Full integrated annual report - African Bank - Investoreports

Remuneration policy of African Bank Investments Limited
continued
Long term incentive plans (LTIP)
The LTIP is a cash-settled, share appreciation scheme, modelled on the performance of ABIL shares, which
is awarded to employees generally at management level and higher. Qualifying participants are awarded a
certain value of LTIPs each year, with the instrument structured as follows:
The total LTIP award, plus an additional gearing of between 100% and 200% of the award amount
(2010: 100%) achieved through a notional loan, is synthetically “invested” into ABIL shares, i.e. assuming
an award of R50 000 LTIPs, it would result in between R100 000 and R150 000 being notionally invested in
ABIL shares. The gearing varies from 100% for staff, 150% for senior management and 200% for executives
and executive directors.
The entry price is set at the ABIL volume-weighted average price (VWAP) for the calendar month of issue
of the LTIPs, being September of each year. The settlement value is determined with reference to the
VWAP for the month of vesting.
Interest is accrued on the notional loan on a semi-annual basis and the dividends paid on the synthetic
ABIL shares (grossed up at the corporate tax rate) are applied to reduce the loan balance. The interest
rate charged on the notional loan is market-related.
The value of the LTIP from time to time, is the market value of the synthetic ABIL shares, less the remaining
balance on the notional loan after accruing interest and notional dividends.
The LTIP vests over fi ve years (2010: four years) on the following ratio 15:20:20:20:25 (2010: 25% each
year). Employees will be given the ability as from this year to roll-over a tranche into the following year or
years, which must be done prior to each vesting period. Any LTIP rolled over will be subject to the same
forfeiture rules in the event the employee resigns or is dismissed prior to the new vesting date.
The LTIP is paid out at market value, based on the ABIL VWAP for the calendar month of maturity. Should
the individual resign or be dismissed, the unvested LTIPs will be forfeited and cancelled.
Each year a new LTIP will be created which will run parallel to existing LTIPs resulting in a maximum of fi ve
separate LTIPs running concurrently.
A greater portion of the incentives for the executives are granted through LTIPs so as to ensure that their
performance is balanced more towards a longer term sustainable performance of the group linked to the
execution of the strategy as approved by the board. Performance is also assessed departmentally using
scorecards that assess performance against predetermined criteria.
Award criteria
The quantum of all short and long term incentives actually awarded to each individual is determined having
regard to the individual’s own performance against pre-agreed key responsibility areas (KRAs) which are
set and agreed early during each fi nancial year between the individual and their manager. Performance
assessments are conducted immediately after the end of the fi nancial year which then determines the
performance rating of the individual. No incentives are paid to employees or executives where the performance
rating refl ects below an agreed expected level for the role employed. An element of the incentive is also
dependent on the business unit/department’s performance and the company’s and group’s performance as
a whole so as to encourage teamwork.
Non-executive directors’ fees
Non-executive directors’ fees are benchmarked against the market every three to four years having regard to the
nature of the business, complexity, skills needed, qualifi cations, experience, time demanded from the individual,
etc. Annual increases outside of this adjustment are generally at or slightly higher than that granted to the
executive directors of ABIL. No bonuses or incentives are paid or awarded to the non-executive directors.
Conclusion
The board, through Remco, applies the above policies having regard to the markets in which the group
operates and improving them where necessary to achieve the group’s objectives.
112 Integrated report 2011 | African Bank Investments Limited