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Transparency and accountability
Remuneration report

This report summarises Telkom’s remuneration philosophy and policy for non-executive directors, executive directors and prescribed officers. It details the policy’s implementation for the financial year ended 31 March 2018.

The remuneration committee chairman’s report

Dear shareholder,

The group remuneration committee (remco) aligns our reward practices with shareholder interests and employee performance to maximise shareholder value, while complying with relevant legislation and King IV requirements.

The remco remains mindful of the remuneration trends in the trading environment, carefully considers all business challenges and financial sustainability and applies the talent management framework to identify and develop talent within the group. It sets remuneration levels within the context of overall group performance.

We progressively enhance our disclosure to adhere to King IV and to remunerate fairly and responsibly. Fair and responsible remuneration is defined as rewarding employees competitively, and equally for doing substantially the same work, within the same range in accordance with the Labour Relations Act.

In total, 96.43 percent of shareholders voted in favour of the remuneration policies tabled at the 2017 AGM.

Policy changes, key decisions and executive changes

The remco approved the following policy changes during the year:

    1. The short-term incentive (STI) plan for FY2018

  • Financial performance is measured on a group level (group financial performance), and not only at company level.
  • Due to the changes, integration and consolidation process of financial results at group level, the 25 percent interim payment has been withdrawn.
  • No STI is payable if group targets are not achieved, irrespective of Telkom/business unit/subsidiary performance.

    2. Long-term incentive plan (LTIP) – 2017 vesting conditions

  • Simplified performance conditions with an emphasise on financial measurements to improve shareholder value.

The remco took the following key decisions during the year:

  • The committee approved a talent management framework to identify and develop talent within the group. Key top-performing employees were identified, and they are being mentored to achieve their maximum potential.
  • The remco and nomco considered the succession of the GCEO and executive management. All executive positions were mapped and potential successors have been identified for each position. The committee drives talent management within the group, and has a clear succession plan at all times.
  • The committee approved salary increases and adjustments for executives, senior management, management and bargaining unit employees.
  • The remco approved STIs for executives, senior management and other employees, and 14th cheque for bargaining unit employees.
  • The committee evaluated and approved the vesting conditions for FY2013 and FY2014 for the LTIP and FY2014 for employees share ownership plan (ESOP).
  • The remco set performance conditions for the FY2018 STI plan and vesting conditions for FY2017 LTIP and ESOP share awards.

Key executive changes during the year:

We made a number of key executive changes. For details refer to page 88.

Please note that the remuneration report relates to FY2018. It does not take into account changes after year end.

Remco objectives for FY2018/9

Remco objectives for FY2018/9

In closing

As required by the Companies Act and recommended by King IV, the following resolutions will be tabled for shareholder voting at the AGM, details of which can be found in the AGM notice on page 124:

  • Binding vote on non-executive directors' fees
  • Advisory vote on the remuneration policy and implementation report

I would like to thank my fellow remco colleagues for your valuable contribution during the year. I look forward to your continued support and commitment.

Santie Botha
Chairman of the remuneration committee

Remuneration report
Remuneration committee

Role of remco and terms of reference

The remco sets the group's remuneration policy on behalf of the board. It oversees total remuneration for executive directors and senior executives; monitors the execution of the remuneration policy for the group 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 executive directors and senior executives.
  • Determining the total individual remuneration package of executive directors, including guaranteed package, benefits in kind, STI payments and share options. This includes annual performance appraisals of senior executives conducted by the GCEO. It further includes reviewing their guaranteed packages based on the extent to which senior executives have met their performance targets, goals and objectives.
  • Approving the annual guaranteed package increases for all other management and bargaining unit employees.
  • Conducting the annual performance review of the GCEO.
  • Determining targets for performance-related incentive schemes implemented in the group.
  • Seeking board and shareholder approval for any substantial changes in the remuneration policy.
  • Seeking board and shareholder approval for any LTIP 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 the employee and the company.
  • Reviewing succession plans of executive directors and senior executives and ensuring a total group succession process is in place.
  • Ensuring regular dialogue with shareholders to create and maintain a mutual understanding of the meaning of performance and value creation, to properly evaluate the remuneration policy.
  • Engaging shareholders on the remuneration report when the remuneration policy or implementation report or both are voted against by 25 percent or more of the voting rights exercised.

Remco composition

The remco comprises 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)
  • NM Lekota (chief of human resources)
  • DJ Fredericks (GCFO)
  • JC Smit (group executive: total remuneration and performance management)

Refer to page 91 for the members of committees and meeting attendance.

This report is divided into two sections:

  • Section 1, the remuneration philosophy, policy and framework, provides an overview of the group's
    remuneration principles and policies for executive and non-executive directors, prescribed officers,
    and the exco members.
  • Section 2, the implementation report, discloses actual payments, accruals and awards for FY2018.