Integrated Annual Report 2021
Integrated Annual Report 2021
Section 01
Sindi ZilwaChairman of the Remuneration Committee
The Remuneration Committee is accountable for consistent and regular oversight of remuneration governance, which includes the development and implementation of remuneration policies and practices that ensures fair pay, enables the recruitment, retention and motivation of high calibre associates and the alignment of performance with reward. These accountabilities are performed within the confines of risk mitigation and alignment with stakeholders’ interests. Through its oversight, the Committee supports the Board in driving the achievement of strategic objectives, aligned with positive reward outcomes.

 

Letter from the Chairman of the Remuneration Committee to shareholders

On behalf of the Remuneration Committee, I am pleased to present the Massmart Remuneration Report for the year ended December 2021, which complies with best reporting practice as recommended by the King IV report. This report highlights the key components of Massmart’s remuneration philosophy and describes the way in which it underpins the business’ strategic objectives.

The Remuneration Committee remains accountable for ensuring that remuneration policies and practices are fair, equitable and in line with market practice. The Group remains committed to the principles of fair and equitable pay. Executive remuneration is measured in the context of overall associate remuneration.

Business performance and the impact on remuneration outcomes

2021 was a challenging year globally with the Covid-19 pandemic impacting our ability to trade. Continued liquor trading restrictions and lower activity levels in the corporate, hospitality, restaurant and catering sectors negatively impacted our bottom line.

We were also impacted by looting and arson during the civil unrest in July, particularly in our KZN operations. Through the efforts of our leadership team and associates, we were able to re-open most of our stores and get a new DC operational in record time, ensuring delivery to our customers.

Naturally our associates were deeply impacted by the unrest and we took immediate action to protect and assist our affected associates where we could.

Read more detail on our year of unique challenges

Despite the challenges faced this year, we are making good progress with the implementation of our Turnaround plan. As we continue to embed the plan, the Board and management remains focused on driving profitability, controlling costs and increasing value for our investors. All associates received their full salaries and benefits during 2021, as well as scheduled salary increases. Associates who are not required to return to the office, have continued to work from home.

Despite the ongoing trading challenges experienced in 2021, our associates have responded by showing a deep commitment to our customers.

The Remuneration Committee fully supports the efforts of the Massmart leadership to turn the business around under very difficult circumstances.

 

The year in review

Within the remuneration environment, we saw the Turnaround plan as an opportunity to reassess our structures and frameworks, which triggered a number of initiatives to better align the associate benefits and incentivisation to the new Group operating model.

In 2021, we:

  • Approved the Executive Committee Remuneration and the salary increase mandate
  • Recommended Non-Executive Director fee increases to the Board
  • Approved the Massmart benefits harmonisation project, which involved the review, standardisation and enhancement of benefits aligned to the Turnaround plan
  • Approved the redesigned AIP and SIP structures, which were communicated and implemented across the Group, in support of the new Group operating model and aligned to shareholder requirements. Financial performance for 2021 for both the AIP and SIP was measured against five dimensions: earnings before interest and tax (EBIT), SG&A, Comp sales, ROIC and HEPS
  • Approved the introduction of the Game modifier, a short term incentive mechanism designed to drive renewed focus on the Game turnaround
  • Reviewed and enhanced the non-financial goals supportive of Massmart’s strategic intent
  • Monitored the progress made to address identified pay inequity
  • Approved the revised Massmart Remuneration Policy
  • Revised the Massmart Share Plan rules to cap the share usage limit for SIP to a maximum of 5%

 

Shareholder engagement and voting outcomes

At the Annual General Meeting (AGM) held on 20 May 2021, in accordance with King IV, the Group Remuneration Policy and implementation reports were put to separate non-binding advisory votes. We were pleased with the results of the vote on our Remuneration Policy of 90.86% (2020: 91.26%) and implementation report of 85.23% (2020: 74.97%). We believe the results reflect that our shareholders recognise the work we are doing to continually improve our Remuneration governance. We commit to continuing our focus on Remuneration matters and remain considerate of shareholders input.

We value the opinion of our shareholders and have addressed many of the points they raised in 2020. We believe that strong stakeholder engagement strengthens the relationship between our shareholders and our Board, helping to ensure the effectiveness of our Board and its alignment to all stakeholder interests.

Aligned with the governance principles as set out in King IV, Massmart will again table its Remuneration Policy and implementation reports for two separate non-binding advisory votes at its 2022 AGM. Should 25% or more of the shareholders vote against either resolution at the AGM, the Board will invite dissenting shareholders to engage with the Remuneration Committee on their concerns.

 

 

 

 

 

FUTURE FOCUS AREAS

In 2022, the Remuneration Committee’s main focus areas and priorities will include:

Continued focus on the alignment of benefits and assessment of progress on pay equity correction

Continued assessment of Executive pay practice and ensuring alignment to policy and the application of due diligence

Continuous review of progress to address identified pay inequity

Development and implementation of Massmart’s Fair and Responsible Pay Policy

Supporting the Group in enhancing its Associate Value Proposition to retain key talent as well as to attract critical skills, as may be required to meet new strategic objectives

Investigate the business case for the inclusion of performance criteria in the issue of restricted shares

Reviewing and assessing non-financial metrics, aligned to business strategic focus

Engagement with external consultants

During 2021, Massmart continued its relationship with PwC, an external independent consulting organisation with relevant technical experience, and a listed Company with market knowledge, to partner with us on remuneration related matters. The scope of their work included providing guidance on the revision of the Massmart Share Plan rules and elements of the Remuneration Policy. PwC was also instrumental in providing a report and context on the management of restricted share plans in the market and our peer group. The Remuneration Committee is comfortable with the independence of the consultants and the expertise provided.

The information provided in this review has been approved by the Board on the recommendation of the Remuneration Committee.

I am satisfied that the Remuneration Policy achieved its stated objectives in the year under review and its implementation is fully compliant with policy and business strategic goals.

I would like to recognise and show my appreciation for my predecessor, Phumzile Langeni, who has been instrumental in driving remuneration governance in Massmart. I would further like to express my appreciation to my fellow members of the Remuneration Committee for their support and commitment during the past year and look forward to working with them in 2022.

 

Sindi Zilwa
Chairman of the Remuneration Committee
8 April 2022

 

 

 

 

Concerns raised during our consultations with shareholders and our responses are noted below: