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Our business
Operating context
Delivering on our strategy
Our governance structure
Administration
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% – 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:
g
g
An additional award of Vodacom performance shares with an
on-target value of 50% of his GP, provided that he invests in
Vodacom shares to the value of 50% of his GP; and
g
g
An additional award of Vodafone performance shares with an
on-target value of 50% of his GP, provided that he invests in
Vodafone shares to the value of 50% of his GP.
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.
Forfeitable Share Plan (FSP)
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:
2014 – 2017
g
g
Cumulative operating free cash flow (70%)
g
g
Total shareholder return (30%)
2015 – 2018
g
g
Cumulative operating free cash flow (70%)
g
g
Total shareholder return (30%)
2016 – 2019
g
g
Cumulative operating free cash flow (70%)
g
g
Total shareholder return (30%)
2017 – 2020
g
g
Cumulative operating free cash flow (70%)
g
g
Total shareholder return (30%)
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 peer group from the constituents
of the South African INDI 25 Index on the grant date.
Shareholding guidelines
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.
The YeboYethu Employee Participation Trust (the trust)
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.
Executive contracts and policies
Executives have contracts of permanent employment with
six-month notice periods. The CEO’s notice period is 12 months.