2012 Integrated report - Sappi

Governance and compensation continued
Compensation report continued
fund and the company’s contributions in total during 2012 was
37.8% of base salary. This includes a contribution increase all
pension fund members received so that the solvency status of the
pension fund met the requirements of the South African Financial
Services Board.
No additional payments were made to any retirement funds
on behalf of the executive directors.
Short term incentive
The annual management incentive scheme bonus is determined
by the achievement of pre-determined targets. At the beginning of
the financial year, the board approves a budget with financial
targets for the group.
Executive directors and other key senior managers participate in
the annual management incentive scheme.
Cash bonuses are earned based on achieving both the financial
criteria targets for the business unit in which the individual is
working (80%) and individual performance objectives (20%).
The performance measures for the management incentive
scheme for 2012 were Operating Profit (60%), Working Capital
(30%) and Capital Expenditure (10%).
A performance threshold of 75% of Operating Profit is required
before a bonus can be paid.
If the group or business unit did not achieve a minimum of 75% of
the Operating Profit target for that year, no bonus is paid to the
participants in either the group or business unit for that year.
No bonus will be paid to participants in Sappi Fine Paper North
America this year, as they did not meet the performance threshold.
In exceptional circumstances, in recognition of new business
goals or major unplanned events, the committee has the right to
exercise its discretion in authorising adjustments to financial and
individual performance targets, which it deems appropriate when
evaluating performance against targets at financial year end.
Group executive bonus payments for financial year 2012, which
will be paid in December 2012, were calculated on the
achievement of financial targets of 52.2% for the group.
Weighting Target points
2012 Actual
achievement
Operating profit 60% 48 8.16
Working capital 30% 24 36.00
Capital expenditure 10% 8 8.00
80 52.16
In December 2012 it is estimated that Mr Boëttger will receive a
bonus payout of US$483,471 (64% of base salary) and that
Mr Binnie will receive a bonus payout of US$53,282 (15% of base
salary). Mr Binnie was appointed in July 2012 and his bonus
payout is pro-rated for the period he worked for the group.
Mr Thompson, who was the CFO until the end of August 2012,
will receive an estimated bonus payout of US$228,274 (56% of his
base salary). Mr Thompson’s bonus will be pro-rated for the
11 months he worked in the 2012 financial year.
The bonuses paid in December 2012 fall within the 2013 financial
year and relates to performance in the 2012 financial year.
Mr Boëttger has voluntarily offered to buy Sappi shares with 40%
of his post-tax 2012 cash bonus and to hold these for a period of
three years.
In December 2011, which was in the 2012 financial year,
Mr Boëttger received a bonus of US$669,438 and Mr Thompson
received a bonus of US$288,872. These bonuses relate to
performance in the 2011 financial year.
Bonus award targets
Target bonus
as % of
base salary
Maximum
bonus % of
base salary
that can
be earned
Group CEO 85 116
Regional CEOs 70 95
Executive management 65 88.5
For 2013, a number of changes have been made to the annual
management incentive scheme rules:
> The general rules of the scheme have changed by replacing
Capital Expenditure with Safety as a performance measure.
Safety targets will be based on a rolling 12-month average
performance of Lost-Time Injury Frequency Rates set to be in
the upper quartile of the industry in which the business unit is
located. If no industry benchmark exists, the target is set at
equal or better than the average of the last three years.
Should one or more fatalities occur within a region, the CEO of
the group may recommend that the management incentive
scheme of those accountable and responsible for Safety at a
mill and/or region, be negatively impacted.
The committee may exercise its discretion in line with the rules
of the management incentive scheme and decide that the
management incentive scheme award of the group CEO and
anyone else who they deem responsible for a poor safety
record, also be negatively impacted.
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