| for the year ended 30 September 2010 |
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INTRODUCTION |
| This remuneration report is intended to provide an overview
and understanding of the group’s remuneration philosophy and
practices with specific emphasis on executive and non-executive
directors’ remuneration. |
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The remuneration committee |
The remuneration committee (the committee) is mandated, within
its approved terms of reference, to monitor the implementation of
the remuneration policy in general and to approve the remuneration
and benefits of executive directors and senior management. The
committee is also mandated to advise on non-executive directors’
fees and fees for directors performing board functions on various
committees. The recommendations are proposed to shareholders
at the annual general meeting.
To this end, the committee, comprising non-executive directors
assisted by independent remuneration advisory experts, drive
the implementation of the company’s remuneration philosophy
throughout the group. More detail on the committee. |
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| Remuneration policy |
| The committee assists the board in setting the PPC group
remuneration policy and directors’ remuneration. |
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| Key principles of the remuneration policy |
| • |
The policy is designed to support key business strategies and
create a strong, performance-orientated environment. At the
same time, the policy must aim to attract, motivate and retain
talented employees. |
| • |
In setting remuneration levels for executive directors, the
committee takes account of the remuneration policies and
practices of comparable companies of a similar size. |
| • |
Executive directors and senior management have the opportunity
to earn enhanced total remuneration by meeting annual
performance targets set by the committee. |
| • |
Components of remuneration for executive directors and senior
management comprise: |
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| – |
Annual basic pay and benefits which are reviewed annually in
September. |
| – |
A performance-related annual cash incentive bonus, reviewed
annually in October. |
| – |
Longer-term incentives aligned to the company’s share price,
reviewed annually in October. |
|
| • |
The policy adopted by the committee ensures that a significant
proportion of the remuneration of executive directors and senior
management is aligned with corporate performance, generating
strong alignment with the interest of shareholders. |
| • |
Non-executive directors do not receive remuneration or incentive
awards related to share price or corporate performance and
non-executive directors’ fees are approved by shareholders
in advance. |
|
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| Service contracts with directors and senior management and the
incentive scheme rules are consistent with these key principles
and the committee is confident these will continue to contribute
towards PPC’s short-term goals and longer-term objectives. |
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| The remuneration framework |
| The following are the components of the remuneration framework
within the company: |
| • |
Monthly pay and benefits such as salary and company
contributions to retirement funding and medical aid. |
| • |
The short-term incentive scheme (STIS). A performance-related
cash award reviewed annually. |
| • |
The long-term incentive plan (LTIP). A cash-settled share scheme
with a share strike price and three- to five-year vesting period. |
| • |
The restricted share scheme (RSS). A cash-settled share scheme
with a zero share strike price and three-year vesting period aimed
specifically at retaining key employees. |
|
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| Monthly pay and benefits |
| • |
Monthly pay and benefits are targeted to be above average
for comparable roles in companies of similar complexity and
size. Market data is used to benchmark salary and benefits
and to inform decisions on salary adjustments. Salaries are
adjusted around the benchmarks depending on the individual’s
performance and experience, and are reviewed each year. The
review takes into account changes in scope of the roles performed
by individuals, changes required to meet the principles of the
remuneration policy and the market competitiveness of salaries
and benefits. |
| • |
Professional advisers to supply benchmark information are
appointed by the committee. |
| • |
Salary and benefit adjustments for directors are reviewed and
approved by the committee. |
| • |
Salary and benefit adjustments for all other employees are
approved by the CEO. |
| • |
Attention is paid to consistent job evaluation and grading of
roles throughout the group, to ensure equity of reward and
facilitate equity and mobility within the company. |
|
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| Short-term incentive scheme (STIS) |
| Design principles for the STIS include: |
| • |
Alignment – The incentive bonus for each participant is expressed
as a percentage of annual salary and scored with reference to
the overall financial performance of the company, measured as
earnings before interest, tax, amortisation and depreciation or
EBITDA and the score on personal objectives for the participant. |
| • |
Performance culture – The incentives are significantly geared
to individual, team and/or organisational performance, with
no payments made for performance related to doing the basic
job as laid down in the job model or unacceptable levels of
performance. Exceptional payments are made only in the case of
genuinely stretching achievements. |
| • |
Retention – Participants must still be employed at the end of the
financial year to qualify for STIS participation. Incentive bonuses
for participants who join, transfer or retire during the financial
year are pro-rated according to the time spent in a specific role. |
| • |
Good governance – Targets and parameters are set in advance
of the applicable financial year by the committee. Disclosure of
targets, achievements against those targets and payments are
disclosed to the appropriate governance bodies – the committee,
the board, shareholders, executive committees and management
as required by disclosure best practice. |
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| Long-term incentives |
| Design principles of long-term incentives are to: |
| • |
Attract, motivate and retain participants as part of a market
competitive package. |
| • |
Reward participants for medium to longer-term company
performance. |
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Alignment with shareholder interests. |
|
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| The company uses two long-term incentive instruments: |
| • |
A share appreciation right (with/without performance vesting
conditions). |
| • |
A restricted share unit (with/without performance vesting
conditions). |
|
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| The long-term incentive plan (LTIP) |
| • |
The allocating of share appreciation rights is governed by the
LTIP rules as approved by the committee on 8 August 2007 and
amended from time to time. These rules are regularly reviewed
by the committee. |
| • |
Share appreciation rights are similar to share options in that the
participant is awarded a conditional right to the appreciation (or
increase) in the market value of a number of PPC ordinary shares,
from grant date to exercise date which is settled in cash. The
payment is subject to normal income tax in the hands of the
participant. The price at the date of grant is determined by the
volume weighted average price immediately preceding the grant
date of the share appreciation rights. |
| • |
Selected individuals in Peromnes grades 0 to 6 are eligible for
share appreciation right awards. |
| • |
A performance condition is required for executive directors and
senior management participants’ share appreciation rights to
vest (Peromnes grades 0 to 3). |
| • |
The share appreciation rights may be exercised after vesting
dates and if the applicable performance conditions have been
met. One third of the rights vests three years after the grant date,
a further third after four years, and all the rights are exercisable
from five years to ten years after the grant date, provided that
the performance conditions, if applicable, have been met. |
| • |
Grants will be made annually by the committee at its discretion
to achieve the company’s objectives of attracting, retaining and
rewarding key employees and offering market-competitive total
reward to employees. Regular and consistent granting of share
appreciation rights, ie annually, is desirable. |
| • |
If the participant resigns or is dismissed for disciplinary reasons
then all vested and unvested rights lapse. When participants
retire, they are entitled to the same rights and subject to the
same conditions under this scheme as if they had continued to
be an employee. |
| • |
In the case of a participant’s death, the executor has one year to
exercise all vested rights. |
| • |
In the case of retrenchment, ill health, disability or any other
circumstances which the committee may consider appropriate,
the participant must exercise vested rights within three months.
The committee may, in its absolute discretion, permit a portion
of the unvested rights to vest – the portion will be proportional
to the time served of applicable vesting periods and the extent
to which any applicable performance conditions have been met. |
| • |
The annual share appreciation right grants are based on multiples
of basic salary. The committee reviews these multiples regularly
to ensure they are in line with market trends, and remain fair and
motivating as longer-term rewards. |
|
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| The restricted share scheme (RSS) |
| The restricted share scheme is specifically aimed at retaining key
employees. |
| • |
Restricted share units are rights to the cash value of company
shares granted to an individual subject to him/her remaining in
the employ of the company until a specified date, usually three
years from the grant date. |
| • |
The right is automatically settled in cash after the specified
vesting date. Participants will forfeit the rights if they resign or
are dismissed for disciplinary reasons before the vesting date. |
|
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| Eligibility for restricted share units |
| • |
Selected individuals in Peromnes job grades 0 to 6 are eligible for
restricted share unit awards. |
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A performance condition is required for executive directors and
senior management participants’ restricted share units to vest
(Peromnes grades 0 to 3). |
| • |
Exceptional awards of restricted share units are made to
qualifying individuals over and above their normal remuneration
package. The awards are made after appraisal of the market
for talented individuals in each year and the performance and
potential of the participants at that time. They are not intended
as regular annual awards. |
| • |
The list of those eligible for awards is reviewed annually by the
committee to include only those key individuals with significant
value to the company. |
| • |
The value of restricted share unit awards is linked to benchmark
values provided by external advisors. |
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Mentoring, development, succession and career planning and
all other non-financial aspects of retention programmes are
pursued vigorously together with awards of restricted share units
to optimise the effectiveness of the scheme. |
|
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| Policy on employment contracts |
| In relation to contracts with executive directors, the committee,
subject to circumstances, will maintain the following policy: |
| • |
Fixed-term contracts should not exceed three years but may
provide for extension. |
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All agreements should contain a restraint of trade clause with a
term of not less than a year. |
| • |
Contracts should not commit the company to pay on termination
arising from the director’s failure. |
| • |
Balloon payments on termination are not seen as fair
remuneration policy. |
| • |
If a director is dismissed because of a disciplinary procedure,
a shorter notice period should apply without entitlement for
compensation for the shorter notice period. |
| • |
Contracts should not compensate directors for severance
because of change of control. |
|
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Both executive and non-executive directors are subject to election
by shareholders at the first annual general meeting following their
appointment and are then required to submit to retire in accordance
with the board rotation plan.
The appointment of a non-executive director may be terminated
without compensation if that director is not re-elected by
shareholders or otherwise in accordance with the company’s
articles of association. |