Remuneration committee report
Dear Stakeholder,
I am grateful for the opportunity to present to you the 2021 remuneration committee report, highlighting the key considerations, decisions and outcomes of our work during the last financial year.
As mandated by the Board, the remuneration committee oversees the remuneration activities of the Group, including regularly updating the remuneration policy, establishing a holistic compensation model for employees and non-executive directors, promoting fair and equitable pay practices and engaging with stakeholders on remuneration related matters. In setting and administering AYO’s remuneration policy, the committee also ensures that the Company observes its obligations in terms of the Employment Equity Act 55 of 1998 (as amended) and the regulations in terms thereof, specifically the principle of “equal pay for work of equal value”.
PRINCIPLES AND AMENDMENTS OF REMUNERATION POLICY
I am the chair of the committee and am supported by two other non-executive directors, as stipulated in the Companies Act and paragraph 3.84(c) of the JSE Listing Requirements. Mr Ismet Amod, who was previously also a member of the committee, stepped down during the reporting period, due to his appointment into an executive director role, which precludes him from serving on the committee. Notwithstanding his departure, I am confident that in its current composition, the committee is sufficiently well resourced and has the prerequisite mix of skills and experience to adequately discharge its duties.
The committee met two times during the financial year, hosting the executive team by invitation, with only one apology received in one instance, which did not disturb the quorum requirement. During these meetings we deliberated proposed changes to the remuneration policy, reviewed the implementation of the policy during the financial year and approved the annual salary increase increment, which remained unchanged at 5%. Further, we authorised a benchmarking review of the salaries of executive management and key staff, to ensure their fairness and market competitiveness, as we were made aware during the year that AYO’s executive packages were inconsistent with (i.e., were far below) industry standards. As soon as the assessment is complete, the findings will be shared with interested stakeholders and used to inform future amendments to the remuneration policy and packages.
Guaranteed pay and benefits are determined with the purpose of attracting and retaining talented, high-performing individuals, who can contribute technically, operationally and financially at a higher than average level, solving problems for customers and finding solutions that will contribute to the overall profitability of
AYO whilst operating in a safe and responsible manner.
It is calculated on the “total cost to company” method and is inclusive of company contributions for selected benefits. Payment of membership fees for affiliation or membership to professional bodies, travel expenses and essential tools of the trade, as required, are also part of the guaranteed pay.
Bonus payments are critical to reward contribution to AYO’s overall performance and motivate employees to play a part in ultimately achieving the Company’s long term objectives. Bonus payments are discretionary and serve to recognise and reward staff members, as well as encourage them to continue to display motivation and diligence in their daily activities. A discretionary bonus of one month’s guaranteed pay was approved and awarded to all employees in 2021.
STIs aim to motivate and reward associates for the achievement of the Group’s short term performance in areas which they can influence. They support and reinforce desired behaviour and are awarded upon satisfactory achievement of financial, non-financial, operational and strategic targets, while simultaneously enhance the competitiveness of the overall reward offering/pay mix in recognition of high performance. Further, STIs enhance employee engagement, satisfaction and retention. STI targets are determined by the committee, agreed with the executive team and senior management and thereafter approved by the Board. They are set reasonably high to encourage problem solving and initiative and weighted to promote collaboration and teamwork. The maximum attainable STI level is set at 150% of the employee’s guaranteed pay and open to executive directors and group executives (senior management).
The fourth component of remuneration, LTIs, serve a dual role. Awarded on the basis of achievement of the Group’s long term financial goals, they align the interests of management with those of shareholders and engender ownership culture. Additionally, as LTIs are presented within a certain financial year, but only paid to an employee two years later, they serve as a retention policy for key executives. This dual purpose makes LTIs particularly important in supporting sustainable long term value creation. As AYO has not yet introduced share allocation scheme, LTIs are currently offered as percentage of guaranteed pay and are awarded to executive directors and group executives at the discretion of the Board.
Amendments to the remuneration policy in 2021 addressed termination guidelines, as retention of executives at Company and subsidiary level was identified as a potential risk area during the reporting period. The amended policy includes a prescribed termination notice period to mitigate the risk of critical staff resigning at short notice and provides for retention measures, such as retention bonuses paid over a pre-determined period.
EXECUTIVE DIRECTORS’ REMUNERATION
The basic remuneration package of executive directors is determined by the nominations committee at the time of their appointment. Their incentives and bonuses are decided by the remuneration committee in line with the remuneration policy. Full details of AYO’s executives’ remuneration is disclosed in the following table.
| Director | Basic Salary | Directors fees | Consulting fees | Bonus | Sign on bonus | STI | LTI | Other benefits | Provident Fund | Total |
|---|---|---|---|---|---|---|---|---|---|---|
| H Plaatjes | 3 928 974 | - | - | 385 000 | - | 8 940 000 | 2 470 000 | 162 520 | 704 746 | 16 591 239 |
| T Bundo | 3 447 235 | - | - | 325 000 | - | 5 825 000 | 2 112 500 | 174 146 | 412 022 | 12 295 903 |
| V Govender | 2 904 492 | - | - | 280 000 | - | 5 240 000 | 1 820 000 | 105 414 | 469 209 | 10 819 115 |
| K Abdulla | 4 335 463 | - | - | 408 729 | - | 4 000 000 | - | 90 598 | 582 565 | 9 417 355 |
| I Amod* | 1 500 000 | 321 563 | 800 000 | - | 4 000 000 | - | - | 55 828 | 6 677 391 |
* Ismet Amod served as non-executive director for part of the reporting period and as executive director for the remainder of the year, hence the combination of payment components.
NON-EXECUTIVE DIRECTORS’ EMOLUMENTS
In contrast, non-executive directors are not employees of the Company and do not participate or benefit from any employee performance schemes and incentives. They are paid set directors’ fees, which are determined in alignment with the SA Guide for Executive Remuneration and Reward national survey, industry standards and relevant individual experience and specialised knowledge. The directors sign service level agreements with AYO for the duration of their tenure, while their fees recommended by the committee, ratified by the Board and tabled for final approval by all shareholders at the AGM. The directors’ fees for the financial year, were approved with 99.94% vote at the 2021 AGM.
During the reporting period, AYO faced unprecedented operational, regulatory and legal challenges, which necessitated the hands-on involvement and high-level engagement of non-executive directors, over and above their Board and committee duties. Thus, additional consulting fees were awarded for the financial year, commensurate to the further demands placed on the relevant individuals. For absolute transparency and in line with section 30(4) of the Companies Act, all directors’ and consulting fees are presented in the table below.
| Director's fees | Consulting fees | Total | |
|---|---|---|---|
| Dr W Mqoqi | 1 181 250 | 100 000 | 1 281 250 |
| A Amod | 787 500 | 900 000 | 1 687 500 |
| Dr D George | 866 250 | 100 000 | 966 250 |
| R Mosia | 708 750 | 100 000 | 808 750 |
| S Rasethaba | 284 710 | 160 050 | 444 760 |
| Adv Dr N Ramathlodi | 393 750 | 100 000 | 493 750 |
| Prof L Fourie | 393 750 | 100 000 | 493 750 |
STAKEHOLDER ENGAGEMENT
In drafting and amending the remuneration policy, the committee utilises a stakeholder-inclusive approach, considering the legitimate expectations of shareholders, employees and all other interested stakeholders. We publish the approved document on the AYO website (at www.ayotsl.com under the corporate governance tab) and are willing and available to engage in any discussion relating to the policy with any interested party. Both the policy and the implementation report for the particular year are presented to shareholders for a separate non-binding advisory vote at the AGM, as stipulated in paragraph 3.84 (k) of the JSE Listing Requirements, and in the event that less than 75% support is obtained for either of the two resolutions, we invite dissenting shareholders for further engagement thereafter.
Unfortunately, yet again in 2021, both resolutions received 66.26% positive votes. At the risk of coming across critical, I feel it is important to note that for the third consecutive period, we are meeting this kind of resistance from the exact same shareholding cluster, yet despite our official invitations via JSE SENS and our direct invitations, these dissenting shareholders decline our engagement calls. This is not an AYO-specific phenomenon and even the Effective Stakeholder Engagement Guidance Paper, published by the Institute of Directors South Africa in May 2021, devotes an entire section to what they dub “stakeholder apathy” and refers to it as a prevalent problem.
Effective engagement is not possible without the participation of both the governing body and the shareholder. The committee is of the view that the AGM is a sufficiently well-understood and formal platform for engagement on the subject of remuneration. Yet, it is grossly underexploited, as key shareholders do not allocate adequate time and resources to this important forum, but instead opt to cast their vote via proxy, who does not have the authority or qualified knowledge to engage in a meaningful manner. Thus, for the upcoming financial year, the committee is considering proactive engagement with key shareholders before the AGM, in an effort to establish transparent lines of communication and secure the support of a wider shareholder base. Should we be unsuccessful with this pre-emptive approach and again receive less than 75% supporting votes, we will once more invite stakeholders to a meaningful discussion and consider their input in future amendments of the remuneration policy.
Aziza Amod
Chair of Remuneration Committee
17 December 2021