Nomination and Remuneration Committee

In accordance with King III, with effect from 4 March 2013, the Nomination and Remuneration Committee has been split into two committees. Mr Mark Lamberti will chair the Nomination Committee and Mr Chris Seabrooke will chair the Remuneration Committee.  The membership of the committees remains the same as that of the former combined committee and with the exception of Mr David Cheesewright, all Committee members are independent non-executive directors. The CEO attends all Committee meetings by invitation.  The Nomination and Remuneration Committee met twice in the 26 weeks ended 23 December 2012. 

Responsibilities of the Remuneration Committee:

Massmart, through the 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 budget and/or personal performance. If achieved, these incentives are paid annually; and
  • long-term equity incentives.

The Massmart remuneration policy strives for the fixed portion of 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. Annually the Committee also reviews the Group’s employee benefit funds, specifically the in-house medical scheme and the provident and pension funds, considering their governance, performance, financial stability and the general principles central to the benefit levels being applied.

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 the approved annual budgeted targets for both Group performance and profit before interest and tax performance of each of the Divisions. Executives can earn an increasing multiple of their monthly basic salary depending upon achievement against these agreed targets. 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 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.

The long-term equity incentive plans ensure alignment of executive reward with shareholders’ interests, in particular the sustained creation of shareholder value.

The Committee commissioned reports by Deloitte, 21st Century Business & Pay Solutions and Price Waterhouse Coopers to review the appropriateness of the current long-term incentive plan. The various reports recommended to the Committee that the current share plan, that requires that the Committee recommends to the trustees of the Massmart Holdings Limited Employee Share Trustthat proposed shares or options be granted in terms of the Share Trust rules, be changed to be more in line with current market trends. The proposed new shares scheme, to be presented to shareholders for approval at the May 2013 AGM, will achieve this and will also no longer need to be administered through a trust. The new plan provides for full value shares allocated based on the executives fixed portion of remuneration in differing %’s between Restricted Shares and Performance Shares. If approved by shareholders the first grant of Restricted shares and award of Performance shares will be in September 2013. Historically new issues of annual allocations of shares or options on the existing share plan were only allowed when Massmart’s growth in headline earnings per share in the prior year exceeded average CPI plus 5%; consequently there will be no annual issue based on the performance for the 26 weeks ended 23 December 2012.

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, were proposed and approved at the November 2012 annual general meeting:

   
Chairman of the Board 822,000
Deputy Chairman 590,000
Directors 244,000
Committee Chairmen 238,000
Committee members 113,000

Responsibilities of the Nomination Committee:

The Nominations Committee’s functions include assisting the Board with making recommendations on the composition of the Board with respect to race, gender and the balance between executive, non-executive and independent non-executive members appointed to the Board, as well as acknowledging the specialist or industry-specific skills required by the Group.  The Nomination Committee assists the Board in identifying and nominating candidates and formulating succession plans for the approval of the Board for the appointment of new executive and non-executive Directors, including the Chairperson and CEO.  The Committee recommends Directors who are retiring by rotation, for re-election.

The Committee is responsible for monitoring the principles of governance and code of best practice in respect of Board composition, structure and process and ensuring that the Board has the appropriate composition to execute its duties effectively.  They ensure that the induction and on-going training and development of Directors take place.

The Committee assists the Board to ensure that the achievement of the competitive strategies, operating plans and financial objectives of the Group are supported by appropriate executive recruitment, succession and compensation strategies which take account of:

    • each Group company's stage in its life cycle and the executive capabilities appropriate for that stage;
    • the present and future posts which need to be filled to mitigate risk;
    • the availability of individuals to fill such posts;
    • the cost and composition of remuneration packages paid to individuals holding comparable positions in the retail and wholesale industry or other industries as appropriate;
    • the Company's policies regarding the various components and mix of compensation, incentivisation and wealth creation;
    • the cost of executive compensation to the company relative to short, medium and long term performance;
    • the time required to recruit, induct, inculcate and train individuals to be fully effective in new positions;  and
    • the total compensation programme is designed with full consideration of all accounting, tax and regulatory requirements and shall be of the highest quality.