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Our Remuneration Approach

Our approach to remuneration follows our strategic intent to create sustainable value for all stakeholders. The Board is responsible for the governance of remuneration while the Group Human Resources and Remuneration committee (GHRRC) is mandated to ensure that the Group remunerates fairly, responsibly, and transparently. This supports the achievement of strategic objectives and positive outcomes in the short, medium and long term.

Sanlam’s remuneration philosophy and policy incentivises the behaviour required to meet and exceed predetermined strategic goals. Both short- and long-term strategic objectives are measured and rewarded. This blended approach mitigates excessive risk-taking and balances longer-term strategic objectives with short-term operational performance. The remuneration philosophy is therefore an integral part of Sanlam’s risk management structure. In setting up the reward structures, cognisance is taken of prevailing economic conditions as well as local and international governance principles.

A great deal of attention is given to correctly position both the nature and the scale of remuneration relative to relevant comparator groups and international best practice. Steps are also taken to ensure alignment with the applicable regulatory and governance requirements in each of the countries in which Sanlam operates. In South Africa, those specifically include the Prudential Standards (Governance and Operational Standards for Insurers, issued in terms of the Insurance Act) and King IV™, while also conforming to the remuneration principles contained in the Codes of Good Practice which support employment equity legislation.

Sanlam is the sole or part owner of a number of subsidiaries, joint ventures and associates. While compliance with the Sanlam Group remuneration strategy and policy is primarily targeted at operating subsidiaries, Sanlam will use its influence to encourage the application of sound remuneration practices in those businesses where it does not hold a controlling interest. In businesses outside South Africa, where the Group remuneration policy is in conflict with local statutes or regulations, the local standards will apply.

Key GHRRC Matters for 2018

  • Benchmarking remuneration levels and practices with local and international comparator groups, as appropriate.
  • Benchmarking Sanlam executive directors and members of the Exco’s remuneration against a suitable market.
  • Alignment of Sanlam’s remuneration policy and practices in South Africa with prudential standards that provide a risk-based governance framework for the regulation of life and general insurers and with further updates from King IV™ governance principles and practices.
  • Reviewed and approved the remuneration design of heads of control functions and persons whose actions may have a material impact on the organisation’s risk exposure.
  • Recruited the new Chief Executive: Sanlam Brand and ratified the appointment of other executive employees.
  • Approved short- and long-term incentive awards to Exco members.
  • The review and approval of short-term incentive measures achieved for accrual of bonus pool/s and achievement of performance conditions for the vesting of long-term incentives.
  • Created the opportunity for certain portfolio and fund managers within Sanlam Investments to invest a portion of their long-term incentives in their own portfolios. This is done on terms and conditions (including the performance hurdles) similar to that of the existing long-term incentive schemes and ensures solid alignment to shareholders and clients.
  • Internal review of gender pay equity across all levels of the Group.
  • Defined measures to support existing strategies to correct the under-representation of black people at executive and senior management levels.
  • Monitored the work and decisions of other Sanlam Group companies’ HR and Remuneration committees and approved overall mandates on remuneration increases and variable remuneration (short and long term) per the delegation of authority framework.
  • Reviewed Sanlam Malus and Clawback policy and principles and approval of enhancements.
  • Reviewed and approved enhancements to the Group remuneration policy and improved disclosure of policy implementation as an outcome of engagement after the 2018 AGM with shareholders and proxy voting advisors.

Shareholder Engagement on Remuneration

The Group’s remuneration policy and the implementation thereof are subject to a non-binding advisory vote at the AGM. At the 2018 AGM, a total of 1 439 527 009 votes (2017: 1 576 758 190) were cast on the advisory vote for the Group’s remuneration policy, while 1 418 376 569 votes were cast on the implementation of the policy. The result of the voting was as follows:

The 2018 voting outcome and particularly the reasons for the lack of support for the Implementation Report was the focus of management’s subsequent engagement with major shareholders and proxy voting advisors. Sanlam extended an invitation to all dissenting shareholders via SENS to submit their concerns to the Company Secretary as basis for consultation.

The Remuneration Report contains a summary of the key areas discussed and Sanlam’s proposed actions. The subsequent feedback received from shareholders and proxy voting advisors on the consultations, actions and increased disclosure has been positive. We acknowledge that this is an ongoing process and are committed to open and continuous dialogue in this regard.

For the 2019 AGM the remuneration policy and the implementation report of the Remuneration Report will again be tabled separately for non-binding advisory votes by shareholders. In the event that either the policy or implementation report or both are voted against by 25% or more of the voting rights exercised, the following measures will be taken:

  • An engagement process will commence to ascertain the reasons for the dissenting votes.
  • All legitimate and reasonable objections and concerns will be appropriately addressed with full disclosure of the process followed and will be included in the following year’s Remuneration Report.

Our engagement approach

  • The Group Human Resources and Remuneration Committee (“the Committee” or “GHRRC”) welcomes engagement with shareholders and encourages shareholders to put their ideas to the Committee.
  • Once shareholders have had time to study the Remuneration Report we would appreciate feedback, preferably in writing. The Committee Chairman will then respond to queries and input from shareholders in writing and he will be available for a discussion in this regard.
  • If shareholders would like to make suggestions or provide input to the Committee at other times during the year, it will be appreciated and will be handled in the same manner as set out above.

Sanlam’s Remuneration Design Principles

In applying the remuneration philosophy and implementing the total reward strategy, a number of principles are followed:

Performance is the cornerstone of the remuneration philosophy. On this basis, all remuneration practices are structured to provide for clear differentiation between individuals with regard to performance. It is also positioned so that a clear link is maintained between performance hurdles and the Sanlam strategy.

A key objective of the remuneration philosophy is that remuneration packages should enable the Group and its businesses to attract and retain employees of the highest quality in order to ensure the sustainability of the Group

The reward consequences for individual employees are as far as possible aligned with, linked to and influenced by:

  • the interests of Sanlam shareholders (and, where applicable, minority shareholders in subsidiaries);
  • the interests of other stakeholders (e.g. employment equity; client service);
  • sustainable performance of Sanlam as a whole;
  • the performance of any region, business unit or support function; and
  • the employee’s own contribution.

The reward philosophy strives to provide a framework that encourages consistency, but allows for differentiation where it is fair, rational and explainable. Differentiation in terms of market comparison for specific skills groups or roles is necessary and differentiation concerning performance is imperative. Unfair differentiation is unacceptable.

Remuneration practices are recognised as a key instrument in attracting and retaining the required talent to meet Sanlam’s objectives and ensure its sustainability over the long term.

Employee identification with the success of Sanlam is important owing to the fact that it is directly linked to both Sanlam’s and individual performance. All employees should have the chance to be recognised and rewarded for their contribution and the value they add to Sanlam, and, in particular, for achieving excellent performance and results, in relation to Sanlam’s stated strategic objectives. The performance management process contributes significantly towards obtaining this level of participation and towards lending structure to the process.

Reward packages and practices reflect local and international best practice, where appropriate and practical.

The remuneration philosophy, policy and practices, as well as the processes to determine individual pay levels, are transparent and communicated effectively to all employees. In this process the link between remuneration and Sanlam’s strategic objectives is understood by all employees.

Accurate and up-to-date market information and information on best practice is a crucial factor in determining the quantum of the remuneration packages.

Where defined trigger events take place, provision is made for redress against remuneration through either malus (pre-vesting forfeiture) or clawback (post-vesting forfeiture). Malus and clawback provisions and the application thereof to trigger events are governed by the Sanlam Group Malus and Clawback Policy, which is a related policy to this Group Remuneration Policy and these provisions will be incorporated in relevant remuneration governance documents/rules

Key 2018 remuneration facts

Sanlam delivered a solid performance during the 2018 financial year. Despite difficult operating conditions in certain markets, the overall Group performance mostly met targets. This resulted in a weighted average bonus achievement of 114,3% (2017: 134,9%) at a Group level.

For the year ended 31 December 2018 the following long-term incentive allocations were made:

  • 3 978 478 shares (2017: 4 332 349) to 915 participants (2017: 885) under the Deferred Share Plan (DSP).
  • 1 517 182 shares (2017: 1 622 117) to 237 participants (2017: 224) under the Performance Deferred Share Plan (PDSP).
  • 390 433 shares (2017: 522 617) to 18 participants (2017: 11) under the Restricted Share Plan (RSP).

Sanlam Exco shareholding requirement

To encourage alignment between executive and stakeholder interests, Sanlam applies a minimum shareholding policy to all current and future members of the Sanlam Exco, including Sanlam executive directors. In terms of these arrangements, the following minimum shareholding levels, expressed as a percentage of annual total guaranteed package, must be reached by the later of 31 December 2021 or within six years from the date of appointment of a participating executive:

  • Group Chief Executive 175%
  • Financial director 125%
  • Business executives 100%
  • Support executives 50%

Participating executives are required to maintain the target shareholding throughout their tenure with the Group. Unvested shares under any long-term incentive arrangement will not be taken into account when assessing compliance with the MSR policy.

Sanlam’s Remuneration Policy and Implementation Report is included in the Remuneration Report.

Linking Remuneration to Strategy Execution

Sanlam operates four long-term incentive plans. Measurements for all plans are linked to the four strategic pillars. The Exco members’ scorecards contain strategic targets and outcomes to drive execution. Due to their roles and line of sight, the performance scorecards contain financial targets as well as other strategic targets. However, generally, financial targets comprise the majority of performance scorecard metrics.

The Group Exco members have the following financial and strategic metrics for vesting of long-term incentives.

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