FOR THE YEAR ENDED 31 DECEMBER 2014
It is the Remuneration Committee’s role and responsibility to ensure that the remuneration arrangements for executive directors and senior executives offer an incentive to enhance the Group’s performance and deliver responsibly on the Group’s strategy. The Remuneration Committee also needs to ensure that the actual rewards received by the executive directors are proportionate to levels of performance achieved and the returns received by shareholders. The Remuneration Committee gives full consideration to the Group’s priorities, its performance and shareholder interests.
Sibanye believes it is important that the structure and level of remuneration and reward are consistent across the Group and competitive within the operating market. Our remuneration structures are benchmarked against our peers and we operate comprehensive performance-based reward systems to retain and also attract the best people.
All information disclosed in this Remuneration Report for the year ended 31 December 2014 was in compliance with remuneration policies set by the Remuneration Committee. The Remuneration Committee reviewed the performance measures for the Group’s incentive plans during 2014 to reposition alignment with the Group strategy.
2014 REMUNERATION POLICY
The key principles of Sibanye’s remuneration policy are to:
- support the execution of the Group’s business strategy;
- provide competitive rewards to attract, motivate and retain highly skilled executives;
- motivate and reinforce individual, team and business performance; and
- ensure Sibanye’s remuneration arrangements are equitable and facilitate the deployment of people across the Group’s operations.
At Sibanye, one of the critical drivers of performance is the Total Reward strategy. The Total Reward strategy is an integral part of the people strategy and promotes a holistic approach which combines all elements of cash remuneration (guaranteed and performance based) with other elements of reward (shares as well as non-financial motivators) to attract, retain and motivate employees. The principle of performance-based reward is one of the cornerstones of the reward strategy. The reward strategy is also underpinned by sound remuneration management and governance principles which are promoted across Sibanye in order to ensure the consistent application of the strategy and its policies.
The Group’s reward strategy includes the following elements:
- guaranteed remuneration;
- cash bonus;
- bonus shares; and
- performance shares.
Sibanye’s remuneration philosophy is aimed at attracting and retaining motivated, high-calibre employees and to align their interests with the shareholders. Such alignment is achieved through an appropriate mix of guaranteed and performance-based remuneration (variable pay), which provides for differentiation between high, average and low performers. The pay mix of guaranteed and variable remuneration differs according to the level of the employee within the Group. Typically, more senior employees’ remuneration will consist of a higher portion of variable pay as a percentage of their total package.
The following remuneration mix for the period under review was approved by the Remuneration Committee for 2014.
|Role||Total||Guaranteed pay||Cash bonus||Bonus shares||Performance shares|
Sibanye endeavours to reward its people fairly and consistently according to their role and individual contribution to the Group. To achieve external equity and a competitive total remuneration position, Sibanye surveys the relevant markets regularly.
The benchmark for guaranteed remuneration is the market median levels within the relevant gold mining companies and other comparable mining companies.
Guaranteed remuneration levels are reviewed annually by the Remuneration Committee, taking into account the Group’s performance, change in responsibility, levels of increase based on market trends and inflation. The Remuneration Committee also considers the impact of any guaranteed remuneration increase on the total remuneration package.
Executive directors are able to earn bonuses of 60% (for the CFO) and 65% (for the CEO) of their salaries for on-target performance, which is a combination of Group and individual performance. The annual bonus could increase above 60% and 65% if stretch targets are achieved whereby the maximum variable pay potential is capped at two times the on-target bonus percentage.
The targets for annual bonus are set by the Remuneration Committee. In the case of the CEO and CFO, 90% of the annual bonus is based on Group objectives and the remaining 10% on individual objectives.
In 2014 annual bonuses were based on targets approved in advance by the Remuneration Committee, comprising a combination of Group and Operational objectives taking account of the Group’s business plans. For the year ended 31 December 2014, the Group performance measures for the senior executives were set by the Remuneration Committee and the weightings were as follows:
- Safety 10%;
- Production (Volume) 20%;
- Cost 30%; and
- Quality (Grade) 40%.
Aside from these four key drivers, the CEO and CFO were also assessed on personal objectives. Personal objectives are set every year for each executive based on key performance areas and are approved at the beginning of each year by the Remuneration Committee. The personal objectives are centred on three themes: Operational Excellence, Growing Sibanye and Securing Our Future.
For the year ended 31 December 2014, the Group performance measures for executive directors and senior executives were:
|Reduce LTIFR rate||2.5||5.86||5.55||50|
|Reduce SIFR rate||2.5||3.87||3.13||0|
|Primary on-reef development (m)||10.0||19,778||27,466||0|
|Primary off-reef development (m)||10.0||48,975||48,466||107|
|Cost of ore milled – R/ton (underground)||30.0||1,651||1,699||119|
|Grade and quality – gold produced (kg)||40.0||49,432||50,467||111|
In turn, the CEO develops specific individual objectives with his own direct reports at the beginning of each year. These objectives are then reviewed with the Remuneration Committee and form the basis upon which the other executives’ performance will be reviewed at the end of the year.
Based on the bonus accrued for the year ended 31 December 2014, the annual bonus as a percentage of guaranteed pay paid to directors and prescribed officers of Sibanye in February 2015 was:
|Name||Actual 2014 Annual Incentive|
|Robert van Niekerk||51.6%|
REVIEW OF RULES AND TARGETS:
All scheme rules and targets are regularly reviewed by the Remuneration Committee to ensure they remain relevant and effective in enabling Sibanye business objectives by driving appropriate behaviours and providing retention incentives.
In terms of the MOI, the fees for services as non-executive directors are determined by the Company’s shareholders at a general meeting.
|The Chair of the Board||R1,500,000|
|The Chair of the Audit Committee||R287,000|
|The Chairs of the Nominating and Governance Committee, Remuneration Committee, Social and Ethics Committee and Safety, Health and Sustainable Development Committee (excluding the Chairman of the Board)||R177,000|
|Members of the Board (excluding the Chairman of the Board)||R793,000|
|Members of the Audit Committee (excluding the Chairman of the Board)||R149,000|
|Members of the Nominating and Governance Committee, Remuneration Committee, Social and Ethics Committee and Safety, Healthand Sustainable Development Committee (excluding the Chairman of the Board)||R112,000|
NON-EXECUTIVE DIRECTORS’ FEES, EXECUTIVE DIRECTORS AND PRESCRIBED OFFICERS’ REMUNERATION
The directors and prescribed officers of Sibanye were paid the following remuneration during the year ended 31 December 2014:
|Directors’ fees (R’000)||Committee fees (R’000)||Salary (R’000)||Annual bonus accrued for the period ended 31 December 2014 paid in 2015 (R’000)||Shares proceeds and Dividends on Bonus Shares (R’000)||Pension scheme total contributions (R’000)||Expense allowance (R’000)||For the period ended 31 December 2014 (R’000)||For the period ended 31 December 2013 (R’000)|
|Robert van Niekerk||–||–||3,431||1,956||3,364||375||–||9,126||6,214|
|Susan van der Merwe||793||261||–||–||–||–||–||1,054||899|
- 1 Appointed as a prescribed officer on 1 March 2014
- 2 Appointed as a prescribed officer on 1 June 2014
- 3 Appointed as a prescribed officer on 1 February 2014
- 4 Appointed as a non-executive director on 16 May 2014
- 5 Appointed as a non-executive director on 16 May 2014 (Gold One Nominated)
DIRECTORS AND PRESCRIBED OFFICERS’ EQUITY-SETTLED INSTRUMENTS
The directors and prescribed officers of Sibanye held the following Sibanye equity-settled instruments at 31 December 2014:
31 December 2013
exercised during the year
31 December 2014
|Number||Number||Number||Number||Average price||Share proceeds in Rands||Number|
|Robert van Niekerk||821,464||213,924||18,474||143,735||22.42||3,222,323||873,179|
- 1 Appointed as a prescribed officer on 1 March 2014 (Opening balance of 204,275 equity-settled instruments at 28 February 2014)
- 2 Appointed as a prescribed officer on 1 June 2014
- 3 Appointed as a prescribed officer on 1 February 2014
SHARE OWNERSHIP OF DIRECTORS AND PRESCRIBED OFFICERS
The following sets forth, to the knowledge of Sibanye’s management, the total amount of ordinary shares of Sibanye directly or indirectly owned by the directors, prescribed officers, and their associates as at 31 December 2014:
|2014 Ordinary shares||2013|
This holding is unchanged at the date of this report.
THE SIBANYE GOLD LIMITED 2013 SHARE PLAN
Sibanye has in place a share plan for certain of its employees, the Sibanye Gold Limited 2013 Share Plan (the SGL Share Plan). The SGL Share Plan comprises of two parts:
- bonus shares (which serve as medium-term incentives); and
- performance shares (which serve as long-term incentives).
(I) BONUS SHARES
The Committee makes an annual conditional award of shares to each Executive Director, Senior Executive and Vice President. The size of the award depends on the individual’s annual cash bonus, which is determined by actual performance against predetermined targets.
The value of the award is equal to two-thirds of the actual annual bonus and is allocated in the form of restricted shares. The Bonus Shares vest in two equal parts at 9 months and 18 months after the award date. Dividends are payable on the Bonus Shares during the holding period.
(II) BONUS SHARES
The Remuneration Committee makes an annual conditional award of shares to the CEO, CFO, SVPs and Vice Presidents (VPs). The number of performance shares awarded to an employee is based on the employee’s annual guaranteed pay, grade and performance. The actual number of performance shares which can further vest at 100%, 150% or 200%; is determined by Sibanye’s share price performance measured against the performance of a peer group, being Harmony Gold Mining Company and Pan African Resources plc over a performance period of three years. This peer group is determined and approved by the Remuneration Committee. The amount of performance shares, which finally vest, is based on the relative change in the Sibanye share price compared to the respective share prices of the individual companies within the peer group and with discretion allowed due to the small sample size. For any performance share award to be settled to executives, an internal company performance target is required to be met before the external relative measure is applied.
This threshold performance criterion is set at 85% of Sibanye’s expected gold production over the three-year measurement period as set out in the business plans of Sibanye as approved by the Board. Only once the internal measure has been achieved, will the external measure (Sibanye’s share price performance measured against the abovementioned peer group) be applied to determine the scale of the vesting of awards of performance shares.
THE SIBANYE GOLD LIMITED PHANTOM SHARE SCHEME
The Remuneration Committee approved a revised Annual Incentive Scheme for management level employees that were eligible for participation in the Phantom Scheme, which was subsequently discontinued post final allocations made in March 2014.
EXECUTIVE DIRECTORS’ CONTRACTS OF EMPLOYMENT
The employment of an executive director will continue until terminated upon (i) 24 or 12 months’ notice by either party for the CEO and CFO, respectively, or (ii) retirement of the relevant executive director (currently provided for at age 60 in the contract). Sibanye can also terminate the executive director’s employment summarily for any reason recognised by law as justifying summary termination.
The employment contracts also provide that, in the event of the relevant executive director’s employment being terminated solely as a result of a “change of control” as defined below, and within 12 months of the change of control, the director is entitled to:
- payment of an amount equal to twice his Gross Remuneration Package (GRP), or two and a half times in the case of the CEO;
- payment of an amount equal to the average of the incentive bonuses paid to the executive director during the previous two completed financial years;
- any other payments and/or benefits due under the contracts;
- payment of any annual incentive bonus he has earned during the financial year notwithstanding that the financial year is incomplete;
- an entitlement to awards, in terms of the Sibanye Gold Limited Incentive Scheme, shall accelerate on the date of termination of employment and settle with the full number of shares previously awarded.
The employment contracts further provide that these payments cover any compensation or damages the executive director may have under any applicable employment legislation.
A “change of control” for the above is defined as the acquisition by a third party or concerned parties of 30% or more of Sibanye ordinary shares.
In the event of the consummation of an acquisition, merger, consolidation, scheme of arrangement or other reorganisation, whether or not there is a change of control, if the executive director’s services are terminated, the “change of control” provisions summarised above also apply.
The two executives who are currently entitled to the change of control compensation benefits will be grandfathered. Except for the two executives, none of the prescribed officers have entered into employment contracts that should compensate for severance because of change of control. The two executives who are currently entitled to the change of control compensation benefits will be grandfathered.
DIRECTORS’ AND OFFICERS’ DISCLOSURE OF INTERESTS IN CONTRACTS
During the year under review, no contracts were entered into in which directors and officers of the company had an interest and which significantly affected the business of the Group.