PART 2: REMUNERATION POLICY OVERVIEW
ADvTECH seeks to attract, retain, reward and develop high performing individuals within the group to promote the achievement of its strategic objectives and to ensure the group's long-term sustainability. As such, the group is committed to ensuring it remunerates fairly, responsibly and transparently in order to promote and advance diversity and transformation within the group.
We have developed competencies for identified key roles which, together with psychometric assessments, are used to validate the people we hire. It is our policy to implement performance goals against which we measure each individual's performance and reward. Our reward incentive structures are based on both short-term incentives and long-term incentives.
The following key principles of our philosophy shape and guide our remuneration policy and support value creation:
- Attracting crucial skills to provide world-class education and recruitment.
- Rewarding our employees for achieving strategic and operational priorities which in turn strengthens our ability to retain talented individuals.
- Short-term incentives to recognise superior performance.
- Long-term incentives as a retention and reward mechanism for key executives and managers to ensure continued alignment between management and stakeholder objectives for the long-term sustainability of the business.
The RemCom seeks to entrench a culture of high performance by aligning the group's remuneration philosophy with its business objectives, values and strategy. It also ensures that remuneration practices are based on principles of sound governance.
The independence of RemCom in determining the remuneration and bonus policies for all employees, and in reviewing and approving of remuneration and bonuses payable to executive management, is key to this process.
Conditions of employment are reviewed from time to time against best practice and, where necessary, improvements to conditions of employment are implemented with due regard to the cost implications and their impact on staff. In an education environment, non-material aspects (such as study leave and study assistance) are welcomed by employees.
A review of the remuneration policy and its implementation is therefore undertaken annually to ensure that it fulfils its purpose.
The guaranteed remuneration and other benefits of executive directors, prescribed officers and other key senior executives are benchmarked periodically against the market and are aligned with group performance to ensure that remuneration packages remain competitive and appropriate.
Non-executive fees are benchmarked annually with the assistance of external consultants.
ADvTECH's remuneration structure consists of the three core elements:
- Guaranteed remuneration;
- Short-term incentive; and
- Long-term incentive.
Remuneration is structured to attract and retain outstanding individuals and provide incentives for exceptional performance. This is achieved through a combination of guaranteed remuneration, incentive rewards of a short and long-term nature and conditions of service. Guidance is provided in the group's integrated remuneration policy, which seeks to combine and calibrate all forms of remuneration. Executive management is offered a remuneration structure similar to that of senior employees and management, and which consists of the same three elements.
Executive remuneration structure
Our remuneration policy seeks to achieve a suitable balance between guaranteed and variable remuneration. Variable short-term incentives and long-term incentives are each limited to a maximum of 100% for the group CEO of his guaranteed remuneration and 80% for the group FD.
The group CEO and group FD's total achievable remuneration packages are therefore made up as follows based on the maximum targets under the short- and long-term incentives schemes:
The RemCom considers this to be an appropriate mix to reward achievement of both short-term and long-term objectives.
Long-term incentives: MSI Scheme
The MSI scheme which was approved at the AGM held on 31 May 2017 replaced the previous Share Incentive Scheme 2010 ('old scheme') that had been in operation since 18 May 2010. Annual awards of forfeitable shares in the form of performance and retention shares are made to eligible participants.
The shares automatically vest in full after three years, on the achievement of the set targets and provided the individual is in employment on the vesting date and a minimum individual performance rating has been achieved over the three-year period.
The first award (a total of 1 781 289 shares) was made on
28 September 2017 and vests in 2020. The second award (a total of 2 266 166 shares) was made on the 27 September 2018 and vests in 2021. Unvested shares carry dividend rights and voting rights. In order to be eligible to receive an award of forfeitable shares under the new MSI, participants were required to relinquish their rights under the old scheme and all rights to vesting of the old scheme from 2021 onwards were forfeited.
When considering retention, the RemCom takes the following into account:
- Business critical skills;
- Scarce skills;
- Succession planning; and
- Top performers.
The split in shares under the award favours performance-based targets over retention-based awards, with weightings being 75% performance and 25% retention for executives, and 60% performance and 40% retention for other participants.
The MSI scheme has been designed to promote:
- good performance in relation to predetermined performance objectives;
- retention of valuable skills and experience; and
- better alignment of executive management with shareholders.
The objectives are:
- drive the longer-term strategic and sustainable performance of ADvTECH
- motivate participants to achieve the strategic objectives, thereby aligning shareholder and management interests
- reward management for their contribution to the delivery of the long-term strategic objectives
- attract future key talent in a competitive market with market-related variable earnings > retain key talent to ensure sustainable performance of ADvTECH
- facilitate succession planning
- alignment with current market practice and King IV™
Executive directors, prescribed officers, senior executives and managers participate in the MSI scheme.
The RemCom has approved the following performance conditions and targets:
- achievement of the minimum average growth in normalised earnings per share (NEPS) target
- achievement of the minimum return on funds employed target
- achievement of a minimum individual performance rating
The participant must still be in the employ of the group at vesting date.
The RemCom has absolute discretion in the interpretation and application of the rules to the MSI to determine the following:
- individual participants based upon retention need
- level of awards based on market benchmarks
- allocation of awards between performance and retention share
- classification of termination (good or bad leaver) on a case-by-case basis
- performance measures, weightings and targets
- vesting period and basis of vesting
Termination of employment or office
Non-executive directors are appointed in terms of a formal letter of acceptance and are not required to service notice periods.
Executive directors, prescribed officers and other key senior management are employed on standard employment agreements. Employment contracts for executive management do not provide for termination payments arising from incapacity, dismissal, voluntary resignation, retirement, retrenchment or redundancy. In addition, no contracted balloon payments are due to executives upon termination.
The following notice periods are in place:
Voting on the Remuneration Policy
The shareholders of ADvTECH will be requested to cast a non-binding advisory vote on the remuneration policy at the AGM on 30 May 2019.
Our remuneration policy sets out the principles used to ensure competitive remuneration while complying with all applicable laws and codes. It applies to the payments, accruals and awards made to executive directors, non-executive directors, senior executives and prescribed officers for the year ended 31 December 2018.