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228 NEDBANK GROUP Limited INTEGRATED REPORT 2010The committee is confident that the remuneration policy aligns theinterests of management with shareholders and ensures that proper riskand performance-based remuneration is applied.See page 237 for the complete remuneration policy. The policy issupported by all committee decisions, scheme rules, approved practicesand operational procedures.Components of total remunerationGuaranteed packageAll staffmembers of Nedbank Group are remunerated on a total-cost-tocompanybasis (‘the guaranteed package’), which includes a basic salary,13th cheque (if selected), allowances and contributions to benefit funds,except for staffmembers employed in some non-SA countries where thepractice is still to pay a basic salary plus benefits.Contributions from the guaranteed package (GP) can be made to theNedgroup Medical Aid Scheme, a postretirement medical aid fund,a retirement fund (compulsory), a disability fund and a death benefitscheme. A car allowance/company car contribution may be structuredinto the package where the employee is required to travel on groupbusiness, subject to the requirements of the relevant tax authorities.Annual increases in guaranteed remuneration are performance- andmarket-related, based on the local rate of inflation, increases awardedby the relevant peer group, individual performance and affordability.To maintain appropriate remuneration competitiveness relative to thelabour market individual remuneration is reviewed regularly and annualincreases take effect on 1 April.For South Africa, most non-managerial staffmembers are covered undera collective bargaining agreement with SASBO and IBSA respectively. InApril 2010 the non-managerial remuneration bill was increased by 8,5%,and the managerial and executive remuneration bill by 6,5% and 5%respectively.Retirement schemesThe majority of staffmembers as well as all appointees since 1 January 1994are members of the Nedgroup Defined-contribution Pension or ProvidentFund, with a flexible investment choice. At 31 December 2010 a total of7 100 staffmembers are members of the Defined-contribution Pension Fundand 17 078 members of the Defined-contribution Provident Fund.Nedbank Group also has the closed defined-benefit Nedgroup Pension Fundwith 364 active members and 2 933 pensioners at 31 December 2010. TheNedgroup Pension Fund is fully funded with an actuarial surplus.Signon bonusesIn February 2010 the committee approved a signon bonus pool fromwhich the Chief Executive could allocate bonuses, at his discretion, onrecommendation of the responsible Group Exco member to prospectivestaffmembers who meet specific eligibility criteria. The intentionof a signon bonus is to act as a recruitment incentive to aid in talentattraction and compensate for potential loss of benefits from the previousemployer. For the financial year ended 31 December 2010 R5,4 millionwas allocated to key staff, with such allocations having been reviewedand ratified by the committee.Short-term incentive schemesShort-term incentives (STIs) are intended to encourage particularbehaviours and obtain desired results within the agreed risk appetiteframework. In the Nedbank Group environment the STI scheme is alsoreferred to as the annual performance bonus. Nedbank Group’s STIschemes are structured to support collaborative work across differentclusters. The committee has agreed a set of principles and all group andcluster incentive schemes are designed according to those principles.Performance is measured at a group and business unit level againstagreed targets after the finalisation of the audited year-end results.The incentive pools for all support clusters are based on a combinationof performance relative to the targets in respect of economic profit(EP), headline earnings and cluster specific non-financial performancescorecards.In the income-generating clusters incentive pools are structured with aweighting linked to the group, cluster and, where appropriate, divisionalperformance. The five income-generating clusters within Nedbank (Capital,Corporate, Business Banking, Retail and Wealth) are measured against acombination of performance targets namely EP, headline earnings and nonfinancialtargets. As in previous years, the committee continues to institutea control limit whereby there may be no more than a 10% variancebetween the group topdown performance calculation and the independentbottomup cluster performance calculations.Distribution of these STI pools is on a discretionary basis is alignedwith market practice and utilises individual performance relative to theagreed deliverables in the performance management process. To take fullcognisance of long-term sustainability of performance a portion of theSTI earned above a threshold is deferred and remains at risk over a futuresettlement period.The year-on-year change in the STI pool was broadly aligned with thechange in headline earnings. The scheme incorporates non-financialmetrics and thus the 2010 pool has an element of additional rewardas a result of the outperformance of the group against its non-financialtargets. However, the 2010 STI pool is still smaller than the 2007 STI pool.The table below shows the STI pools for the 2009 and 2010 financial years:FY2009FY2010Year-on-year% changeHeadline earnings 4 277 4 900 +15%EP 57 (289) n/aSTI 833 981 +18%While economic conditions have improved since 2009, the globalrecovery remains muted and uneven. Financial targets, which were settaking into account the deteriorating macroenvironment, were largelymet during 2010.
229Reports andcertificationsConsolidatedannual financialstatementsShareholdermeeting mattersDefinitions andabbreviationsInstrumentcodesContactdetailsremuneration reportAll individual STI payments in excess of 200% of GP are individuallymotivated by the respective Group Exco members and individuallysigned off by the committee. For the 2009 financial year the committeeapproved 11 STI payments in excess of 200% of GP.Refer to the table below for the distribution of the STI/GP ratio for allstaffmembers for financial year 2009. The data for financial year 2010will be included in the 2011 Remuneration Report:1,2%distribution of the STI/gp ratio9,8%63,9%STI Deferral SchemeIn line with best practice, from financial year 2009 the group implementeda scheme for the compulsory deferral of STI awards earned in excess ofR1 million.For financial year 2010 STIs, payable in 2011, the committee agreed tooffer the following deferral choices:Basis of the deferral25% between R1 and R3m and 50% in excess of R3mCash Deferral Scheme30 months – cash earns interestat a prime-linked call deposit rate.No matching option.Release and payment after6/18/30 months in equaltranches.24,6%Deferment period0,5%Maximum potential matchingRelease of forfeiture obligationno bonus100%Compulsory Bonus ShareScheme36 months.Matching will apply to thenumber of shares remaining atthe end of the 36-month vestingperiod, subject to the followingtwo conditions:0,5:1 still in employment.0,5:1 performance target being met.Release from forfeiture after6/18/30 months in equaltranches and matching only after36 months.For the scheme applicable to financial year 2009, 35% of participantsselected the Cash Deferral Scheme and 65% of participants selected theCompulsary Bonus Share Scheme.The committee also introduced a cash-settled compulsory STI deferral forall staffmembers employed in the United Kingdom earning a short-termincentive in excess of R1,5 million. No United Kingdom staffmembers earnedSTIs in excess of the threshold for financial year 2009, payable in 2010.During the last quarter of 2010 the committee approved the rulesapplicable to the financial year 2011, with STI allocations payable in2012. The changes are that 50% of STIs earned in excess of R1 millionwill be deferred into the Compulsary Bonus Share Scheme and that nocash option will be made available.For all deferral options, the deferred amount will be forfeited should theemployee resign before the end of the release of forfeiture obligationsas well as in cases where, in the sole opinion of the board, materialirregularities in or misrepresentation of financial results come to lightduring the deferral period. The board will have absolute discretion as tothe nature of any action to be taken against the individual, or grouping ofindividuals, who may be affected by the transgression. The deferral policywill be reviewed annually.Deferred short-term incentiveThe Chief Executive is granted a pool by the committee for the financialyear, within which he may make discretionary deferred short-termincentive (DSTI) allocations to specific individuals where their retentionis a concern. All DSTI payments are individually motivated by theresponsible Group Exco member and individually approved by the ChiefExecutive. All allocations are reviewed by the committee.The Chief Executive and members of the Group Exco are excluded fromparticipating in the scheme, except in circumstances where they receivedan allocation prior to their appointment as a Group Exco member.During 2010 a total of R23,7 million was allocated and paid to specificstaffmembers.Participants leaving the service of the group before the termination dateof the agreed deferral period are required to reimburse Nedbank Groupthe gross initial amount awarded.Long-term incentivesLong-term incentives (LTIs) are awarded with the primary aim ofretaining key staffmembers and aligning performance with the interestsof shareholders. The allocation of LTIs is discretionary and based on thefollowing key eligibility criteria:• Talent management strategy and succession plans• Retention of key talent/scarce skills• Transformation objectives• Higher potential/performance• Leadership pool• Cluster strategy and individuals key to driving the business strategyAll LTI allocations were motivated by the Group Exco and approved bythe committee.Criteria and the quantum of allocations are benchmarked annuallyagainst market practices. Furthermore, scheme rules and the applicationthereof are annually evaluated to ensure compliance with legislative andregulatory requirements.
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