This implementation report details the remuneration committee’s application of the group’s remuneration policy and principles in the year under review.
The founders and executive team were on track to deliver on both quantitative and qualitative outcomes for the first six months of the 2020 financial year, with COVID-19 materially impacting the second half of the financial year.
The executive team, led by David Hurwitz, showed strong leadership in guiding the business through the COVID-19 crisis, quickly implementing measures necessary to protect the group’s balance sheet and facilitate agile responses to first stabilise the group and then take advantage of opportunities as they arose.
The remuneration committee believes that the CTC is fair in light of the outcomes of the benchmarking undertaken as well as relative market norms. Despite the strong leadership displayed by the executive team in guiding the business through the COVID-19 pandemic, in light of the 65% decline in core headline earnings from continuing operations attributable to the group for the 2020 financial year, the board, through the remuneration committee, has resolved that there will be no annual increases awarded to executive directors and prescribed officers for the 2021 financial year.
In light of the 65% decline in core headline earnings from continuing operations attributable to the group for the 2020 financial year, the quantitative targets set for the year were not achieved. As a result, the remuneration committee resolved that no quantitative or qualitative STIs be awarded for the 2020 financial year.
The COVID-19 pandemic and the resulting domestic and worldwide shutdowns increased volatility and severely impacted economies globally. Despite the agility with which the group and its divisions responded to the crisis, the resultant conditions impacted Transaction Capital’s earnings for the 2020 financial year and have resulted in the 2020 LTIs not vesting.
The remuneration committee believes that due to the unprecedented nature of the COVID-19 pandemic, the principle of aligning shareholder value with employee awards needs to be balanced with the long-term sustainability of the business and the critical need to retain key talent. The group’s executives performed well to protect shareholder value and position the business for future value creation.
The remuneration committee has therefore resolved that the LTIs that were to have vested in 2020 be deferred until November 2021, at which point performance conditions will be reassessed in accordance with clause 7.2.3 of Transaction Capital’s CSP rules.
In response to the COVID-19 pandemic, all executive and non-executive directors of Transaction Capital waived up to 30% of their salaries, benefits and fees over a three-month period. The amounts foregone were donated to the Solidarity Fund to assist the collective efforts of South Africa in combating the pandemic. The 2020 executive compensation and non-executive directors’ fees in this implementation report are presented net of these salary waivers.
Executive directors’ and prescribed officers’ remuneration and specific considerations by the remuneration committee during the year are detailed below:
David Hurwitz (CEO)
In addition to leading the business through the crisis, David:
|David’s total reward comprised:
Sean Doherty (CFO)
Sean Doherty was appointed as CFO with effect from 1 June 2019, replacing Ronen Goldstein who resigned as an executive director with effect from 31 May 2019.
In addition to providing leadership through the crisis, Sean:
|Sean’s total reward comprised:
Mark Herskovits (chief investment officer)
|In addition to providing leadership through the crisis,
||Mark’s total reward comprised:
|In addition to leading SA Taxi through the crisis, Terry:
||Terry’s total reward comprised:
|In addition to leading TCRS through the crisis, David:
||David’s total reward comprised:
In addition to providing leadership through the crisis, Jonathan:
Jonathan's total reward comprised:
At a time when other businesses were focused on managing risk at the expense of growth, Transaction Capital was able to complete the acquisition of a non-controlling 49.9% interest in WeBuyCars, to establish the group's third adjacent market vertical.
Michael was instrumental in this transaction, identifying, facilitating and negotiating the successful conclusion of this investment. Michael's discretionary incentive bonus of R15000 000 was awarded in this regard.
Michael's total reward comprised:
Focus areas that will inform STIs for executive directors in the next financial year are as follows:
There were no post-employment, post-termination or other long-term benefits paid to executive directors during the year under review.
It is the view of the remuneration committee that LTI awards promote long-term equity value creation for employees and shareholders alike, while STI awards serve to reward superior financial and operational performance for the past financial year. As the value of the CSP on vesting is based on the equity valuation of each division (and Transaction Capital group for group employees), employees are rewarded for the quality and sustainability of earnings over the long term, thus aligning their interests with the group’s shareholders. As a result, the growth hurdle of the CSP is viewed to be appropriate.
The following table shows the CSP position of executive directors and prescribed officers at 30 September 2020:
of CSP awards
during the year
during the year
|Granted on 22 November 2016||382 007||30 759||2 to 4||70 304||1 527 706|
|Granted on 22 November 2017||1 414 535||113 680||2 to 5||18 506||402 135|
|Granted on 20 November 2018||2 990 230||183 554||2 to 5||–||–|
|Granted on 26 November 2019||3 632 316||191 007||3 to 5||–||–|
|Granted on 24 November 2020||4 635 135||255 192||3 to 5||–||–|
|Granted on 19 June 2019||5 568 168||323 668||3 to 5||–||–|
|Granted on 26 November 2019||1 634 558||85 954||3 to 5||–||–|
|Granted on 24 November 2020||2 267 200||124 823||3 to 5||–||–|
|Granted on 22 November 2016||SA Taxi||286 679||37 328||2 to 4||85 321||1 367 534|
|Granted on 29 May 2017||SA Taxi||768 011||164 824||2 to 4||–||–|
|Granted on 22 November 2017||SA Taxi||715 003||81 253||2 to 5||13 227||212 020|
|Granted on 20 November 2018||SA Taxi||1 286 537||130 059||2 to 5||–||–|
|Granted on 26 November 2019||SA Taxi||1 688 093||120 492||3 to 5||–||–|
|Granted on 24 November 2020||Group||3 013 986||165 938||3 to 5||–||–|
|Granted on 22 November 2016||TCRS||310 817||72 283||2 to 4||1 159 252||8 787 851|
|Granted on 22 November 2017||TCRS||5 476 644||1 140 402||2 to 5||41 072||311 369|
|Granted on 25 March 2019||TCRSX||11 460 166||2 196 837||2 to 4||–||–|
|Granted on 24 November 2020||TCRS||785 824||142 102||3 to 5||–||–|
Jonathan Jawno, Michael Mendelowitz and Terry Kier do not participate in the CSP.
All SAR plan awards were approved by the remuneration committee, with no SARs awarded since 25 November 2015. In previous years, executives were awarded SARs based on executive performance, potential, tenure, job grade, current fixed compensation and STIs relative to market benchmarks; the recommendation of the CEO; and the reasonably expected growth in Transaction Capital’s share price.
The following table shows the SAR position of executive directors and prescribed officers at 30 September 2020:
year and not
during the year
during the year
|Granted on 26 November 2015||–||–||4||–||250 000||2 061 916|
|Granted on 26 November 2015||–||–||4||–||150 000||1 719 895|
|Granted on 26 November 2015||–||–||4||–||200 000||1 649 529|
Jonathan Jawno, Michael Mendelowitz and Terry Kier do not participate in the SAR plan.
Terry Kier (CEO of SA Taxi) holds a direct investment in SA Taxi Holdings Proprietary Limited, incentivising him and directly aligning his long-term interests with those of SA Taxi, Transaction Capital and its shareholders.
Terry disposed of 0.5% of his shareholding to Transaction Capital on 1 December 2018 for total proceeds of R28 million. Terry's shareholding was further diluted following SA Taxi's ownership transaction with SANTACO.
At 30 September 2020, Terry held a direct investment of 1.2% (2019: 1.2%) in SA Taxi Holdings Proprietary Limited. This shareholding was valued at R102 million.
Terry owed a wholly owned subsidiary of Transaction Capital an amount of R24 million at 30 September 2020. The loan was granted on an interest-free basis and will be repaid upon certain predetermined events. Appropriate fringe benefits tax has been levied on the interest-free loan, the benefit of which is included in his executive compensation table.
Terry does not participate in the SAR or CSP plans.
The remuneration committee continually assesses whether those executives charged with setting and implementing group strategy are meaningfully invested in Transaction Capital, by way of direct investment and/or through the CSP. As mentioned previously, the remuneration committee has set an executive investment policy that mandates that key executives should hold a meaningful interest in Transaction Capital, with a minimum target exposure to Transaction Capital's equity value maintained at three times annual CTC (held directly or indirectly). Where the equity value of a key executive of the group is determined to be low, accelerated annual LTI awards or once-off LTI awards may be awarded.
The executive directors and prescribed officers of the group hold the following direct or indirect equity value in Transaction Capital Limited at 30 September 2020, aligning their interests with the broader shareholder base:
|Notes||Shares held||Valuation of shares
at closing share price on
30 September 2020
|Sean Doherty||1||–||–||8 691 319||8 691 319||<3|
|Mark Herskovits||1 547 055||33 524 682||5 229 784||38 754 466||>3|
|David Hurwitz||2||4 876 769||105 679 584||11 012 090||116 691 674||>3|
|David McAlpin||445 249||9 648 546||17 262 208||26 910 753||>3|
|Jonathan Jawno||4||36 333 333||787 343 326||–||787 343 326||>3|
|Michael Mendelowitz||36 333 333||787 343 326||–||787 343 326||>3|
|TOTAL||79 535 739||1 723 539 464||42 195 401||978 391 539|
|*||SAR/CSP valuations are determined on current share prices and are prior to any tax payable.|
|1.||Sean Doherty joined Transaction Capital as an executive director in June 2019. The minimum target exposure to Transaction Capital's equity value will be built up over the next three to five years.|
|2.||The Dovie Trust, of which David Hurwitz is a discretionary beneficiary, owns 4 876 769 shares in Transaction Capital Limited.|
|3.||The Empire Trust, of which Terry Kier is a discretionary beneficiary, owns 1.2% of SA Taxi Holdings Proprietary Limited.|
|4.||Pilatucom Holdings Limited owns 36 333 333 shares in Transaction Capital Limited. All the shares of Pilatucom Holdings Limited are held by trusts of which Jonathan Jawno is a discretionary contingent beneficiary.|
Fees paid to non-executive directors are for directorship and membership of board sub-committees, with no additional meeting attendance fees paid. This is due to board members providing input to the company on an ongoing basis, which is not limited to the attendance of meetings.
The fees paid to non-executive directors have been determined on a market-related basis, as recommended by the remuneration committee and the board, and approved by shareholders at the AGM. The board, through the remuneration committee, has resolved that there will be no increase in non-executive directors' fees for the 2021 financial year.
Fees paid to non-executive directors for the year ended 30 September 2020:
|C Seabrooke1||P Langeni2||R Rossi3||K Pillay4||P Miller5||D Radley6||B Hanise||S Wapnick7||Total|
|Board chairman (including committee attendance)||1 585 417||–||–||–||–||–||–||–||1 585 417|
|Lead independent non-executive director||–||–||–||141 667||–||–||–||–||141 667|
|Director||–||370 917||370 917||370 917||175 726||370 917||370 917||196 293||2 226 602|
|Alternate director||–||–||–||–||146 393||–||–||–||146 393|
|Audit, risk and compliance committee (chairperson)||–||–||–||–||–||394 875||–||–||394 875|
|Audit, risk and compliance committee (member)||–||114 792||–||–||–||–||158 542||–||273 333|
|Asset and liability committee (member)||–||–||–||–||–||127 000||127 000||–||254 000|
|Remuneration committee (chairperson)||–||–||–||263 667||–||–||–||–||263 667|
|Remuneration committee (member)||–||–||66 651||–||60 349||–||–||–||127 000|
|Nominations committee (member)||–||–||127 000||127 000||–||–||–||–||254 000|
|Social and ethics committee (chairperson)||–||263 667||–||–||–||–||–||–||263 667|
|Social and ethics committee (member)||–||–||82 333||127 000||–||–||–||–||209 333|
|TOTAL ANNUAL FEES||1 585 417||749 375||646 901||1 030 250||382 468||892 792||656 458||196 293||6 139 954|
Fees paid to non-executive directors for the year ended 30 September 2019:
|C Seabrooke1||P Langeni||R Rossi2||K Pillay||O Ighodaro3||P Miller||D Radley4||B Hanise5||Total|
|Board chairman (including committee attendance)||1 636 667||–||–||–||–||–||–||–||1 636 667|
|Director||–||382 083||382 083||382 083||61 833||382 083||382 083||289 333||2 261 581|
|Audit, risk and compliance committee (chairperson)||–||–||–||–||66 250||–||342 625||–||408 875|
|Audit, risk and compliance committee (member)||–||163 667||–||–||–||–||26 500||123 917||314 084|
|Asset and liability committee (member)||–||–||–||–||21 200||–||131 167||99 367||251 734|
|Remuneration committee (chairperson)||–||–||–||273 167||–||–||–||–||273 167|
|Remuneration committee (member)||–||–||–||–||–||131 167||–||–||131 167|
|Nominations committee (member)||–||–||131 167||131 167||–||–||–||–||262 334|
|Social and ethics committee (chairperson)||–||273 167||–||–||–||–||–||–||273 167|
|Social and ethics committee (member)||–||–||–||131 167||–||–||–||–||131 167|
|TOTAL ANNUAL FEES||1 636 667||818 917||513 250||917 584||149 283||513 250||882 375||512 617||5 943 943|