Our performance
Governance review
Other
This report summarises Vodacom’s remuneration philosophy and policy for non-executive directors, executive directors and prescribed officers. It also provides a description as to how the policy has been implemented.
It is noted that while elements of King IV have been included in this report, further disclosures will evolve when either practice notes on King IV or revised JSE Listings Requirements get published in the year ahead.
For the detailed remuneration report, including the full disclosures
The Group’s Remuneration Committee (RemCo) determines the policy for remunerating executives and the Board recommends the fees for non-executive directors to shareholders for approval at the annual general meeting (AGM).
The report is divided into three sections:
Section
01Background statement with feedback from the Chairman of the Remuneration Committee
Section
02Our remuneration philosophy, policy and framework
Section
03Implementation report
Independent non-executive director
As members of the RemCo of the Group, our focus is to assist and advise the Board on matters relating to the remuneration of senior management. We ensure that the remuneration philosophy and policy supports the Group’s strategic targets to enable the recruitment, motivation and retention of senior executives in order to maximise shareholder value while also complying with legislation and the requirements of King IV.
The Group’s financial performance was good and once again we delivered a solid set of results that will make our shareholders proud. This is testament to the calibre of management and employees that work for us. We had a tough set of targets to achieve, relating to service revenue, EBITDA, operating free cash flow and customer appreciation. Customer growth and the strong demand for data were two of the key drivers of our success, along with excellent execution in enterprise. More detail on the actual achievement against these targets is provided later in the report.
These targets and the extent to which they are achieved have a direct impact on the long- and short-term incentives payable to executives.
For the 2018 reporting period, the RemCo approved the following 2 policy changes:
The key decisions we took this year were to:
The Remuneration Committee contracted the services of Vasdex Associates (Pty) Ltd for independent external advice.
We received the support of 99.2% of shareholders who voted in favour of the remuneration philosophy and policies tabled at the 2016 AGM.
Nyimpini Mabunda has been appointed as Chief Officer for the Consumer Business Unit effective 1 September 2016.
As required by the Companies Act and King IV, the following resolutions will be tabled for shareholder voting at the AGM, details of which can be found in the AGM notice:
I would like to thank my fellow RemCo members for their continued support and look forward to the challenges that lie ahead.
Thoko Martha Mokgosi-Mwantembe
Chairman of the Remuneration Committee
Our Board is responsible for the Group’s remuneration policy assisted by the Remuneration Committee. The Chief Executive Officer, Chief Human Resources Officer and any other executives invited for specific discussion topics attend the meetings by invitation, but recuse themselves before any decisions are made. The Remuneration Committee operates according to a charter approved by the Board and this charter is reviewed regularly.
The Remuneration Committee’s role and responsibilities are summarised below:
The Remuneration Committee Chairman reports to the Board after each RemCo meeting and attends the AGM to answer questions from shareholders on RemCo’s areas of responsibility.
Section
02Our remuneration philosophy, policy and framework
Our aim is to attract, retain and motivate executives of the highest calibre, while at the same time aligning their remuneration with shareholder interests and best practice. Our approach to reward is holistic, balanced across the following elements:
Vodacom adheres to a ‘total cost to company’ philosophy, which we refer to as the guaranteed package (GP). All employees, including executive directors and prescribed officers, receive a guaranteed package based on their role in the company and also linked to their individual performance. Contributions to medical aid, retirement funding and insured benefits are included in the GP.
The above elements are underpinned and reinforced by our Performance Dialogue (PD) and Talent Management processes.
Our policy is to reward our executives for their contributions to our strategic, financial and operating performance.
To be a top employer in our industry we need to attract, develop and retain top talent and intellectual capital both locally and internationally.
To ensure that our reward offerings remain competitive, we conduct our annual salary review in July of each year. On an annual basis we conduct remuneration benchmarking and award increases in the GP according to the market, individual performance and potential. Individual performance and potential assessment is determined through our talent management and PD processes. The outcome of these also influences the awarding of short- and long-term incentives in the future.
Our short-term incentive, in the form of an annual cash bonus, is linked to achieving financial, strategic and operational objectives and the employee performance against their objectives set by line management. The pool available for short-term incentives is determined by financial performance of the Group against previously set and agreed targets.
Our long-term incentive, in the form of an annual share allocation, encourages ownership and loyalty, and supports our objective to retain valued employees. It is designed to align executive performance to shareholders’ interests, as a portion of the award is subject to Group performance conditions. The scheme is a full ownership scheme; as a result, participants receive dividends from the award date although the value of the shares can only be realised after a three-year vesting period, to the extent that the vesting conditions have been met.
RemCo reviews the total pay mix of executives every year and decides on the proportion of total remuneration to be paid as GP, STI and LTI, as each of these elements is linked to creating shareholder value and the strategic progress made in the year.
Vodacom’s reward framework comprises financial and non-financial elements and is applied to all employees, including the executive directors and prescribed officers. The Vodacom reward framework is explained in the picture below.
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Within the context of our GP, Vodacom offers a selection of benefits that are both best practice and compliant with legislative practices. In terms of our total cost to company philosophy, any change in the price of a benefit or contribution level will not have a cost impact on the employer but will impact on the net remuneration of the employee.
As a standard, we offer the following benefits to all our employees, including our executive directors and prescribed officers:
All permanent employees have to join the Vodacom Group Pension Fund, a defined contribution pension scheme. Executives also participate in the Vodacom Group Executive Provident Fund, which is also a defined contribution scheme. Employees have the option to choose their level of contribution to the pension fund. They also have the option to choose where they would like their money to be invested based on their own individual risk profile.
Normal retirement age is 60 for executive directors and other executives. For all other employees it is 65.
In the unfortunate event of an employee’s death, a lump sum amount of three times annual pensionable salary (core cover) is paid to the beneficiaries. If the employee had a qualifying spouse and/or qualifying children upon death, a spouse’s pension of 40% of monthly pensionable salary and a child’s pension of 10% of monthly pensionable salary becomes payable. The scheme also covers the cost of children’s education fees.
All employees have the option to select additional death cover of up to seven times their annual pensionable salary, inclusive of the compulsory core cover of three times annual pensionable salary. These additional contributions are calculated at a percentage of pensionable salary.
In the event of employees becoming unable to perform their duties as a result of disability, they will receive a monthly income of 75% of their monthly pensionable remuneration. The disability premiums are also funded from the GP. This benefit is payable until the employee recovers sufficiently to return to work, or if not, up to normal retirement age, whereafter the employee will retire normally. During the period of disability, payment to the retirement fund and to Group life insurance continues.
Employees can choose to participate in any nominated medical aid scheme. The schemes available at Vodacom were chosen for cost effectiveness and to address the needs of the diverse Vodacom workforce. On an annual basis we review the medical aid schemes to assess their appropriateness for our employees. As part of the medical aid benefit offering, we have a full time Alexander Forbes consultant on site to assist with any medical aid related queries.
We do not offer post-retirement medical benefits and have no such liabilities.
All employees, including executive directors and prescribed officers, excluding employees on a commission, quarterly or bi-annual bonus structure, participate in the annual GSTIP plan. Bonus payments are discretionary and depend on financial performance and individual contribution. Payments are made in cash in June each year.
Where annual targets are achieved in full, 100% of the on-target bonus will be paid. In instances where target goals are exceeded, the bonus is capped at a percentage of the guaranteed package. Where the bonus targets are not achieved in full, a pro rata bonus is paid only if the threshold performance level has been achieved.
Financial and personal multipliers are applied as separate multiples of the on-target percentages to determine the final award.
The financial multiplier ranges from 0% – 200% and the personal multiplier from 0% – 150%. The personal performance multipliers are based on the performance of executives relative to their objectives.
The CEO does not have a personal performance multiplier and as such his STI is based on business performance only.
The on-target and STI cap percentages are set out below:
| Role | On-target % of GP |
Maximum % of GP |
|
| CEO | 100% | 200% | |
| Executive director | 60% | 180% | |
| Prescribed officers | 60% | 180% |
The metrics and weightings used in the business performance scorecard remained unchanged from FY2016. The targets comprise three financial measures, which focus on the core operations of our business and one strategic measure, being customer appreciation.
| Measure | Weighting | |
| Service revenue | 20% | |
| EBITDA | 20% | |
| Operating free cash flow | 20% | |
| Customer appreciation | 40% |
These weightings align short-term incentives to our strategic focus on service revenue growth and market performance.
These incentive plans aim to retain key skills and motivate executives over the long-term, which is essential to sustainable performance.
The current policy for annual LTI awards split the total award into the following elements at the time of the awards.
For the CEO, executive director and prescribed officers, the standard on-target value of FSP awards (as a percentage of GP at target level) is shown below. As with the STI scheme, the CEO does not have an individual multiplier, but for executive directors and prescribed officers the standard awards may be multiplied by 0% to 200% to set an annual award, based on the performance and potential of the individual.
| Role | On-target value % 2017 |
On target value % 2016 |
|
|---|---|---|---|
| CEO | 90% | 90% | |
| Executive director | 70% | 70% | |
| Prescribed officers | 50% or 70% | 50% or 70% |
In addition to the annual award, the CEO is entitled to participate in a Vodafone matching arrangement provided that he meets an annual co-investment requirement, which are all subject to performance conditions. The additional incentives offered and associated conditions are:
The CEO may only take advantage of the additional Vodafone share award if he has met the full Vodacom co-investment requirement. His investment in both Vodacom and Vodafone shares must be on an ever-increasing basis to qualify for the additional awards.
The FSP was introduced in 2009 as our main long-term incentive plan. Although it is focused on executives, other employees may be selected to participate. Non-executive directors are not eligible for the FSP.
The purpose of the FSP is to give executives the opportunity to own shares in Vodacom through annual grants of forfeitable share awards. This means they receive shares (with dividend and voting rights) on the date of award, subject to restrictions and the risk of forfeiture during a three-year vesting period. A portion of the award depends on meeting targets. If the targets are not met, the appropriate portion is forfeited.
Performance targets set for the vesting of FSP awards:
There is some overlap between financial targets for the short-term and long-term incentives. Both include operating free cash flow, which is critical to our business in the short- and long-term.
Total shareholder return refers to Vodacom Group Limited’s total shareholder return relative to a peergroup from the constituents of the South African INDI 25 Index on the grant date.
The Board wishes to encourage individual shareholding in the Company by executives, as a tangible demonstration of their commitment to the Company and to align with shareholder interests. As a result, we implemented a shareholding guidelines policy for our executives, which requires them to build up minimum levels of personal shareholding in the Group.
Executives are required to hold between 0.5 times and 1 times their GP as a minimum shareholding.
The CEO is required to make substantial investments in company shares to qualify for his co-investment share awards, as described previously, and as a result does not participate in the shareholding guidelines policy.
As an incentive to exceed the minimum requirements, additional awards of FSP performance shares will be made to executives who exceed the minimum requirements over a three-year vesting cycle (six years). The participants will be granted a performance share for every three additional shares held. This award will be capped so that holdings of no more than double the minimum requirements will be recognised. The time period over which the executives are permitted to build up this shareholding is based on the vesting of three cycles of the annual awards under the FSP plan.
In July 2008, YeboYethu acquired 3.44% of Vodacom South Africa in our R7.5 billion BBBEE transaction. All permanent South African employees were able to participate in the trust. Of the 1.875 billion units available to the trust, 75% was allocated to employees on 1 September 2008. The remaining 25% was set aside for future employees on a sliding scale over the next five years from date of inception. The allocation is weighted 70/30 in favour of black employees. The trust’s seven-year maturity period ended in August 2015.
The initial seven-year maturity period was extended in March 2016 after taking notional vendor financing into account and will be converted into YeboYethu shares in March 2019.
Following this date, we will aim to facilitate the sale of these shares to qualifying members of the South African public through the online YeboYethu Limited trading platform, which was launched for Black South Africans in February 2014.
Executives have contracts of permanent employment with six-month notice periods. The CEO’s notice period is 12 months.
Section
03Implementation report
The implementation report details the outcomes of implementing the approved policy detailed in Section 2 of this report.
The table below shows the extent to which the Group targets were met for the year ended 31 March 2017.
Overall achievement against the performance measures for this year was 108.6% for the Group on the short-term incentive plan.
Service revenue in specific was impacted by customer disconnections in compliance with customer registration requirements in Tanzania, the DRC and Mozambique.
The comparable result for the period that ended 31 March 2016 was 174.6%.
Achievement of targets for the June 2017 vesting
Overall achievement against the performance measures on the 2014 issue of the long-term incentive scheme was 106.2% of target.
Our business benefits from active non-executive directors who do a lot more than attend meetings. Non-executive directors therefore get a yearly fee for their services on the Board and other committees rather than a fee for meetings attended. They also do not receive short- or long-term incentives.
Our memorandum of incorporation states that shareholders must approve these fees at the AGM. The current fee level was approved on 19 July 2016 at the AGM and was implemented on 1 August 2016.
Details of the beneficial interests of directors and prescribed officers in Vodacom’s ordinary shares (excluding interests in the long-term incentive plans) are set out in the directors’ report.
Funding of share plans and dilution details of the shares used for the FSP are set out in the consolidated annual financial statements and the directors’ report. All awards granted under the FSP are settled through the shares purchased in the market and not by newly issued shares.
| R | GP | Other2 | Short-term incentive3 |
Total | ||||
| Executive directors | ||||||||
| 2017 | ||||||||
| MS Aziz Joosub | 10 000 000 | 498 667 | 10 860 000 | 21 358 667 | ||||
| T Streichert (GBP) | 333 949 | 66 309 | 199 390 | 600 648 | ||||
| T Streichert (ZAR) | – | 1 611 892 | – | 1 611 892 | ||||
| 2016 | ||||||||
| MS Aziz Joosub | 7 825 000 | 3 600 | 13 968 000 | 21 796 600 | ||||
| T Streichert (GBP) | 210 334 | 41 998 | 188 743 | 441 075 | ||||
| T Streichert (ZAR) | – | 1 094 673 | – | 1 094 673 | ||||
| Prescribed officers | ||||||||
| 2017 | ||||||||
| V Jarana | 4 500 000 | 4 800 | 3 592 485 | 8 097 285 | ||||
| N Mabunda4 | 2 216 667 | 2 192 400 | 1 538 810 | 5 947 877 | ||||
| V Mathur (INR) | 25 973 419 | 5 979 242 | 8 971 408 | 40 924 069 | ||||
| V Mathur (ZAR) | – | 1 854 366 | – | 1 854 366 | ||||
| 2016 | ||||||||
| V Jarana | 3 912 500 | 6 180 | 5 031 480 | 8 950 160 | ||||
| V Mathur (INR) | 8 854 981 | 2 176 076 | 5 008 369 | 16 039 426 | ||||
| V Mathur (ZAR) | – | 1 829 005 | – | 1 829 005 |
| Notes: | |
| 1 | This table excludes the settlement of long-term incentives and accruals. |
| 2 | This includes the Vodacom mobile phone benefit, sign-on bonus, settling-in allowance and Vodafone dividend equivalent cash bonus. For assignees this amount includes the gross value of assignment allowances, accommodation and education benefits for children. |
| 3 | These amounts relate to the bonus payable in June 2017, for the year ended 31 March 2017. |
| 4 | Appointed in September 2016. |
| Year awarded |
Number allocated |
Number settled in current year |
Number forfeited in current year |
Closing number |
Settled price |
Settlement date |
Settlement value |
Current unit value1 |
Estimated value |
Currency | ||
| MS Aziz Joosub | ||||||||||||
| Conditional benefit – restricted shares | ||||||||||||
| 2014 | 208 610 | – | – | 208 610 | – | – | – | 152.00 | 31 708 720 | ZAR | ||
| FSP – with company performance conditions | ||||||||||||
| 2014 | 140 410 | 63 325 | 77 085 | – | 162.75 | June 2016 |
10 306 144 | – | – | ZAR | ||
| 2015 | 95 482 | – | – | – | – | 76.00 | 7 256 632 | ZAR | ||||
| 2016 | 98 133 | – | – | – | – | 76.00 | 7 458 108 | ZAR | ||||
| 2017 | 108 099 | – | – | 108 099 | – | – | 76.00 | 8 215 524 | ZAR | |||
| Vodacom co-investment | ||||||||||||
| In terms of the CEO co-investment requirement, the CEO made the following investments in Vodacom shares: | ||||||||||||
| 2015 | 26 864 | |||||||||||
| 2016 | 28 608 | |||||||||||
| 2017 | 29 499 | |||||||||||
| Vodacom matching award | ||||||||||||
| Matching award – with company performance conditions | ||||||||||||
| 2014 | 52 772 | 23 800 | 28 972 | – | 144.09 | November 2016 |
3 429 342 | – | – | ZAR | ||
| 2015 | 53 088 | – | – | 53 088 | – | – | 76.00 | 4 034 688 | ZAR | |||
| 2016 | 70 475 | – | – | 70 475 | – | – | 76.00 | 5 356 100 | ZAR | |||
| 2017 | –2 | |||||||||||
| Vodafone co-investment | ||||||||||||
| In terms of the CEO co-investment requirement, the CEO made the following investments in Vodafone shares: | ||||||||||||
| 2014 | 94 657 | |||||||||||
| 2015 | 95 863 | |||||||||||
| 2016 | 84 360 | |||||||||||
| 2017 | 100 670 | |||||||||||
| Vodafone matching award | ||||||||||||
| Vodafone made a matching award of performance shares to the equivalent value. The Vodafone matching award will vest based on actual target achieved. For the 2014 range the target is 0% – 300%; 2015: 0% – 250%, 2016: 0% – 250%; 2017: 0% – 250%. The actual amount vested will be disclosed at the time of vesting. | ||||||||||||
| Vodafone matching | ||||||||||||
| 2014 | – | 72 319 | – | – | 2.19 | June 2016 | 158 379 | – | – | GBP | ||
| YeboYethu units | ||||||||||||
| 2008 | 2 628 498 | – | – | 2 628 498 | – | – | 0.26 | 683 409 | ZAR | |||
| 2016 | 876 862 | – | – | 876 862 | – | – | 0.26 | 227 984 | ZAR | |||
| Notes: 1. For FSP and Vodafone shares with performance conditions, a vesting percentage of 50% is applied. 2. The CEO matching award for 2017 was not allocated as Vodacom was restricted from purchasing shares. Executives received dividend payments on the FSP shares held from the award date. |
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| V Jarana | ||||||||||||
| Conditional benefit | 8 604 465 | ZAR | ||||||||||
| Conditional benefit – restricted shares | ||||||||||||
| 2014 | 26 208 | – | – | 26 208 | – | – | 152.00 | 3 983 616 | ZAR | |||
| FSP – no company performance conditions | ||||||||||||
| 2014 | 6 534 | 6 534 | – | – | 162.75 | June 2016 | 1 063 409 | – | – | |||
| 2015 | 3 789 | – | – | 3 789 | – | – | 152.00 | 575 928 | ZAR | |||
| 2016 | 5 699 | – | – | 5 699 | – | – | 152.00 | 866 248 | ZAR | |||
| 2017 | 7 567 | – | 7 567 | – | – | 152.00 | 1 150 184 | ZAR | ||||
| FSP – with company performance conditions | ||||||||||||
| 2014 | 18 736 | 8 450 | 10 286 | – | 162.75 | June 2016 | 1 375 238 | – | – | ZAR | ||
| 2015 | 7 577 | – | – | 7 577 | – | – | 76.00 | 575 852 | ZAR | |||
| 2016 | 11 398 | – | – | 11 398 | – | – | 76.00 | 866 248 | ZAR | |||
| 2017 | 15 134 | – | – | 15 134 | – | – | 76.00 | 1 150 184 | ZAR | |||
| Vodafone shares – no performance conditions | ||||||||||||
| 2014 | 11 133 | 11 133 | – | – | 2.19 | June 2016 | 24 381 | – | – | GBP | ||
| Vodafone shares – with performance conditions | ||||||||||||
| 2014 | 22 266 | 7 414 | 14 852 | – | 2.19 | June 2016 | 16 237 | – | – | GBP | ||
| 2015 | 29 016 | – | – | 29 016 | – | – | 1.14 | 33 078 | GBP | |||
| 2016 | 25 630 | – | – | 25 630 | – | – | 1.14 | 29 218 | GBP | |||
| 2017 | 55 442 | – | – | 55 442 | – | – | 1.14 | 63 204 | GBP | |||
| YeboYethu units | ||||||||||||
| 2008 | 1 567 336 | – | – | 1 567 336 | – | – | 0.26 | 407 507 | ZAR | |||
| 2016 | 522 860 | – | – | 522 860 | – | – | 0.26 | 135 944 | ZAR | |||
| Notes: 1. For FSP and Vodafone shares with performance conditions, a vesting percentage of 50% is applied. Executives received dividend payments on the FSP shares held from the award date. |
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| T Streichert | ||||||||||||
| Vodafone shares – no performance conditions | ||||||||||||
| 2014 | 25 492 | 25 492 | – | – | 2.12 | June 2016 | 54 043 | – | – | GBP | ||
| 2015 | 17 871 | – | – | 17 871 | – | – | 2.28 | 40 746 | GBP | |||
| 2016 | 17 392 | – | – | 17 392 | – | – | 2.28 | 39 654 | GBP | |||
| 2017 | 42 999 | – | – | 42 999 | – | – | 2.28 | 98 038 | GBP | |||
| Vodafone shares – with performance conditions | ||||||||||||
| 2014 | 50 985 | 16 978 | 34 007 | – | 2.12 | June 2016 | 35 993 | – | – | GBP | ||
| 2015 | 71 478 | – | – | 71 478 | – | – | 1.14 | 81 485 | GBP | |||
| 2016 | 69 562 | – | – | 69 562 | – | – | 1.14 | 79 301 | GBP | |||
| 2017 | 171 992 | – | – | 171 992 | – | – | 1.14 | 196 071 | GBP | |||
| V Mathur | ||||||||||||
| Vodafone shares – no performance conditions | ||||||||||||
| 2014 | 36 839 | 36 839 | – | – | 2.12 | June 2016 | 78 099 | – | – | GBP | ||
| 2015 | 24 566 | – | – | 24 566 | – | – | 2.28 | 56 010 | GBP | |||
| 2016 | 21 471 | – | – | 21 471 | – | – | 2.28 | 48 954 | GBP | |||
| 2017 | 12 999 | – | – | 12 999 | – | – | 2.28 | 29 638 | GBP | |||
| Vodafone shares – with performance conditions | ||||||||||||
| 2014 | 73 679 | 24 535 | 49 144 | – | 2.12 | June 2016 | 52 014 | – | – | GBP | ||
| 2015 | 98 258 | – | – | 98 258 | – | – | 1.14 | 112 014 | GBP | |||
| 2016 | 85 874 | – | – | 85 874 | – | – | 1.14 | 97 896 | GBP | |||
| 2017 | 51 992 | – | – | 51 992 | – | – | 1.14 | 59 271 | GBP | |||
| N Mabunda | ||||||||||||
| Vodafone shares – no performance conditions | ||||||||||||
| 2017 | 54 374 | – | – | 54 374 | – | – | 2.28 | 123 973 | GBP | |||
| Notes: 1. For FSP and Vodafone shares with performance conditions, a vesting percentage of 50% is applied. Executives received dividend payments on the FSP shares held from the award date. |
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