2008 Annual report - Sappi

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Compensation report Compensation committee Sappi has a dedicated board committee that determines governance of compensation matters, group compensation philosophy, compensation of executive directors and other senior managers as well as the compensation of non-executive directors which is approved by the board and ultimately by the shareholders. The compensation committee meets twice a year and holds special meetings on an ad hoc basis when necessary. Attendance at these meetings is set out in the Corporate Governance section on page 65. The committee comprises five independent nonexecutive directors (one of whom serves as a chairperson). Members of the committee during fiscal 2008 were Mr D C Brink (chairman); Prof M Feldberg; Mr H C Mamsch; Mr J D McKenzie and Sir A N R Rudd. At the invitation of the committee, Dr D C Cronjé (group chairman), Mr R J Boëttger (group chief executive officer) and Ms L Swartz (group head human resources) attended meetings except where matters pertaining to their own compensation were considered. Mr D J O’Connor (group company secretary) also attended meetings by invitation. Compensation committee mandate The compensation committee is responsible for: • Ensuring that the compensation philosophy and practices of the group are aligned to the strategy and performance goals; • Reviewing the compensation of company directors and senior executives to ensure that they are fairly rewarded based on their performance and contribution to the company’s overall performance and that the compensation packages are market related; • Satisfying shareholders that the senior executive compensation is set by a committee of board members who are independent and who will give due regard to the interests of the shareholders and to the financial and commercial health of the group; • Reviewing and agreeing of proposals (submitted by the group executive committee) on the fees and benefits of non-executive directors, including reference to external benchmarks, and to make recommendations to the board. Compensation philosophy Underpinning our compensation practices is a philosophy that is based on the following principles: • Reward people fairly and equitably in relation to job levels, experience and the employment market; • Achieve competitive compensation levels, which enables the group to attract and retain talented individuals; • Align the interests of management with those of the group’s shareholders; • Implement a globally consistent pay philosophy with regional application to local market practices. Our compensation practice aims to meet the following objectives: • Attract, retain and motivate high calibre employees at all levels; • Reward individuals and teams for their contribution and performance that delivers on the business objectives; • Encourage behaviour which is linked to the six core Sappi Leadership Competencies (leading others, strategic thinking, operational delivery, driving change, commercial insight and self-awareness) and/or group values (excellence, integrity and respect). Compensation structures Our compensation structures comprise of fixed and variable components: Fixed pay: Variable pay: base salary and benefits annual performance bonus and long-term share incentive programmes Base salary Base salary is targeted at the median of the market for comparable roles in companies of similar size. Market data is used to benchmark salary levels and to inform decisions on base salary changes. Salaries are reviewed annually and an individual’s performance is a key consideration. Retirement benefits Across the group and based on the location, employees are offered membership in a defined benefit or a defined contribution fund. 70
sappi In certain European jurisdictions, retirement benefits are provided by the state through the social security system. The design of both the defined benefit and contribution schemes in Europe takes into account these social security benefits when determining the contribution tables and final pensions earned. Contributions to plans are either contributory or non-con - tributory. A number of defined benefit plans in the group have been closed to new entrants. Employees who participate in these legacy defined benefit plans continue to accrue benefits in such plans. Other benefits These include benefits such as medical insurance, death and disability insurance, vehicle benefits, leave and recognition for service, and are applied where applicable in respective regions and employee categories. participate in the share scheme received share options under the Share Incentive Scheme. Long-term incentives are intended to be a key retention tool. Details of The Sappi Limited Share Incentive Trust and The Sappi Limited Performance Share Incentive Plan can be found in note 29 on page 144. • Service contracts and notice provisions The group chief executive officer and his direct reports all have employment contracts which outline the required notice periods in the event of a termination of employment. The notice terms vary from six months to 18 months, and include base salary plus benefits, for that period. Variable pay • Short-term incentives Executive directors and other key management personnel throughout the group participate in an annual management incentive scheme. Incentive target awards range from 15% to 85% of base salary. The key business performance criteria for the 2008 financial year were operating income, working capital and capital expenditure. All other employees participate in either sales incentive plans, performance bonus schemes or receive discretionary bonuses or a thirteenth cheque payment. Payments in terms of short-term incentives are dependent upon achievement of the business performance targets or production/sales targets being met or exceeded in addition to an employee’s individual performance. • Long-term incentive programmes The group operates two long-term incentive programmes: the Sappi Share Incentive Scheme and the Performance Share Incentive Plan. For 2008, executive directors and other key management personnel received share allocations under the Performance Share Incentive Plan. All other employees who are eligible to // 2008 Annual report 71
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annual report 2008
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sappi Our report in overview In pro
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sappi Our performance The group’s
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sappi Target Target Net debt to tot
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sappi Our score on the DJSI World D
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sappi People continued Our commitme
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sappi Our business structure Johann
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sappi Pulp Paper pulp is the main r
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sappi Ideas that matter Print remai
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sappi Objectives for 2009 Meaningf
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Page 35 and 36: sappi Transaction funding overview
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Page 42 and 43: Risk management Our top risks These
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Page 46 and 47: Chief financial officer’s report
Page 60 and 61: Five year review Not restated for I
Page 62 and 63: Share statistics at September 2008
Page 64 and 65: Corporate governance We are committ
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Page 74 and 75: Annual financial statements for the
Page 76 and 77: Directors’ approval The directors
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Page 80 and 81: Group income statement for the year
Page 82 and 83: Group cash flow statement for the y
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Notes to the group annual financial
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Condensed Sappi Limited company inc
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Condensed Sappi Limited company cas
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Notes to the condensed Sappi Limite
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Glossary General definitions bleach
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Glossary // continued Non-GAAP fina
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Notice to shareholders // continued
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Notice to shareholders // continued
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Shareholder’s diary Annual genera
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Notes to proxy The form of proxy mu
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Notes 1. To be effective, this form
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Notes 1. To be effective, this form
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2008 Annual report - Sappi

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