Nomination and Remuneration Committee

The Nomination and Remuneration Committee (the Committee) comprises Messrs Mark Lamberti (Chairman), David Cheesewright and Chris Seabrooke. With the exception of Mr David Cheesewright, all Committee members are independent non-executive directors. The CEO attends all Committee meetings by invitation.

Massmart, through the Nomination and Remuneration 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 motor 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. At least 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 2012 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 senior managers was adjusted.

With regard to 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 growth in 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 percentage increments. With effect from 2006, an element of the annual incentive bonus was linked to corporate accountability performance, specifically the achievement of BBBEE transformation targets approved by the Nomination and Remuneration 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%; consequently there was no annual issue during the 2012 financial year. 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 2002, only members of the Executive Committee can elect to receive scheme shares, whilst all other participants receive options.

Non-executive directors’ fees paid in the current financial year are detailed below:

  2012   2013
Chairman of the Board R775,000   R822,000
Deputy Chairman R555,000   R590,000
Directors R230,000   R244,000
Committee Chairmen R225,000   R238,000
Committee members R107,000   R113,000
 

The fees paid to the trustees of the Massmart Holdings Limited Employee Share Trust are R40,000 each and R50,000 for the Chairperson.

Interest of directors in the Company Share Scheme

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Directors’ emoluments

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The comments on this page provide further background and context to the figures disclosed in the ‘Directors’ emoluments’ and ‘Interests of directors in the Company’s Share Scheme’ tables. These notes can also be found in the Group financial statements, note 35 and note 36.

GM Pattison

Following a third party executive remuneration analysis which assessed positions of similar stature and complexity, the Nomination and Remuneration Committee awarded Grant a 4.3% increase to his salary and allowances for the 2012 financial year, from R3.7 million to R3.9 million. Grant did not receive a bonus for this financial year.

During the 2012 financial year Grant converted and sold 149,000 Massmart options, realising a gain on exercise of share options of R19.9 million.

Through the Share Scheme, Grant holds 733,021 Massmart shares and options of which 42,202 shares and 158,603 options are held in the Pattison Family Trust, of which Grant is a beneficiary. The average length of time that he has held these is 4.8 years and the average strike price is R77.99 per share. The Pattison Family Trust also directly owns 218,055 Massmart shares.

GRC Hayward

Following a third party executive remuneration analysis which assessed positions of similar stature and complexity, the Nomination and Remuneration Committee awarded Guy an 8.9% increase to his salary and allowances for the 2012 financial year, from R2.8 million to R3.0 million. Guy did not receive a bonus for this financial year.

During the 2012 financial year Guy converted and sold 36,750 Massmart options, realising a gain on exercise of share options of R5.0 million.

Through the Share Scheme, Guy holds 628,406 Massmart shares and options of which 19,912 shares are held in the Bluett-Hayward Trust, of which Guy is a beneficiary. The average length of time that he has held these is 3.1 years and the average strike price is R103.51 per share. Guy also owns 36,517 Massmart shares directly.

I Zwarenstein

Ilan was appointed to the Board on 7 May 2012, having previously been Company Secretary. His salary and allowances for the 2012 financial year, as reflected in the directors’ emoluments table are representative of his salary and allowances during his time in this role. In his previous position, Ilan received an ad hoc bonus of two months’ salary for this financial year and this is reflected in the prescribed officer section of the directors’ emoluments table.

Ilan did not convert and sell any Massmart options in his capacity as FD.

Through the Share Scheme, Ilan holds 202,659 Massmart options. The average length of time that he has held these is 1.2 years and the average strike price is R137.76 per share.

Top three executives’ salaries

King III recommends that the salaries of the top three executives, excluding executive directors, should be disclosed. Due to their specialised retail skills, the highly competitive South African retail environment and the employees’ value to Massmart, the Board does not wish to disclose this information for each of the individuals but has instead disclosed the total salaries of the three employees concerned.

In the 2012 financial year, the top three executives’ combined salaries (comprising basic salary, motor vehicle, medical aid and retirement benefits) were R7.3 million (2011: R9.6 million).

Non-executive directors’ fees

The Board’s policy is to pay non-executive directors’ fees that are competitive but not in the top quartile. As noted at the beginning of this Corporate Governance section, attendance fees are not paid. The Walmart-appointed non-executive directors do not receive fees from Massmart. The following fees and fee increases, for the period commencing on 22 November 2012 to the date on which the Company’s annual general meeting in respect of its 2013 financial year will be held, will be proposed for approval at the November 2012 annual general meeting:

  • Chairman
R822,000
  • Deputy chairman
R590,000
  • Non-executive directors
R244,000
  • Committee chairpersons
R238,000
  • Committee members
R113,000