Telkom Integrated Annual Report 2017

Remuneration
report

Role of the remuneration committee and terms of reference

The remuneration committee (remco) acts on behalf of the board in setting the remuneration policy of the group as a whole. It oversees total remuneration for executive directors and senior executives, monitors the execution of the remuneration policy for the organisation as a whole, including non-executives, and makes recommendations to the board.

The committee is responsible for:

• determining the remuneration policy for all employees, including the remuneration of executive directors and senior executives
• determining the total individual remuneration package of each of the executive directors including guaranteed package, benefits in kind, short-term incentive payments and share options. This includes undertaking an annual review, through performance appraisals conducted by the GCEO, of the performance of senior executives and reviewing their guaranteed packages based on the extent to which senior executives have met their performance targets, goals and objectives, as well as approving the annual guaranteed package increases for all other management and bargaining unit employees
• determining targets for performance-related incentive schemes implemented in the company
• seeking board and shareholder approval for any long-term incentive scheme and determining annual grants and share allocations to executive directors and senior executives
• annually reviewing the terms and conditions upon which the executive directors are employed and remunerated
• ensuring that contractual terms on termination and any payments made to executives are fair to both the individual and the company
• reviewing succession plans of executive directors and senior executives and ensuring a total company succession process is in place
• seeking board and shareholder approval for any substantial changes in the remuneration policy
• ensuring regular dialogue with shareholders, to create and maintain a mutual understanding of the meaning of performance and value creation, in order to properly evaluate the remuneration policy

Remco composition

The remco comprises of non-executive directors, all of whom are independent, including the chairman. Executives attending Remco meetings do so in an ex-officio capacity and attend by invitation as provided for in the committee’s terms of reference.

A quorum for a meeting is a majority of members. The following executives attend by invitation:

• SN Maseko (GCEO)
• IM Russell (chief administration officer) replaced by M Lekota (chief human resources officer)
• DJ Fredericks (group chief financial officer)
• JC Smit (group executive: total remuneration and performance management)

Refer to page 36 for the members of committee and meeting attendance.

 

Section 01

Remuneration philosophy and policy

To ensure we remunerate employees competitively, we use market and industry benchmarks. The benchmarking is conducted to determine appropriate market positioning offerings, which are higher than the minimum prescribed wages. In addition, Telkom recognises “equal pay for work of equal economic value”, and strives to remunerate employees doing the same work or substantially the same work, in the same range in accordance with the Labour Relations Act.

The Telkom remuneration strategy is designed to attract, motivate and retain high-calibre talent in a challenging business environment, and supports the delivery of our strategy in a sustainable manner without encouraging undue risks. As the market expands with operators in all spheres of our business and the new operating model, it is increasingly challenging to retain experienced executive leadership, and to attract new talent required for the new and growing areas of our business. Meeting this challenge requires having a competitive and attractive remuneration offering.

We embarked on a turnaround strategy where the current focus is on creating a platform for growth.

To ensure we remunerate employees competitively, we use market and industry benchmarks. Industry and market-related benchmarking is conducted to determine appropriate market positioning offerings which are higher than the minimum prescribed wages. In addition, Telkom recognises “equal pay for work of equal economic value”, and strives to remunerate employees doing the same work or substantially the same work, within the same range in accordance with the Labour Relations Act. However, Telkom recognises that there could be differences which are attributed to the following:

• individuals’ respective seniority or length of service
• individuals’ respective qualifications, ability, competence or potential above required levels of performance for the job
• individuals’ performance – all employees are equally subject to Telkom’s performance management system
• demotion of individual due to restructuring without a concomitant reduction in remuneration
• individual’s lack of relevant skill for a particular job level
• any other differentiator provided that it is not discriminatory

Remuneration objectives

The remuneration policy is designed to attract talent in a competitive labour market and enable Telkom to achieve the following objectives:

		Promote sustainable value creation through transparent alignment with agreed corporate strategy
		Ensure that proper risk management processes are in place and that remuneration is appropriately aligned with both short and long-term performance
		Ensure that all employees are remunerated competitively relative to industry benchmarks, provided with appropriate incentives to encourage enhanced performance, and rewarded for their individual contributions to the success of the company
		To ensure that remuneration is affordable and reasonable in terms of sustainable value creation for shareholders

Remuneration principles

Telkom recognises that, in this competitive environment, we need to differentiate based on strategic roles and growing areas of the business to value employees’ contribution. Therefore, our remuneration and reward policies and practices must be based on the following principles:

		Be designed to motivate and reinforce superior performance
		Encourage the development of organisational, team and individual performance
		Develop the competencies required to meet future business needs
		Be based on the premise that employees should share in the success of the company
		Aim to get the appropriate remuneration mix to ensure Telkom’s business plan objectives are met
		Be fair and non-discriminatory