Integrated Annual Report
2020

Remuneration report

For Transaction Capital, 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 in 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 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 in the shareholder engagement section). 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:

  • KUBEN PILLAY

    Chairperson of the committee; independent non-executive director.

  • IAN KIRK

    Independent non-executive director (appointed 1 November 2020).

  • ROBERTO ROSSI

    Non-executive director (appointed 12 March 2020).

  • CHRISTOPHER SEABROOKE

    Chairman of the board; independent non-executive director.

The remuneration committee was augmented by the appointment of Ian Kirk as a member in 2020. Ian brings a wealth of experience to this critical committee.

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

  • Are fair, responsible and transparent.
  • Attract, motivate, reward and retain human capital.
  • Promote the achievement of strategic objectives within the organisation’s risk appetite.
  • Promote positive outcomes.
  • Promote an ethical culture and responsible corporate citizenship.

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 LTIs to meet the group’s needs and strategic objectives, in addition to reviewing the robustness of LTI 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:

  • Transaction Capital’s remuneration policies are approved by the remuneration committee and the board.
  • Remuneration policies are designed to eliminate differential compensation related to gender, race and location, and apply the principle of equal pay for equal work.
  • Compensation is defined on a cost-to-company (CTC) basis, with all benefits included and fully taxed.
  • Formal and informal research and benchmarking are performed to determine market norms for similar positions.
  • Remuneration is aligned to individual financial and non-financial outputs measured through performance management systems that focus on goals achieved and exceeded.
  • Remuneration policies are designed to achieve the group’s requirements to retain identified employees, while aligning the interests of employees with those of shareholders and other stakeholders.
  • Performance incentives are used to drive specific behaviours that support group, divisional or departmental performance and ensure alignment with the group’s sustainability and transformation objectives. In this regard, transformation targets are included as qualitative measures in the STI structures of key executives.
  • Performance incentives are designed to promote an entrepreneurial culture in which individual and collective performance, above and beyond a designated role, is rewarded and encouraged within the group.
  • Incentives and bonuses at executive level are aligned to profit growth and relevant return metrics, key non-financial measures, as well as additional key operational outputs and individual performance. In certain instances, a portion of these incentives may be deferred or delivered in the form of a share plan award to support both the retention of identified executives and decision-making based on long-term value creation.
  • In instances where an executive’s decisions have a direct impact on shareholder value, an element of their compensation is aligned with the medium- to longer-term value of Transaction Capital or each respective division, specifically through defined LTI schemes.
  • 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 an LTI scheme. In this regard, Transaction Capital introduced a policy of a minimum investment in the group for key executives.
  • Following the approval of the malus and clawback policy at the AGM, the remuneration committee adopted this policy during the financial year. The policy will be applied prospectively for variable remuneration (both short-term and long-term incentives) awarded from the 2020 financial year. It will allow the business to adjust variable remuneration awarded to participants before the vesting of an award (malus) and, in the case of participants who are members of executive committees, to recover variable pay after vesting or even payment (clawback), under appropriate circumstances. In this way, the business can recover value from key executives and thereby align risk and individual reward.
  • Any change to the compensation of any individual at every level of the group must be approved by their second-level manager, with the remuneration committee approving the compensation of all executive directors, including the CEO and his direct reports, and certain functional specialists.
  • Subject to the remuneration committee’s approval, ‘good leavers’ will receive a pro rata benefit due to them in terms of LTIs, subject to meeting the performance requirements of each tranche.

Shareholder engagement

At the 2019 AGM on 11 March 2020, 83.08% of shareholders voted in favour of the group’s remuneration policy, with 83.92% voting in favour of the remuneration implementation report.

Following engagements with shareholders after the 2019 AGM, several enhancements have been implemented to the remuneration policy in the 2020 financial year, as outlined below.

ENHANCEMENTS TO THE REMUNERATION POLICY

Sustainability targets included as a measure in the qualitative component of STIs for key executives as the newly adopted
ESE framework is operationalised in the 2021 financial year.

Performance vesting criteria for the CSP awards extended to include both an income statement (earnings) and balance sheet return measure.


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

ENHANCEMENTS TO REMUNERATION DISCLOSURE

Weightings provided for the qualitative, quantitative and discretionary components of the executives’ STI awards.

Disclosure of the performance targets set for STI awards to enable stakeholders to better evaluate executive performance.

The group’s remuneration policy and implementation report are 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.