“In my view the successful companies of the future will be those that integrate business and employees’ personal values. The best people want to do work that contributes to society with a company whose values they share, where their actions count and their views matter.”

Jeroen van der Veer

I am pleased to report that our remuneration practices were aligned with our performance and strategic objectives set for the 2016 financial year.

Reporting and disclosures are evolving to ensure that stakeholders are able to understand how remuneration decisions are made in order to assess the outcome of these decisions. In South Africa, good governance regarding remuneration is primarily informed by King III.

Executive remuneration and the governance of remuneration remained a feature of the corporate governance landscape over the last year while the issue of income differentials and the steps necessary to address these continued to enjoy prominence in the local and international market. It is fundamental to our core remuneration principles that executive remuneration is aligned to the Group’s performance. Income differentials are an important topic within the Group and the remuneration committee remains committed to monitor and address this critical issue.

The alignment of our executive’s remuneration to the long-term strategic goals of the Group to deliver sustainable value to shareholders and building the business remained a key focus during the year.

Some decisions and their related impact in setting targets in terms of performance-related remuneration were made for the executive management and senior management in the Group. Weightings of performance as well as specific financial targets were reviewed and amended accordingly for the year under review. The committee was satisfied and will continue to monitor remuneration closely against the appropriate performance and market benchmarks in the future.

The committee reviewed the targets set in terms of performance-related remuneration for the CEO, executive management team and senior management in the Group which include individual performance factors and a combination of portfolio-specific targets. The CEO and executive management team’s performance are assessed against a set of predetermined objectives that include, inter alia, strategic leadership, execution of the strategy through business results and stakeholder relations. The Board recognises that the successful delivery of the Group’s objectives should constitute both financial and non-financial performance measures, with the key financial measures which include profits, cash flow and asset growth weighted to 70% and the remaining 30% weighted to non-financial measures for most of the executives in the Group.

The committee remains mindful to ensure overall remuneration was appropriate for the performance of the Group and in relation to its operational peers. In doing so, the committee considered the overall risk environment, its risk appetite and risk profile and the need to attract, retain and motivate key talent to enable the delivery of the Group’s strategic objectives.

Over the past year, we have kept our core remuneration policy and principles consistent. A few non-material changes were made to the remuneration policy, strategy and associated practices and we continue to review and adapt to changes in market conditions to ensure that they remain appropriately aligned with our overall business strategy.

Shareholder focus remains on ensuring pay for performance and alignment with shareholder goals, and enhanced disclosure so that shareholders can understand the quantum, rationale and driver of executive remuneration. With the constant focus on the levels of executive remuneration and the relativities between this and the remuneration of employees in general, particularly those at the lower end of the earnings spectrum, we have consistently applied the principle that our remuneration should be fair and competitive and should reflect the performance of the business and the business units. We remain committed to close the wage gap and improve the lives of the lower-paid employees by paying attention to the income differentials and the issue of minimum wages.

We respect and recognise our employees for their contribution made during the year and inspire them to realise their full potential and we believe in rewarding a job well done. Our ethos is one of appreciation for commitment, diligence, care and attention to detail.

REMUNERATION COMMITTEE

The remuneration committee comprises two independent non-executive directors, one non-executive director and a consultant who act independently and have been appointed by the Board. The chairman of the committee is Mr S Young and Professor VC Mehana and Ms AB Amod are members and Mr AI Ipp is the consultant. The company secretary is the secretary of this committee. Attendance of executive management and a consultant are by invitation.

The remuneration committee’s main purpose is to ensure that the Company’s remuneration practices and policies are aligned with good corporate governance. The main aim of the committee is to assist the Board in fulfilling its responsibilities in establishing formal and transparent policies and guiding principles of a standardised approach in the application of remuneration practices within all the business units and functions.

The objectives of the remuneration committee are to ensure that appropriate remuneration and incentive policies are adopted which:

  • support the attainment of AEEI’s Group’s business strategies;
  • determine executive remuneration;
  • attract, retain and motivate key and talented employees;
  • compete in the marketplace to be an employer of choice;
  • reward individual, team and business performance and encourage superior performance; and
  • support the key values of the AEEI Group.

The remuneration committee determines the fees to be paid to non-executive directors, but its primary focus is on executive remuneration and benefits. Consideration is given to the relative contribution of each non-executive director and their participation in the activities of the Board and its committees.

The chairman of the remuneration committee reports to the Board on the activities of the committee at Board meetings.

For the period under review, the committee is satisfied that is has fulfilled all its statutory duties assigned by the Board.

REMUNERATION PHILOSOPHY AND POLICY

PHILOSOPHY

The Group’s process of addressing rewards begins by balancing the Group’s overall business strategy, capabilities, values and employees’ needs, abilities and values. It ends with formulating and marketing a compelling rewards strategy and package that will enable the attraction, motivation and retention of high-calibre employees that the Group requires.

It is AEEI’s belief that to achieve the balance between business strategy and employees’ diverse needs, it continually strives to transform to a broader definition of reward – that of total rewards. To deliver on our philosophy, an enabling strategy was crafted that leverages the proper mix of rewards that satisfies the personal and financial needs of current and potential employees given existing business unit conditions and constraints.

To achieve this, AEEI integrates five key reward elements:

  • Compensation – guaranteed pay (total cost to Company), pay for performance and short-term incentives.
  • Benefits – provident or pension fund, medical aid, wellness awareness, Group risk insurance and funeral cover.
  • Career opportunities, growth and recognition – Company career across business units, career planning, performance management and development.
  • Cultures and values – Company-enshrined values statement, values-based leadership and nurturing culture.
  • Work environment – safety, location and flexibility.

REMUNERATION POLICY (ABBREVIATED)

Objective

The remuneration policy aims to implement the guiding principles of a standardised approach in the application of remuneration practices within all the business units and functions of the Group through sustainable, high performance based on the organisational culture and aligning it with the Group’s approach to risk management.

Scope

The policy aims to provide competitive market-aligned remuneration balanced with the need for cost containment. The policy needs to be seen within the context of total rewards, which embraces all elements of employee value proposition for the Group including career and growth opportunities, recognition, culture and values, compensation, benefits and the work environment.

The remuneration of executives is determined on a cost‑to‑company basis and is subject to an annual review by the remuneration committee. Provident or pension fund and health care provision form part of the overall cost‑to‑company packages.

Compliance

The remuneration policy is reviewed each year to ensure that the remuneration framework remains effective in supporting the achievement of the Company’s business objectives and remains in line with the best practice.

Awareness and understanding of the policy is the responsibility of each employee.

TOTAL GUARANTEED PACKAGE

The term refers to the cost of basic salary and benefits. Annual increases are determined with reference to the level of an employee’s role, benchmarks and individual key performance.

EXECUTIVE DIRECTORS’ SERVICE CONTRACTS

The executive directors do not have fixed-term contracts but have permanent employment agreements with the Company.

NON-EXECUTIVE REMUNERATION

The non-executive directors receive fees for serving on the Board and Board committees. The fees for non-executive directors are recommended by the remuneration committee to the Board for approval. The Board recommends the fees to shareholders for approval at the annual general meeting of the Company.

SUCCESSION PLANNING

The purpose of succession planning is to ensure that plans are in place to develop potentially suitable candidates for the future. The focus also remains on the retention of key and critical skills in the Group.

A succession plan for executives, senior management and critical skill positions are reviewed annually as part of the management process. Included in this process is the succession plan for the chief executive officer and independent non-executive chairman of the Board.