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.
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:
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 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
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:
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:
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.
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.