Remuneration and performance

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:

The following common themes were highlighted by shareholders in 2020:

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:

• Tiger Brands will seek to actively engage with dissenting shareholders by inviting them to one-on-one meetings and, where necessary, will issue a SENS announcement requesting shareholders to appropriately engage on their specific concerns
• Tiger Brands will consider the shareholder concerns and report on the outcome of the engagements and measures taken, in its next integrated report.

Remuneration committee objectives and activities for FY20

In FY20 the committee undertook the following activities:

• Approved salary increase mandate for employees on total remuneration packages (TRP)
• Approved the remuneration for executive directors and executive committee members
• Approved the STI and LTI performance conditions, targets and weightings in respect of FY20/21
• Recommended for approval to the board the non-executive directors’ (NEDs) fee increases
• Approved a single remuneration benchmarking peer group for both executive directors and NEDs
• Oversight of the Covid-19 response.

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:

• Embed the STI integrated scorecard and LTI scheme to align our people with business objectives and ignite winning performance
• Review the minimum shareholding policy to further align the interests of executives with stakeholders
• Cement and refine our approach to monitor and address identified pay inequities
• Continue to review our reward mechanisms and practices with a view to introducing innovative reward strategies to:
  – Ignite winning performance
  – Attract, retain and motivate key talent.

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.

The following are the key objectives of our remuneration policy:

• Strengthen our ability to competitively attract and retain talent to enable the execution of our strategy
• Align Tiger Brands’ annual and long-term performance to the delivery of the strategy
• Align Tiger Brands’ people performance with shareholder interests
• Motivate and stimulate high performance across Tiger Brands through competitive short and long-term incentives
• Cement the foundation for fair and responsible pay we have already built
• Ensure that reward mechanisms are simple and provide line of sight to all employees.

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:

• Total assets
• Turnover
• Market capitalisation.

Companies included in the peer group comprise:

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.

• All permanent employees on a guaranteed package in Paterson grades CU and above, are eligible to participate.
• The STI is paid annually in cash to qualifying people who are employed by the organisation on the payment date.
• The on-target percentage (as a percentage of guaranteed package) is benchmarked against the South African market to ensure we are aligned with market practice. It is based on affordability and the STI payment is based on achieving the defined objectives.
• The STI outcomes are determined based on a multiple of the on-target percentage of guaranteed package, which comprises three performance factors:
  • A group performance factor focused on group financial and non-financial metrics
  • A business unit performance factor focused on business unit financial and non-financial metrics
  • An individual performance factor focused on individual performance objectives and allows for differentiation in rewarding high performers.

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:

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:

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

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:

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

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:

• Strengthen our ability to competitively attract and retain talent to enable the execution of our business strategy
• Align Tiger Brands’ management’s performance to our long-term strategy and, in particular, to unleashing the power of our people objective.

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:

Historical LTI information

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

• Performance vesting shares (full value shares with a three-year vesting period, performance vesting criteria linked to the FINDI30 Index in terms of shareholder return)
• Restricted shares issued as bonus-matching shares (full value shares with a three-year vesting period, no performance criteria)
• Restricted shares issued as deferred bonus shares and company-matching shares (full value shares with a three-year vesting period, no performance criteria)
• Restricted shares as retention specific shares for African, Coloured and Indian (ACI) employees in D band and above (full value shares with a three-year vesting period, no performance criteria)
• Share appreciation rights (SARs).

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:

Performance metrics

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

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:

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:

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:

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:

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:

• Tiger Brands Black Managers Trust (BMT I)
  • Established in 2005 to attract and retain diverse talent
  • Rights allocated – Tiger Brands shares. Rights are settled after making the required capital contributions to BMT I. For all rights allocated on or before 31 July 2010, settlement may take place at any time after the initial lock-in period, i.e. from 1 January 2015. For all rights allocated after 31 July 2010, the lock-in date varies depending on the date of allocation. Periodically, new allocations are made to new joiners and top-up allocations are made to existing participants promoted to higher grades out of shares that may become available as a consequence of forfeitures.
• Thusani Trust
  • Established in 2005 as part of the company’s BEE phase I empowerment initiative. The trust’s resources were enhanced in 2009 under the company’s BEE phase II transaction
  • The trust provides bursaries for tertiary education to dependants of permanently employed black people who might not otherwise be able to afford this cost.

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

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:

• Material misstatement of financial results
• Misconduct, incompetence, fraud, dishonesty
• Negligence or material breach of obligations to the company
• Deliberate harm to the company’s reputation
• Material failure of risk management.

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:

• STI represents the cash component of short-term performance
• LTI represents the total award of performance vesting shares.

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:

• Employees remaining in the service of Tiger Brands as a permanent employee for an uninterrupted period of 24 months from date of the payment. Should the employee or Tiger Brands decide to terminate the employment relationship for any reason, excluding those listed below, before the expiration of 24 months, the employee will be required to repay Tiger Brands the full gross amount. There will be no pro rata refunds. Should Tiger Brands terminate the employment relationship because of operational reasons (for example, retrenchment or redundancy) or ill health, or if termination occurs as a result of death, the employee will not be required to repay Tiger Brands.

Payments on termination of employment

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:

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:

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.

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

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

Member of executive committee

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.

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

* 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:

* 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.