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Remuneration

Massmart, through the Remuneration and Nominations Committee, implements remuneration policies that enable it to recruit, retain and motivate the executive talent needed to achieve superior performance. The Committee, with periodic advice from external executive remuneration consultants, ensures the provision of executive remuneration packages that are competitive with reference to other major South African retail companies, as well as other companies similar to Massmart in their size, spread and complexity.

Remuneration policy

Our executive remuneration policy has three components, being:

  1. The fixed portion, specifically the monthly basic cash salary, and benefits including motor vehicles, retirement funding and medical aid
  2. The short-term or performance incentives, represented as multiples of basic monthly salary, and linked to the achievement of profit growth and/or personal performance. If achieved, these incentives are paid annually
  3. Long-term equity incentives under the Massmart Holdings Limited Employee Share Trust, Thuthukani

The Committee considers and recommends to the trustees of the Massmart Holdings Limited Employee Share Trust any proposed shares or options that are granted in terms of the Share Trust rules. Annually the Committee reviews the Group’s employee benefit funds, specifically the in-house medical scheme and the provident and pension funds, considering their performance, financial stability and the general principles governing the benefit levels being applied.

The Massmart remuneration policy strives for fixed remuneration at the median to upper quartile of comparable positions. At least every two years the Committee receives a report prepared by independent remuneration consultants on the recent trends in, and the current levels of, short- and long-term executive remuneration in South Africa. In May 2011 the Committee received such a report prepared by 21st Century Business & Pay Solutions, an independent remuneration consultancy. As a result of this report, the remuneration of several executives and senior managers were adjusted.

With regard to short-term or performance incentives, Massmart places particular emphasis on generous annual incentives for high performance for both executive directors and executive management. This policy, communicated to and understood by the Group’s executives, codifies a range of performance incentives linked to annual headline earnings per share growth for the Group in excess of average CPI (as reported by StatsSA) plus 5%, or growth in profit before tax for each Division, as appropriate. Executives can earn an increasing multiple of their monthly basic salary depending upon the earnings growth exceeding CPI plus 5% or higher percentage increments. With effect from 2006, an element of the annual incentive bonus was linked to corporate accountability performance, specifically the achievement of BBBEE transformation targets approved by the Remuneration and Nominations Committee. This incentive can amount to an additional one to three months’ salary. The Committee also has the discretion to reward superior individual performance.

Long-term equity incentive plans ensure the alignment of executive reward with shareholders’ interests, in particular the sustained creation of shareholder value. New issues of annual allocations of shares or options are only allowed when Massmart’s growth in headline earnings per share in the prior year exceeds average CPI plus 5%, consequently there was no annual issue during the 2011 financial year. The amount allocated is based upon a factor of the executive’s total prior-year remuneration including incentive bonus.

The Committee believes that participants in the employee share scheme should, on average, hold unvested shares or options representing value equivalent to approximately three times their annual remuneration.

With effect from 2002, only members of the Executive Committee can elect to receive scheme shares, while all other participants receive options.

Non-executive directors receive fees in the top quartile for their role as directors and for their roles on Board Committees.

The Committee believes that participants in the employee share scheme should, on average, hold unvested shares or options representing value equivalent to approximately three times their annual remuneration.

Only members of the Executive Committee can elect to receive scheme shares, whilst all other participants receive options.

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