Full annual report - African Bank - Investoreports

■ Gearing was increased from 50% of the award value to
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100%, 150% and 200% depending on seniority in the
organisation with employees at 100%, management at
150% and executives at 200%.
The vesting period was lengthened in line with the
recommendation in King III to ensure that long term
incentives do not provide any material benefits before three
years. This phase out of vesting in year one and year two will
continue in future years until the ABIL executives do not have
any LTIPs vesting within three years of award date.
The gearing was increased so as to afford participants with a
potential for greater upside, but more importantly ensuring
that the ABIL executives are at greater risk in the event of a
reduction in the ABIL ordinary share price, thus aligning their
interest more closely to that of shareholders.
Changes effected in respect of 2012 long term incentives:
LTIP2012
The issue price of the LTIP2012 has been changed from the
September VWAP to a 90-day VWAP using the calendar
months of September, October and November. The reason
for this change is that the annual results are only released to
the market in November each year and the September price
does not therefore necessarily reflect the year’s performance
for which the LTIPs are granted. Similarly the vesting price will
be the 90-day price for the same months. The move from a
30-day to 90-day VWAP is to take into account the share price
post the release of the final results, minimise the impact of
temporary share price volatility on the LTIPs and also align to
the fact that they are awarded in November of each year
rather than September.
In addition, the gearing has been set at compulsory 100%
of the award value for all participants with the option for
the African Bank and Ellerine Furnishers members of the
executive management committee entitled to elect a
further gearing equal to 50% of award value. This will take
the maximum gearing to 150% of the award value. The
ABIL executive management committee members are
entitled to elect a further gearing equal to 100% of the
award value which then translates to a maximum gearing of
200% of award value. It was felt inappropriate to force all
participants to take on more risk but rather to give the
executives the elective to increase their risk under the LTIP
should they so choose.
All other terms and conditions remain as those applicable to
the LTIP2011.
Deferred bonus
Participants who would have qualified for LTIP2012 awards
of R100 000 or less were given deferred bonuses. These
deferred bonuses vest equally over three years commencing
30 September 2013. If the employee resigns prior to the
vesting date, all unvested portions of the bonus are forfeit.
Remuneration governance
The group remuneration and transformation committee is a
subcommittee of the main board which comprises three
independent non-executive directors. This committee is
tasked with assisting the board in formulating and monitoring
the implementation of the group’s transformation and
remuneration policies. The group’s policies are applicable to
all subsidiaries including the foreign subsidiaries in Ellerines.
Details of the directors comprising this committee and its
activities are disclosed in the corporate governance report.
The board has delegated, through a documented charter, to
the group remuneration and transformation committee
certain responsibilities and powers which include the following:
■ Monitoring the group’s human resources policies, practices
and procedures to ensure they are relevant, dynamic,
competitive and aligned at all times to the strategy of
the group.
■ Monitoring the development and implementation of
transformation and employment equity policies as a
business imperative, with special focus on senior
management and at the executive level.
■ Approving the group’s overall remuneration philosophy,
including the structure of the monthly total cost to
company (CTC), the incentive and retention schemes and
performance measurement systems and criteria.
■ Reviewing and approving the overall incentive pools for
each financial year, in accordance with the group’s
approved incentive policy and schemes, taking into
account the ever changing competitive landscape and
customer needs.
■ Determining and recommending to the board of directors
for approval, the CTC and incentive allocations for
executive directors and members of the ABIL executive
management committee and the allocation between
short term and long term incentives for the wider group.
■ Reviewing and recommending to the board of directors for
approval, the remuneration of non-executive directors
based on recommendations from the executive directors.
■ Ensuring that there is timeous, adequate and appropriate
succession planning for all senior executives and key
positions across the group.