6.3 Remuneration and benefits
Introduction
The remuneration and benefits
offered to employees play a central
role in attracting and retaining key
talent. These are discussed in the
Remuneration Report on pages
43 – 62 of the Annual Financial
Report (AFR).
During 2015, the South Deep wage and Ghana wage negotiations were the most notable remuneration and benefits events and are discussed below.
South Deep wage agreement
South Deep’s bargaining unit
employees received an average 10%
salary increase over the three-year
period of the wage agreement that
came into effect in April 2015.
However, the agreement varies
depending on the employee category
and goes beyond wage increases to
provide employees with a range of
benefits. These include:
- A scarce skills allowance of R4,000 per month in the first year, escalating by R500 per annum over the next two years, for TM3 artisans and Category 1 machine operators
- A retention allowance of R1,000 per month for Category 2 machine operators and artisans in the plant, backfill, shafts as well as tramming and recovery areas, for each of the three years covered by the agreement
- An increase of 20,96%, 14,29% and 12,5%, respectively in each of the three years, for Category 4 – 8 employees and an 8% increase per year for miners, artisans and officials
- A housing allowance to replace the current living out allowance over the three-year period (p131).
Ghana wage agreement
Gold Fields Ghana concluded 2015
wage negotiations with the Ghana
Mineworkers’ Union (GMWU) for the
bargaining units in early 2016. The
outcomes included:
- A 5% increase on basic pay
- A GHS 1,000 (US$250) one-off, development reimbursement
- A 30% rent allowance for employees not accommodated by the Company
The Ghana Chamber of Mines has proposed collective bargaining with the GMWU for the 2016 wages and working condition negotiations. The GMWU has not consented to this and by March 2016 negotiations had not commenced.
Summarised Remuneration Report
This is a summarised version of the
Remuneration Committee’s
Remuneration Report, the full version
of which can be found on pages
43 – 62 of the AFR.
The key principles of Gold Fields’ remuneration policy are to:
- Ensure that the Group’s executive remuneration policy encourages, reinforces and rewards the delivery of sustainable shareholder value
- Provide competitive rewards to encourage ownership in the business, as well as setting stretch performance targets for the delivery of reward-based variable short-term and long-term incentive plans for its executive directors and senior management
- Motivate and reinforce individual, team and business performance in the short, medium and long term.
The remuneration strategy is underpinned by sound remuneration management and governance principles, and comprises the following key elements:
- Guaranteed pay
- Benefits
- Short-term incentives (STI), i.e. annual performance bonuses
- Long-term cash incentive instrument i.e. as detailed in the Long-Term Cash Incentive Plan (LTIP).
Gold Fields’ remuneration philosophy aims to attract and retain motivated, high-calibre employees, whose interests are aligned with those of our shareholders. This is achieved through a balance of guaranteed and performance-based remuneration (variable pay).
The pay components for our executives are displayed below:
Total remuneration actual outcomes for 2015
(US$’000) (An average exchange rate of US$1= R12.68 for 2015 was used)
Guaranteed pay and benefits (Remuneration package)
Gold Fields’ policy is to reward its
people fairly and consistently
according to their role and their
individual contribution to the Company
and its performance. As a global
Company, with the majority of our
operations now outside South Africa,
we expect our senior executives to
have global experience. We therefore
compete for talent in a global
marketplace, and our approach to
remuneration takes account of the
need to be competitive throughout the
various jurisdictions in which the
Group operates.
To achieve external equity and competitive remuneration, Gold Fields uses surveys of peer group mining companies. During the year, Gold Fields contracted Mercer Consulting South Africa to provide a comprehensive analysis of the Group Executive Committee’s remuneration. The study confirmed that the compensation of executives is in line with Gold Fields’ position in the basket of comparative companies.
Gold Fields also provides, where appropriate, additional elements of compensation, including retirement savings, healthcare assistance, life and disability insurance, housing and personal accident cover.
The 2016 annual gross remuneration packages, or GRP, payable to the CEO, Nick Holland, and the CFO, Paul Schmidt, as determined the Remuneration Committee, were as follows:
- Nick Holland: R10,252,100 plus US$390,000
- Paul Schmidt: R6,478,000 plus US$119,000.
In addition to the GRP, each executive director is entitled, among other things, to benefits that comprise participation in the Gold Fields Long-Term Cash Incentive Plan; consideration of an annual incentive bonus based on the fulfilment of certain targets set by the Board of Directors; and an expense allowance.
In 2015, the ratio of average executive director compensation vs average employee compensation was 21.3.
This ratio has reduced from 25.02 in 2014 as a result, among others, of the above inflationary wage increases received by our employees in South Africa in terms of three wage agreement reached in 2015 (p129).
Short-term incentives (Annual
bonus)
Executive directors are eligible to
earn performance bonuses of 60%
of GRP for the CFO and 65% of
GRP for the CEO for on-target
performance, which comprise both individual and strategic performance
objectives as well as wider Group
objectives. The annual bonus could
increase above 60% and 65%
respectively if the stretch target
is achieved.
The Remuneration Committee sets targets for annual bonuses. In the case of the CEO and CFO, 65% of the performance bonus is based on Group objectives and the remainder is based on individual strategic objectives. For the regional Executive Vice-Presidents, bonuses are judged against Group, regional and operational objectives.
The on-target annual bonus parameters for the CEO, CFO and executive vice-presidents are set out below.
| Role | Target earning potential as % of guaranteed remuneration | Bonus cap (stretch earning potential) as % of guaranteed remuneration | ||
| CEO | 65 | 130 | ||
| CFO | 60 | 120 | ||
| Executive vice-presidents | 55 | 110 |
The bonus parameter objectives will be based on the drivers below and support
the Group scorecard as reflected above. Other elements of the Group
scorecard, not described below, are captured in the personal scorecards.
Group scorecard parameters
| Safety | 20% | ||
| Total gold production | 20% | ||
| All-in Cost (AIC) per ounce | 40% | ||
| Development or waste mined | 20% |
The CEO’s 2016 annual performance bonus is made up of the bonus parameter objectives (65%) as stated in the table on
the previous page and personal performance objectives (35%) as stated in the table below:
| 2016 performance scorecard for Gold Fields CEO Nick Holland | |||||
| Objective | Weighting | Measurement | |||
| 1. Group free cash flow | 10% | Deliver free cash flow margin of 5% based on a gold price of US$1,100/oz and exchange rates of A$0.73/US$ and R14.14/US$ | |||
| 2. South Deep cash flow | 15% | Cash breakeven by year-end | |||
| 3. South Deep rebase plan | 25% | Conclude the rebase life-of-mine plan | |||
| 4. Portfolio decisions on Damang and Darlot | 20% | Decision on Darlot and Damang | |||
| 5. Technology and innovation | 10% | Technology and innovation strategy approved | |||
| 6. Improve the quality of assets in the Gold Fields portfolio | 20% | Grow mineable resources that maintain growth in FCF/oz and average reserve life per operation, through a combination of brownfields exploration and portfolio management (acquisition, joint venture and/or disposal) | |||
Individual performance targets
The CEO and CFO were also
assessed on individual, strategic
objectives (the CEO’s performance
scorecard is included in full in the
Remuneration Report).
The CEO received a personal performance score of 4.2 out of 5 and the CFO received a personal performance score of 4.5 out of 53. The aggregate bonus paid to members of the executive team in February 2016 was 109% of annual salary. For the CEO it was 111%¹ and the CFO 106%² of annual salary.
| 1 | CEO bonus = (65% x 170%) + (35% x 172%) x 65% = 111% |
| 2 | CFO bonus = (65% x 170%) + (35% x 190%) x 60% = 106% |
| 3 | Gets converted into a percentage with 3 = 100% and 5 = 200%. 4.2 = 172%, 4.5 = 190% |
Long-term incentives
The Company operates a Long-term
Incentive Plan (LTIP) designed to
encourage senior and key employees
to identify closely with the long-term
objectives of Gold Fields and allow
them to participate in the future
financial success of the Company.
In particular the LTIP is designed to:
- reward key senior managers for their performance and contribution to long-term sustainable financial results that drive shareholder value; and
- increase the alignment of executives and shareholders with the future growth and profitability of Gold Fields.
During 2015 the long-term incentives were governed by the 2014 LTIP – the salient features of this plan are:
- The LTIP is a three-year performance plan.
- Each performance cycle starts on 1 January of the first year and ends on 31 December of the third year.
- Annual awards will be made to eligible participants.
- Allocations will be based on the formula: Annual salary x applicable % by grade x personal performance.
- Vesting will be based on two
corporate performance conditions
equally being met:
- Free cash flow margin 50% weighted
- Total shareholder return 50% weighted
Threshold must be achieved for pay-out of any portion of the award to be triggered.
The Gold Fields Limited 2014 LTIP is set to be replaced with the revised Gold Fields Limited 2012 Share Plan, which requires shareholder approval at the 2016 Annual General Meeting.
On approval of the changes to the revised 2012 Share Plan, no new awards will be made under the 2014 LTIP. In the event that the 2012 Share Plan is not approved, annual long-term incentives will revert to the terms of the 2014 LTIP, with revised corporate performance conditions
Minimum shareholding
requirement for executives
In line with best practice and in
response to shareholder input, the
Company has adopted a Minimum
Shareholding Requirement policy
that will become mandatory for
executives. The policy requires
executives to hold a specific
percentage of shares in the
Company. The proposed target
shareholdings of vested and
unencumbered shares for the
relevant executives is:
- CEO: 200% of annual Guaranteed Remuneration Package (GRP); and
- CFO and other executives: 100% of annual GRP
The table below provides details of the remuneration of executive directors and prescribed officers in 2015, in terms of US Dollar values. An average exchange rate for the 12-month period ended 31 December 2015 was used: i.e. US$1 = R12.68 to convert to US Dollar values.
Non-executive directors’ fees and executive directors’ and prescribed officers’ remuneration
The directors and prescribed officers were paid the following remuneration (US$ terms) for the year ended 31 December 2015:
| Fees and remuneration in US Dollars | |||||||||||||
| All figures stated in
US$’000 |
Salary1 | Pension scheme contri- bution |
Annual bonus2 |
Sundry | Subtotal | Pre-tax share proceeds for shares awarded in previous years |
Total realised earnings for the 12-month period ended 31 December 20153 |
For the 12-month period ended 31 December 2014 |
|||||
| Board fees | |||||||||||||
| Directors’ fees |
Committee fees |
||||||||||||
| Executive directors | |||||||||||||
| Nicholas J Holland | – | – | 935.7 | 145.3 | 618.910 | – | 1,699.8 | 1,132.5 | 2,832.4 | 2,603.5 | |||
| Paul A Schmidt | – | – | 512.2 | 58.4 | 616.5 | – | 1,187.0 | 568.2 | 1,755.3 | 1,602.7 | |||
| Prescribed officers | |||||||||||||
| Ernesto Balarezo4 | – | – | 622.4 | – | 425.7 | 414.8 | 1,463.0 | 109.4 | 1,572.4 | 1,970.4 | |||
| Alfred Baku5 | – | – | 688.9 | 158.5 | 572.0 | 298.8 | 1,718.2 | 220.5 | 1,938.7 | 1,889.2 | |||
| Richard Weston | – | – | 560.9 | 64.5 | 482.0 | – | 1,107.4 | 688.6 | 1,796.0 | 1,506.5 | |||
| Naseem A Chohan | – | – | 283.0 | 53.1 | 306.9 | – | 643.0 | 221.4 | 864.4 | 726.6 | |||
| Brett Mattison | – | – | 347.1 | 38.4 | 379.3 | – | 764.8 | 207.7 | 972.6 | 851.3 | |||
| Lee-Ann Samuel | – | – | 307.7 | 33.8 | 322.1 | – | 663.6 | 175.4 | 839.0 | 807.1 | |||
| Taryn Harmse | – | – | 265.2 | 65.3 | 322.4 | – | 652.9 | 106.6 | 759.6 | 673.8 | |||
| Nico Muller6 | – | – | 412.8 | 45.0 | 423.5 | 197.2 | 1,078.5 | – | 1,078.5 | 403.6 | |||
| Avishkar Nagaser7 | – | – | 210.6 | 23.4 | 208.5 | – | 442.5 | – | 442.5 | – | |||
| Willie Jacobsz8 | – | – | – | – | – | – | – | – | – | 1,034.4 | |||
| Michael D Fleischer9 | – | – | – | – | – | – | – | – | – | 510.7 | |||
| Kgabo FL Moabelo9 | – | – | – | – | – | – | – | – | – | 727.1 | |||
| Non-executive directors | |||||||||||||
| Cheryl A Carolus | 203.8 | – | – | – | – | – | 203.8 | – | 203.8 | 232.3 | |||
| Alan R Hill | 66.9 | 43.3 | – | – | – | – | 110.2 | – | 110.2 | 125.6 | |||
| David N Murray | 66.9 | 33.8 | – | – | – | – | 100.8 | – | 100.8 | 114.9 | |||
| Richard P Menell | 66.9 | 46.4 | – | – | – | – | 113.3 | – | 113.3 | 127.5 | |||
| Gayle M Wilson | 66.9 | 52.6 | – | – | – | – | 119.5 | – | 119.5 | 136.2 | |||
| Donald MJ Ncube | 66.9 | 46.4 | – | – | – | – | 113.3 | – | 113.3 | 129.2 | |||
| Kofi Ansah | 66.9 | 18.9 | – | – | – | – | 85.8 | – | 85.8 | 97.8 | |||
| Total | 605.3 | 241.4 | 5,146.5 | 685.7 | 4,677.9 | 910.8 | 12,267.6 | 3,430.5 | 15,698.1 | 16,270.4 | |||
| Average exchange rates were US$1 = R12.68 for FY2015 and R10.82 for FY2014 respectively | |
| 1 | The total US$ amounts paid for 2015, and included under salary, were as follows: Nick Holland US$356,000, Paul Schmidt US$100,000 |
| 2 | The annual bonus accruals for the 12-month period ended 31 December 2015, paid in February 2016 |
| 3 | These amounts reflect the full directors’ emoluments for comparative purposes. The portion of executive directors’ emoluments payable in USD is paid in terms of agreements with the offshore subsidiaries for work done by directors offshore for offshore companies. The total realised earnings for 2015 for Nick Holland in ZAR = R35,914,615 and for Paul Schmidt = R22,256,668 |
| 4 | Ernesto Balarezo – Sundry payment relates to legislated bonuses |
| 5 | Sundry payment for Alfred Baku relates to relocation/leave allowance and encashment of excess leave |
| 6 | Nico Muller – Sundry payment relates to pro rata sign-on bonus |
| 7 | Avishkar Nagaser – Appointed on 1 January 2015 |
| 8 | Willie Jacobsz – Prescribed officer until 31 December 2014 |
| 9 | Michael Fleischer and Kgabo Moabelo – Resigned during 2014 |
| 10 | Nick Holland elected, prior to the determination of the annual performance bonus for FY2015 and in line with the Rules of the Minimum Shareholding Requirement Policy, to convert 50% of his cash bonus into Gold Fields Shares (US$618,900) which will be held in escrow for a five-year restricted period. |
The directors and prescribed officers were paid the following remuneration (Rand terms) for the year ended 31 December 2015:
| Fees and remuneration in Rands | |||||||||||||
| All figures stated in
US$’000 R'000 |
Salary¹ | Pension scheme contri- bution |
Annual bonus2 |
Sundry7 | Subtotal | Pre-tax share proceeds for shares awarded in previous years11 |
Total realised earnings for the 12-month period ended 31 December 20153 |
For the 12-month period ended 31 December 2014 |
|||||
| Board fees | |||||||||||||
| Directors’ fees |
Committee fees |
||||||||||||
| Executive directors | |||||||||||||
| Nicholas J Holland | – | – | 11,864.8 | 1,841.9 | 7,847.410 | – | 21,554.1 | 14,360.6 | 35,914.6 | 28,169.4 | |||
| Paul A Schmidt | – | – | 6,494.2 | 740.1 | 7,817.4 | – | 15,051.7 | 7,205.0 | 22,256.7 | 17,341.7 | |||
| Prescribed officers | |||||||||||||
| Ernesto Balarezo4 | – | – | 7,892.6 | – | 5,398.3 | 5,260.0 | 18,550.9 | 1,387.2 | 19,938.1 | 21,319.2 | |||
| Alfred Baku5 | – | – | 8,735.5 | 2,009.3 | 7,252.8 | 3,789.0 | 21,786.5 | 2,795.7 | 24,582.2 | 20,440.5 | |||
| Richard Weston | – | – | 7,112.1 | 817.9 | 6,112.1 | – | 14,042.1 | 8,731.8 | 22,773.9 | 16,296.9 | |||
| Naseem A Chohan | – | – | 3,588.2 | 673.3 | 3,891.9 | – | 8,153.4 | 2,807.5 | 10,961.0 | 7,861.1 | |||
| Brett Mattison | – | – | 4,401.3 | 487.1 | 4,809.8 | – | 9,698.2 | 2,634.0 | 12,332.2 | 9,212.1 | |||
| Lee-Ann Samuel | – | – | 3,901.1 | 429.2 | 4,084.0 | – | 8,414.3 | 2,224.3 | 10,638.5 | 8,732.3 | |||
| Taryn Harmse | – | – | 3,362.5 | 828.3 | 4,088.3 | – | 8,279.1 | 1,352.2 | 9,631.3 | 7,290.7 | |||
| Nico Muller6 | – | – | 5,234.5 | 570.8 | 5,370.4 | 2,500.0 | 13,675.8 | – | 13,675.8 | 4,366.3 | |||
| Avishkar Nagaser7 | – | – | 2,670.8 | 296.7 | 2,643.3 | – | 5,610.8 | – | 5,610.8 | – | |||
| Willie Jacobsz8 | – | – | – | – | – | – | – | – | – | 11,191.9 | |||
| Michael D Fleischer9 | – | – | – | – | – | – | – | – | – | 5,525.6 | |||
| Kgabo FL Moabelo9 | – | – | – | – | – | – | – | – | – | 7,867.3 | |||
| Non-executive directors | |||||||||||||
| Cheryl A Carolus | 2,584.1 | – | – | – | – | – | 2,584.1 | – | 2,584.1 | 2,513.6 | |||
| Alan R Hill | 848.5 | 548.9 | – | – | – | – | 1,397.4 | – | 1,397.4 | 1,359.3 | |||
| David N Murray | 848.5 | 429.1 | – | – | – | – | 1,277.6 | – | 1,277.6 | 1,242.8 | |||
| Richard P Menell | 848.5 | 588.5 | – | – | – | – | 1,437.0 | – | 1,437.0 | 1,379.2 | |||
| Gayle M Wilson | 848.5 | 666.6 | – | – | – | – | 1,515.1 | – | 1,515.1 | 1,473.8 | |||
| Donald MJ Ncube | 848.5 | 588.5 | – | – | – | – | 1,437.0 | – | 1,437.0 | 1,397.9 | |||
| Kofi Ansah | 848.5 | 239.7 | – | – | – | – | 1,088.2 | – | 1,088.2 | 1,058.5 | |||
| Total | 7,675.1 | 3,061.3 | 65,257.5 | 8,694.6 | 59,315.7 | 11,549.0 | 155,553.1 | 43,498.2 | 199,051.3 | 176,040.1 | |||
| Average exchange rates were US$1 = R12.68 for FY2015 and R10.82 for FY2014 respectively | |
| 1 | The total US$ amounts paid for 2015, and included under salary, were as follows: Nick Holland US$356,000, Paul Schmidt US$100,000 |
| 2 | The annual bonus accruals for the 12-month period ended 31 December 2015, paid in February 2016 |
| 3 | These amounts reflect the full directors’ emoluments for comparative purposes. The portion of executive directors’ emoluments payable in USD is paid in terms of agreements with the offshore subsidiaries for work done by directors offshore for offshore companies. The total realised earnings for 2015 for Nick Holland in ZAR = R35,914,615 and for Paul Schmidt = R22,256,668 |
| 4 | Ernesto Balarezo – Sundry payment relates to legislated bonuses |
| 5 | Sundry payment for Alfred Baku relates to relocation/leave allowance and encashment of excess leave |
| 6 | Nico Muller – Sundry payment relates to pro rata sign-on bonus |
| 7 | Avishkar Nagaser – Appointed on 1 January 2015 |
| 8 | Willie Jacobsz – Prescribed officer until 31 December 2014 |
| 9 | Michael Fleischer and Kgabo Moabelo – Resigned during 2014 |
| 10 | Nick Holland elected, prior to the determination of the annual performance bonus for FY2015 and in line with the Rules of the Minimum Shareholding Requirement Policy, to convert 50% of his cash bonus into Gold Fields Shares (US$618,900) which will be held in escrow for a five-year restricted period. |