Download PDF - Kumba Iron Ore

Both fixed and variable components are designed to ensure that
a substantial portion of the remuneration package is linked to the
achievement of the company’s strategic objectives, thereby aligning
incentives awarded to improving shareholder value.
A portion of the approved cash salary and the annual performance
incentive elements of the chief executive, Mr CI Griffith, and chief
financial officer, Mr VP Uren, were determined and paid in terms
of separate employment agreements concluded between Kumba
International Trading SA (KITSA) and the respective executive
director for services rendered outside South Africa.
The remuneration paid by KITSA is calculated according to the
time spent by the director on services performed offshore.
Fixed remuneration
Following established practice, the fixed salaries of executive
directors are reviewed every year in January. Adjustments to the
fixed packages are determined with reference to the scope and
nature of an individual’s role and their performance and experience.
The fixed packages are also compared with the median pay
ensure market competitiveness and performance excellence. The
review also takes into account any change in the scope of the role
performed by the individual, changes required to meet the principles
of the remuneration policy and market competitiveness. Reward
benchmarking is conducted bi-annually when reward elements are
compared with those of peer mining companies.
In addition to a basic cash salary, executive directors receive benefits
that include a contribution towards membership of one of the group’s
approved medical health care schemes, vehicle benefits, vehicle insurance
and security services. There are no other material benefits paid.
Retirement and risk benefits, including life cover and death-in-service
benefits are provided to executive directors subject to the rules of
the Kumba Selector Pension and Provident Funds. During the year,
contributions calculated as a percentage of the pensionable income
are paid to contributory retirement schemes established and/or
approved by the group and subject to the rules of the pension and
provident funds. The employer’s retirement contribution is 9.5% of
cost to company. The rate of contribution for each executive director
is calculated on the basis of the assumption that executive directors
will retire at the age of 60 years.
The basic salaries payable to the executive directors for the 2010
and 2011 financial year and proposed 2012 basic salaries are set
out in the table below:
2012
Basic
salary 1 2011
Basic
salary 2 2010
Basic
salary
CI Griffith 4,616 4,269 3,953
VP Uren – 3,504 3,197
1 Included in the 2012 salary above is EUR51,212 to CI Griffith by KITSA in
respect of services to be rendered in 2012.
2 Included in the 2011 salary above is EUR49,007 to CI Griffith and USD46,688
to VP Uren by KITSA in respect of services rendered as directors in 2011.
Annual performance incentives
In addition to fixed remuneration, each executive director participates
in an executive performance incentive scheme, the Bonus Share
Plan (the BSP). This incentive scheme is designed to reward and
motivate the achievement of agreed group financial, strategic and
performance objectives linked to the key performance areas of their
respective portfolios.
Cash awards under the BSP are determined annually, based on
performance in the previous financial year. Performance of the group
is assessed on various financial, business and strategic performance
criteria and metrics, targeting EBIT and ROCE. For executive directors’
cash awards, 50% will reflect the extent to which the company
achieved its financial targets in 2011. The balance of the cash awards
is determined by the extent to which certain personal strategic and
other performance objectives were achieved by each executive director
in 2011. Maximum earnings potential is set at 60% of annual BEC.
The group’s EBIT target is set at budgeted levels, with an entry
threshold at 95% and maximum payout at 110%. The group’s ROCE
target is set at budgeted levels, with an entry threshold at 30% and
maximum payout at 100%.
The performance targets for executive directors within Kumba’s
business operations will vary depending on business-specific
strategic value drivers and key objectives as approved by the board.
Focused value drivers derived from group business objectives
include targets agreed for growth, safety and employment equity to
ensure continued focus on these important business objectives.
In 2011 the CEO’s performance targets were as follows: Kumba
financial targets – 50%; Safety targets – 10%; Production and
sales – 20%; Anglo American plc earnings per share (EPS) – 10%;
strategic initiatives and projects – 10%.
In 2011 the CFO’s performance targets were as follows: Kumba
financial targets – 50%; safety targets – 10%; strategy execution,
asset optimisation and strategic projects – 40%.
In February 2011, the Remco considered an overall assessment of
the financial performance of the group for the 2010 financial year
and considered the personal performances of the participants in this
executive performance incentive scheme, against the agreed group
financial targets and the levels of achievement against their strategic
and other key performance objectives within their respective areas
of accountability. Following this, the Remco reported the outcome to
the board which then approved the annual incentives for 2010.
Long-term incentive plans
Executive directors and executive management participate in
one or more of the long-term incentive schemes described below
as proposed by the Remco and approved by the board:
since 2008);
Kumba Management Share Incentive Scheme (no grants awarded
since unbundling).
Audited annual financial statements
Annual Financial Statements 2011
21