Mr EJ Myburgh
I am pleased to present the remuneration and nomination committee report for the year ended 31 December 2019
The remuneration and nomination committee is constituted as a committee of the board of directors of the company in terms of section 72 of the Companies Act, the company's memorandum of incorporation, the JSE Listings Requirements and King IVTM.
The role of this committee is to provide an independent and objective oversight to assist the board in ensuring that the group remunerates fairly, responsibly and in a transparent manner so as to promote the achievement of the company's strategic objectives and positive outcomes in the short, medium and long term.
The remuneration and nomination committee is responsible for determining the specific remuneration packages of executive directors of the company and the group company secretary, based on the principles of the approved remuneration policy. It furthermore considers the results of the performance evaluation of the chief executive officer and the finance director, as directors and as executives, as well as that of the group company secretary, in determining their remuneration.
It is also this committee's responsibility to annually review the board structure, size and composition, and to make recommendations to the board with regard to any adjustments that are deemed necessary based on King IVTM as well as the targets set for race and gender representation. It has a similar responsibility in respect of the composition of all committees of the board.
The board ensures that members of this committee have a suitably balanced blend of skills and experience to enable the committee to discharge its functions. The committee consists of a majority of independent non-executive directors. Attendees include the chief executive officer, finance director, executive head: human resources and other individuals with specific skills and expertise to assist members in their deliberations.
Four meetings were held by the committee during 2019. Committee attendance throughout the year illustrates high levels of commitment and engagement by our committee members. The following table provides an overview of member designations and attendance since appointment.
|Mr EJ Myburgh||Independent non-executive director and chairman||100|
|Ms GJ Fraser-Moleketi||Independent non-executive director||100|
|Mr VZ Mntambo||Non-executive director||100|
|Mr J van Rooyen||Independent non-executive director||100|
As part of the annual review of the board composition, this committee considered the rotation of directors as well as the succession plan for key positions on the board and the company's executive directors. In addition, the committee also conducted formal assessments of all independent non-executive directors who have served for longer than nine years and reported to the board on the outcome of such assessment.
The board has recognised the importance and promotion of broader diversity at board level, specifically focusing on the diversity attributes of gender, race, culture, age, field of expertise, skills and experience. The new appointments to be made to the board, following the resignations of two of our female directors, will apply the policy of broad diversity in the nomination of new directors to the shareholders for appointment.
Remuneration policy review
The Exxaro remuneration philosophy and policy were submitted for an independent review, following which the committee considered the recommendations and implementation plan. The committee also considered the feedback from the investor roadshow on the remuneration philosophy and policy as well as the implementation plan.
The committee considered the results of the performance evaluation of the chief executive officer and the finance director, as directors and as executives, as well as that of the group company secretary, in determining their remuneration. Details of the assessments are included in the remuneration report.
Additional targeted voluntary packages were offered to white male and female employees at the company's head office, and white male employees at the mining operations, with the objective of closing the gender gap as well as to achieve new transformation targets. The process was monitored by this committee.
In addressing the workforce demographic representation, management has been requested to ensure that the skills loss risk is mitigated across the organisation. A total of 225 targeted voluntary package applications were approved, based on the availability and readiness of employment equity successors in the internal pipeline and external market, the exit date and level of criticality of the position.
Feedback was given to this committee following on the engagement with institutional investors to understand and address their concerns regarding the Exxaro remuneration policy. The committee requested management to re-visit the remuneration policy and implementation plan to include KPIs to address social impact within the various areas of responsibility and also requested that performance criteria in respect of ESG be highlighted in the strategic performance dashboard.
This was done after a remuneration governance roadshow was convened (following the vote at the AGM of 2019) with institutional investors during the month of October to ensure that shareholder concerns were incorporated into the revised remuneration philosophy and policy of Exxaro.
Key performance indicators
|KPIs in 2019||Evaluation|
|Review remuneration and nomination committee KPIs quarterly and understand management plans for out of appetite KPIs and periodically review management plans||Achieved|
|Review the remuneration philosophy and policy and ensure implementation of the Deloitte recommendations, including whether Exxaro's employees are remunerated adequately||Achieved|
|Review whether a gender-based disparity gap exists||Achieved|
|Review the Exxaro people strategy and ensure alignment with the Exxaro strategy (including workforce of the future strategy)||Achieved|
|Review whether FullCo (full calendar operation system shift) is achieving the desired objectives||Achieved|
|Review the employment equity plan in support of the overall Exxaro strategy||Achieved|
|Track the implementation of the new Exxaro culture journey||Achieved|
KPIs in 2020
|Remuneration committee||Nomination committee|
|Review whether the current remuneration and nomination committee KPIs are still relevant and in line with the new approved strategy and consider new ESG targets for STI and LTIP||Consider skills and experience requirements of the board in light of the proposed new strategy|
|Once approved, review remuneration and nomination committee KPIs quarterly and understand management plans for out of appetite KPIs and periodically review management plans with enhancements requested in 2019||Consider the size of the board and capacity of board members|
|Oversee the review of the remuneration philosophy and policy for adoption by the board and ultimate adoption by shareholders and consider the recommendation by investors as solicited in the 2019 remuneration roadshow||Consider the independence of board members|
|Review non-executive director remuneration, especially the gap between the current committees||Consider nominees for appointment to the board in light of the vacancies|
|Review the Exxaro people strategy and value proposition||Conduct the required fit and proper assessment of board members for approval by shareholders|
|Review workforce transition requirements to support the new Exxaro strategy||Conduct board succession planning|
The effectiveness and performance of the committee was independently evaluated during the reporting period. Generally, the committee seems to be satisfied with its performance and effectiveness.
Herewith the themes that formed part of the assessment (four being the highest rating representing "In line with best practice" and one "needs significant improvement") and the ratings achieved
Highlights of the assessment were:
The following matters were noted as those which the committee conducted correctly during the period under review:
It was specifically recommended that the committee, under the leadership of the committee chair and in consultation with management, interrogated the items that received ratings below 3.00 with a view to identifying interventions that will assist the committee in strengthening its performance and oversight role in the relevant areas. All the recommendations made, as well as points to ponder, will be included in the committee's annual work plan for 2020.
The company was voted as the second-most popular employer of choice in the mining and resources sector by successful job seekers, which was announced at the annual employer awards by the South African Graduate Employers Association. The accolade was regarded by the committee as a validation of the fulfilment of its responsibility to the board.
The committee, in carrying out its duties, has due regard to the principles and recommended practices of King IV and discharged its responsibilities in accordance with its terms of reference. The committee is furthermore satisfied that it has fulfilled its mandate in terms of the regulations to the Companies Act, and that there are no material instances of non-compliance to disclose and, if any material non-compliance existed, that it was duly considered.
On behalf of the committee
Mr EJ Myburgh
20 April 2020