Online Annual Report 2009

Further reading

More information on the committee can be found here.
CORPORATE GOVERNANCE

 

 

 

Non-executive directors receive fees in the top quartile for their role as directors and for their roles on Board Committees. Non-executive directors’ fees paid in the current financial year are detailed below:
Chairman of the Board  R675,000
Deputy Chairman R490,00
Directors R200,00
Committee chairmen R200,00
Committee members R94,000
Audit Committee R25,000
 
For the additional meetings and responsibilities arising from the Corporate Laws Amendment Act relative to subsidiaries.
 
There will be no change to these fees for the 2010 financial year.
 
The fees paid to the trustees of the Massmart Holdings Limited Employee Share Trust are R40,000 each and R50,000 for the chairman.

Remuneration of directors and executives

During the 2009 financial year the Remuneration and Nominations Committee comprised Messrs Kuseni Dlamini (Chairman), Chris Seabrooke, Mark Lamberti, Nigel Matthews and Ms Dawn Mokhobo. With the exception of Mark Lamberti, all committee members are independent non-executive directors. The CEO attends all committee meetings by invitation but is not present when his own remuneration is discussed.

Massmart, through the Remuneration and Nominations Committee, implements remuneration policies that enable it to recruit, retain and motivate the executive talent needed to achieve superior performance. The Committee, with periodic advice from external executive remuneration consultants, ensures the provision of executive remuneration packages that are competitive with reference to other major South African retail companies, as well as other companies similar to Massmart in their size, spread and complexity.

Our executive remuneration policy has three components, being:

  • The fixed portion, specifically the monthly basic cash salary, and benefits including vehicles, retirement funding and medical aid;
  • The short-term or performance incentives, represented as multiples of basic monthly salary, and linked to the achievement of profit growth and/or personal performance. If achieved, these incentives are paid annually; and
  • Long-term equity incentives under the Massmart Holdings Limited Employee Share Trust.

The Committee considers and recommends to the trustees of the Massmart Holdings Limited Employee Share Trust any proposed shares or options that are granted in terms of the Share Trust rules. Annually the Committee reviews the Group’s employee benefit funds, specifically the in-house medical scheme and the provident and pension funds, considering their performance, financial stability and the general principles governing the benefit levels being applied.

The Massmart remuneration policy strives for fixed remuneration at the median to upper quartile of comparable positions. Every two years the Committee receives a report prepared by independent remuneration consultants on the recent trends in, and the current levels of, short-and long-term executive remuneration in South Africa. In May 2009 the Committee received such a report prepared by 21st Century Business & Pay Solutions, an independent remuneration consultancy. As a result of this report, the remuneration of several executives and certain senior managers was adjusted.

As regards short-term or performance incentives, Massmart places particular emphasis on generous annual incentives for high performance for both executive directors and executive management. This policy, communicated to and understood by the Group’s executives, codifies a range of performance incentives linked to annual headline earnings per share growth for the Group in excess of average CPI (as reported by StatsSA) plus 5%, or profit before tax for each Division, as appropriate. Executives can earn an increasing multiple of their monthly basic salary depending upon the earnings growth exceeding CPI plus 5% or higher % increments. With effect from 2006, an element of the annual incentive bonus was linked to non-financial performance, specifically the achievement of BEE transformation targets approved by the Remuneration and Nominations Committee. This incentive can amount to an additional one to three months’ salary. The Committee also has the discretion to reward superior individual performance.

Long-term equity incentive plans ensure the alignment of executive reward with shareholders’ interests, in particular the sustained creation of shareholder value. New issues of annual allocations of shares or options are only allowed when Massmart’s growth in headline earnings per share in the prior year exceeds average CPI plus 5%. The amount allocated is based upon a factor of the executive’s total prior year remuneration including incentive bonus.

The Committee believes that participants in the employee share scheme should, on average, hold unvested shares or options representing value equivalent to approximately three times their annual remuneration.

With effect from July 2002, only members of the Executive Committee can elect to receive scheme shares, whilst all other participants receive options.

Directors' emoluments

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The comments on the next page provide further background and context to the figures disclosed in this note, Directors’ emoluments, and Interests of directors in the Company’s Share Scheme. These notes can also be found in the Group financial statements, note 36 and note 37.

GM Pattison

Grant received a 12.7% increase to his salary and allowances for the 2009 financial year, from R2.55 million to R2.88 million. Grant did not receive any bonus in terms of the Group’s Short-term Executive Incentive Scheme which rewards executives based on growth in headline earnings per share (HEPS), but did receive a three-month ad hoc bonus for his performance as CEO and another three-month bonus for the improvement in the Group’s externally rated BEE score. These bonuses totalled R1.36 million. Grant’s total cash remuneration for the year of R4.86 million is 36.7% lower than that for 2008.

In terms of the rules of the Massmart Holdings Employee Share Trust, shares and options issued after 2002 must be exercised within six years of issue. During the 2009 financial year, Grant was therefore compelled to convert and sell 55,219 Massmart shares and options which he had held for more than five years. With the cash proceeds from the realised gain of R2.95 million, and after paying tax thereon, he purchased 33,210 Massmart shares.

Through the Share Scheme, Grant has 1,562,298 Massmart shares and options. The average length of time that he has held these shares and options is 3.5 years and the average strike price is R50.02 per share. A family trust of which Grant is a beneficiary also owns 445,010 Massmart shares directly.

GRC Hayward

Guy received a 10.0% increase to his salary and allowances for the 2009 financial year, from R2.04 million to R2.24 million. Guy did not receive any bonus in terms of the Group’s Short-term Executive Incentive Scheme which rewards executives based on growth in HEPS, but did receive a three-month ad hoc bonus for his performance as CFO and another three-month bonus for the improvement in the Group’s externally rated BEE score. These bonuses totalled R1.12 million. Guy’s total cash remuneration for the year of R4.11 million is 22.9% lower than that for 2008.

Guy did not sell any Massmart shares or options during the 2009 financial year.

Through the Share Scheme, Guy still has 1,032,898 Massmart shares and options. The average length of time that he has held these shares and options is 3.7 years and the average strike price is R48.75 per share. Guy also owns 22,000 Massmart shares directly.

Sale of shares to black non-executive directors

Shareholders at the November 2008 annual general meeting approved the sale of Massmart treasury shares to the Group’s five black non-executive directors. Accordingly, on 19 December 2008, each director purchased 20,000 Massmart shares for a nominal value of 1 cent each. The market price of the Massmart shares at the time of the transaction was R83.63 and so each director received deferred value of approximately R1.7 million.

The salient points relating to these shares were covered in detail in the resolutions for the November 2008 annual general meeting. Points to note here are that the shares attract ordinary dividends and have voting rights, and that they may only be sold in two 50% tranches in each of November 2011 and November 2013.

Interests of directors in the Company’s Share Scheme

          Number of Gain on  
          shares/ sale/  
      Subscription Market share exercise  
    Relevant date price (R) price (R) options (R000s) Expiry date
Details of directors' shares and share options per director:          
  Pattison, GM            
  Balance at the beginning of the previous year       1,846,138    
  New shares/options granted 26 May 2008     85,248   25 May 2014
  Balance at the beginning of the year       1,931,386    
  Shares traded* 13 November 2000 12.25   (400,000)    
  Options exercised 27 May 2003 18.98 72.42 (55,219) 2,951  
  New shares/options granted 27 May 2009 77.56   86,131   26 May 2015
  Balance at the end of the year       1,562,298    
  Comprising: 27 August 2001 10.95   150,000   26 August 2011
    26 May 2004 29.87   35,919   25 May 2010
    1 April 2005 41.91   400,000   31 March 2011
    23 May 2006 54.13   750,000   22 May 2012
    24 May 2007 94.25   55,000   23 May 2013
    26 May 2008 72.86   85,248   25 May 2014
    27 May 2009 77.56   86,131   25 May 2014
  * These shares were transferred to the Pattison Family Trust
  Hayward, GRC            
  Balance at the beginning of the previous year       752,413    
  Options exercised 29 February 2008 17.43 72.26 (50,000) 2,742  
  New shares/options granted 1 April 2008 66.91   40,641   31 March 2014
    26 May 2008 72.86   74,643   25 May 2014
  Balance at the beginning of the year       817,697    
  New shares/options granted 27 May 2009 77.56   215,201   26 May 2015
  Balance at the end of the year       1,032,898    
  Comprising: 10 March 2000 14.61   8,643   9 March 2010
    13 November 2000 12.25   100,000   12 November 2010
    27 August 2001 10.95   150,000   26 August 2011
    26 May 2004 29.87   43,881   25 May 2010
    1 April 2005 41.91   200,000   31 March 2011
    23 May 2006 54.13   150,000   22 May 2012
    24 May 2007 94.25   49,889   23 May 2013
    1 April 2008 66.91   40,641   1 April 2014
    26 May 2008 72.86   74,643   25 May 2014
    27 May 2009 77.56   215,201   26 May 2015