT

Committee MO Ajukwu MJ Bowman I Burton MP Fandeso CH Fernandez GJ Fraser-Moleketi GA Klintworth
Notes     3 2*   5  
Board fees 879 542 375 519 108 750 209 087 426 587 108 750 888 192
Audit committee fees         190 588    
Investment committee fees   13 364          
Remuneration committee, nomination and governance committee fees   237 854   26 833      
Social, ethics and transformation committee fees             232 702
Risk and sustainability committee fees 347 442     74 050 296 252    
Extraordinary fees in respect of special board meeting 52 870 22 987     22 987   52 870
Ad hoc work/meetings              
Total FY2020 1 279 854 649 724 108 750 309 970 936 414 108 750 1 173 764
Total FY2019 1 531 197 805 643 126 646 434 251 1 102 971
Committee M Makanjee TE Mashilwane KDK Mokhele MP Nyama M Sello YGH Suleman OM Weber DG Wilson
Notes         1   4  
Board fees 426 587 379 892 1 854 115 374 618 426 587   250 125 370 774
Audit committee fees   335 880           190 588
Investment committee fees               13 364
Remuneration committee, nomination and governance committee fees 111 088             97 671
Social, ethics and transformation committee fees 199 013     101 175 25 970      
Risk and sustainability committee fees   151 062   151 062        
Extraordinary fees in respect of special board meeting 22 987 22 987 22 987 22 987 22 987     22 987
Ad hoc work/meetings                
Total FY2020 759 675 889 821 1 877 102 649 842 475 544 250 125 695 384
Total FY2019 722 635 898 687 1 917 855 649 109 231 924 195 566

* Member of the nomination and governance committee only.
1. M Sello appointed 1 October 2019.
2. MP Fandeso resigned 28 February 2020.
3. I Burton appointed 3 August 2020.
4. OM Weber appointed 3 August 2020.
5. GJ Fraser-Moleketi appointed 1 September 2020.

Non-executive directors’ remuneration FY21

The following table reflects no change in the non-executive directors’ fees from 1 March 2021, excluding VAT, subject to the approval of shareholders at the AGM on 17 February 2021:

Forum Capacity Current rate
effective
March 2020
Proposed rate resident
board members –
effective March 2021
Proposed fees to be
paid to non-resident
board members –
effective March 2021
Main board Chairman 2 077 929 2 077 929
  Member 435 000 435 000 1 000 500
Audit Chairman 344 869 344 869
  Member 194 325 194 325
Remuneration and nominations Chairman 245 897 245 897
  Member 114 844 114 844
Risk and sustainability Chairman 302 061 302 061
  Member 154 024 154 024 354 255
Social, ethics and transformation Chairman 202 915 202 915
  Member 103 883 103 883 238 930
Hourly fees*   4 572 4 572 10 516
Extraordinary meetings**   22 987 22 987 52 870

* Hourly fees are for the sole purpose of the calculation of fees for the investment committee meetings which are held on an ad hoc basis.
** Payment of fees for extraordinary meetings are at the discretion of the chairman of the board and chairman of the remuneration committee.

Non-binding advisory vote

This implementation report is subject to a non-binding advisory vote by shareholders at the AGM on 17 February 2021.