2019

Integrated Annual Report

Remuneration report

For Transaction Capital (the group), compensation is a critical determinant of organisational performance and sustainability.

This view is based on the belief that all factors underpinning enhanced performance require the highest calibre of leadership and specialist technical expertise, and that stakeholders’ interests are best served by aligning strategy, business model, structure, staffing and compensation. Moreover, without attracting, motivating and retaining the best available talent, even the best strategies, business models and structures will fail.

These principles are reflected as one of the core components of Transaction Capital’s strategy, which emphasises the group’s commitment to investing in human and intellectual capital. This investment is informed firstly by the view that there is a normal distribution of talent in every field of endeavour, and secondly that the performance and sustainability of Transaction Capital will correlate highly with where its employees rank within that distribution. Put simply, the better Transaction Capital’s people, the better the company. This is all the more relevant in the current environment, where the entrepreneurial flair of the group is augmented by the depth and quality of management teams across the organisation.

Attracting and retaining high-calibre talent depends on providing both intrinsic and extrinsic rewards. While this remuneration report deals with the latter, intrinsic rewards are reflected in Transaction Capital’s employee value proposition, which strives to provide talented individuals with good leadership, personal development and support, and meaningful work in an intellectually stimulating and demanding environment. To complement this, compensation policies aim to sustain a performance-driven and entrepreneurial culture where the most talented people at all levels consider Transaction Capital and its divisions as an employer of choice.

GOVERNANCE OF COMPENSATION

Principle 14 of the King IV Report on Corporate Governance™ for South Africa, 2016 (King IV) states:

“The governing body should ensure that the organisation remunerates fairly, responsibly and transparently so as to promote the achievement of strategic objectives and positive outcomes in the short, medium and long term.”

To provide stakeholders with insight into Transaction Capital’s remuneration policies and structures, the group continues to refine the remuneration report in line with King IV and the JSE Listings Requirements, and in consultation with shareholders (as detailed on the shareholder engagement section ). The board of directors (the board) approved this remuneration report and believes that the performance criteria used to determine and measure short- and long-term incentive awards are fair and align appropriately with Transaction Capital’s goals, strategies and outcomes, taking the requirements of all stakeholders into account.

REMUNERATION COMMITTEE COMPOSITION AND MANDATE

The board has ultimate responsibility for the appropriateness of remuneration policies and executive remuneration. The board delegates oversight of this responsibility to the group’s remuneration committee, which comprises the following non-executive directors, the majority of whom are independent:

The remuneration committee’s mandate is to ensure that the group’s remuneration policies:

Within this mandate, the remuneration committee believes that a well-designed remuneration policy maintains appropriate alignment between the interests of shareholders and executives, and the principles of good governance. The remuneration committee assesses the mix of fixed remuneration, variable remuneration and long-term incentives (LTIs) to meet the group’s needs and strategic objectives, in addition to reviewing the robustness of long-term incentive schemes in ensuring continued contribution to shareholder value.

The remuneration committee is also responsible for ensuring that the implementation and execution of the remuneration policy achieves its objectives.

PRINCIPLES OF REMUNERATION

The following overarching principles are applied to remuneration:

SHAREHOLDER ENGAGEMENT

At the 2018 AGM on 7 March 2019, 80.87% of shareholders voted in favour of the group’s remuneration policy, with 93.99% voting in favour of the remuneration implementation report.

Following engagements with shareholders after the 2018 AGM, a number of enhancements have been implemented to the remuneration policy in the 2019 financial year, as outlined below.

ENHANCEMENTS TO THE REMUNERATION POLICY

Minimum group shareholding/LTI investment policy introduced for key executives.   Malus and clawback policy introduced for short- and long-term incentive plans, subject to shareholder approval at the upcoming AGM.   Transformation targets included as qualitative measures in the discretionary component of short-term incentives for key executives.
   
CONDITIONAL SHARE PLAN (CSP) AMENDMENTS

CSP to vest in years three, four and five after the award, in equal proportions of 33.3% per annum.

The prior vesting period was from two to five years.

  Discontinuance of CSP awards criteria based only on the continued employment of an executive.  

Super-performance to be rewarded, where select executives (as approved by the remuneration committee on every CSP issuance) will receive an additional allocation of up to 25% of their CSP target vesting value.

This requires that predetermined “stretch” performance criteria, known as the maximum vesting value, are met.

       

As in prior years, disclosure on remuneration policies and their implementation has been further enhanced.

ENHANCEMENTS TO REMUNERATION DISCLOSURE

Detailed description provided for the qualitative, quantitative and discretionary drivers’ calculation
of the executives’ short-term incentive awards.

Includes the maximum short-term incentive potential.

  Methodology to quantify the number of CSPs awarded.   Key metrics considered in determining divisional valuations for CSP purposes.   Disclosure of key executives’ total equity value to the group to be determined annually.
     

The group’s remuneration policy and its implementation is presented to shareholders annually for consideration and approval under the terms of separate non-binding advisory votes at the AGM, as recommended by King IV and prescribed by the JSE Listings Requirements.

In the event that 25% or more of the votes cast are recorded against either the remuneration policy resolution or the remuneration implementation resolution, or both, then pursuant to paragraph 3.91 of the JSE Listings Requirements, the company will extend an invitation to dissenting shareholders to engage with the company to discuss the reason for their dissenting votes.