REMUNERATION REPORT

STATEMENT FROM THE CHAIRMAN OF THE GROUP REMUNERATION COMMITTEE

The year 2010 has been challenging and productive for the Group Remuneration Committee (the ‘committee’). Remuneration in the financial services industry remains in the public spotlight with ongoing input from shareholders, regulators, government, organised labour, staff and the industry.

The committee believes that total remuneration at Nedbank is appropriately conservative and structured to attract and retain staff and is aligned with the interests of all stakeholders in a manner that does not encourage excessive risk-taking.

Early implementation of corporate performance targets in the long-term incentive schemes for all staff (from 2007), together with compulsory deferral and clawback arrangements for short-term incentives above a certain threshold (from 2009), positions the group well in relation to emerging best practice in financial services remuneration.

The committee’s active involvement was required to ensure that Nedbank Group was able to recruit key staffmembers in a competitive labour market. The current low levels of lock-in of staffmembers as a result of the operation of the corporate performance targets during the period 2008 to 2010, together with the fight for talent and intent to drive organisational transformation, have led to tough and challenging discussions at committee meetings.

The committee fully supports the principle that organisational culture and remuneration governance are essential to the mitigation of undue risk-taking within the group. The committee has ensured that the remuneration practices are aligned with the performance of the group within its approved risk appetite and contribute to the achievement of its overall business objectives.

To this end the committee fully subscribes to the value and benefits derived from defining appropriately weighted quantitative and qualitative performance targets linked to variable remuneration. These targets need to be continuously assessed by the board to ensure that they remain relevant, appropriate and drive the correct behaviour. The committee believes that both quantitative and qualitative performance targets are required to mitigate all types of risks.

The committee further believes that a hybrid approach is required for the variable remuneration award processes where both topdown (group, performance) and bottomup (cluster/individual performance) measurement approaches are considered. Discretion is applied to individual allocations in an open and transparent process involving the appropriate governance structures.

As required in the King III Code, the committee has also ensured that there is sufficient independence in the evaluation of managers working in various financial control and risk environments and that their remuneration is independently determined.

The committee, in collaboration with the Nedbank Group Risk and Capital Management Committee, developed a risk assessment framework through which specific risk-related decisions of the committee are independently viewed to ensure proper remuneration compliance, governance and alignment within the business.

This Remuneration Report describes the Nedbank Group remuneration philosophy, salient features of the remuneration policy and the key components of remuneration for staffmembers and executive and non-executive directors. This report focuses on the practical application of the Nedbank remuneration policy within the business.

During 2010, other than the normal course of business, the committee attended to the following matters:

  • Compliance and impact assessment of a number of new remuneration regulations, governance frameworks and regulatory requirements.
  • Implementation of the compulsory deferral of a portion of the short-term incentives above a threshold in respect of the financial year 2009 as well as approving the compulsory deferral rules for financial years 2010 and 2011.
  • In line with the spirit of the King III Code, the introduction of a split allocation in long-term incentives where a portion of all allocations is now in the form of performance shares issued with corporate performance targets and a portion is in the form of retention shares issued without corporate performance targets.
  • The redesign of corporate performance targets for long-term incentive issuances during 2010 to incorporate both a relative external performance target, as well as an absolute internal performance target and the introduction of graduated vesting.
  • The vesting of the Eyethu Broad-based Share Incentive Scheme.
  • The vesting of the first and second tranche of allocations done in 2005 and 2006 under the Nedbank Eyethu Black Executive and Black Management Schemes.
  • The successful integration of Imperial Bank staff into Nedbank Group without any job losses.
  • Alignment of the committee charter with regulatory frameworks and the continual upholding of the principles of the charter while taking cognisance of the group’s remuneration challenges. The committee will continue to ensure that remuneration in Nedbank Group remains appropriately competitive, provides an incentive for individual and team performances, aids the retention of staff and supports the implementation of the overall business strategy within the approved risk appetite.

The committee is extremely proud that, during harsh economic times, only one staff member has been retrenched within the bargaining unit. The group has also managed to accommodate approximately 1 000 staff members from Imperial Bank. However, in trying to ensure job security, the general market remuneration settlements in excess of the consumer price index (CPI), have been challenging and are not sustainable.

Some key matters for consideration in 2011 are:

  • In the context of evolving best practice, ensuring that the quantum and construct of total remuneration remains market-related and enables the group to attract and retain key staff within the industry.
  • Ensuring that the demand for remuneration adjustments is more realistically related to the SA inflation environment.
  • Continuously assessing the Nedbank Performance Management Framework to ensure that targets set are relevant, appropriate and are driving the desired behaviour within an acceptable risk framework.
  • Ensuring that the implementation of total remuneration within Nedbank Group is based on an approach that incorporates a formulaic approach as well as a measure of discretion in an open and transparent process.
  • Conducting a total review of all the employee long-term incentive schemes.

I wish to thank my fellow committee members, group executives and the reward team for their commitment to and support of the committee and business during this challenging period.

 

GROUP REMUNERATION COMMITTEE MEMBERSHIP AND CHARTER

The committee functions according to a charter approved by the board of directors of Nedbank Group Limited. The board delegates responsibility to the committee for the investigation and benchmarking of remuneration practices and for considering and approving, according to rules set out in the committee charter, all proposals made on remuneration practices that have a direct or indirect financial impact within the group.

A board initiative was implemented to review all board committee charters with a view to streamlining these into one board charter with addenda specific to each committee. The committee’s responsibilities as defined in the new, combined charter are as follows:

  • To evaluate remuneration proposals and practices for the group to ensure alignment with best practice and the latest governance principles.
  • To manage the overall financial liability related to all elements of remuneration for the entire group.
  • To recommend to the board for approval all elements of remuneration on an individual basis for the Chief Executive, executive directors and other members of the Group Executive Committee (Group Exco).
  • To review and approve the annual performance scorecards of the Chief Executive, executive directors and other members of the Group Exco.
  • To approve the corporate performance targets related to the vesting of long-term incentive allocations and matched shares.
  • To approve overall remuneration increases for all staff.
  • To approve proposed bonus awards to individuals in excess of a defined limit.
  • To approve, on an individual basis, all share-based long-term incentive allocations in excess of a defined limit.
  • To review the material terms and conditions of service of all staff of the group (where appropriate) to ensure that they are fair and competitive.
  • To make recommendations to the board on the remuneration of the Chairman of the board.
  • To review and comment on proposals for non-executive directors’ fees and submit these to an independent committee for consideration.
  • To define the appropriate peer group against which group remuneration will be evaluated.
  • To review any issues raised by the Group Risk and Capital Management Committee that are related to remuneration.
  • To make use of independent external advice where necessary.
  • To prepare an annual remuneration report for the board for publication in the group’s integrated report.
  • To report back to the board after each meeting and more frequently if required.

In 2010 the committee initially comprised three independent non-executive directors, namely
Prof B de L Figaji (Chairman), Mr CJW Ball, and Ms NP Mnxasana and one non-executive director, namely Mr RM Head. On 19 February 2010 Mr DI Hope replaced Mr RM Head as a non-executive member of the committee. On 1 March 2010 Mr MI Wyman was appointed as an independent non-executive member of the committee.

The Chief Executive, Group Executive: Human Resources and Chief Operating Officer are permanent invitees to committee meetings and recuse themselves from discussions on their own remuneration.
The Group Executive: Human Resources resigned from Nedbank in September 2010 and a replacement was appointed in February 2011. The committee met five times during 2010.

All members of the committee act as trustees of the 1994 and 2005 Long-term Incentive Employee Group Schemes.

The committee applies the guiding principles of the remuneration policy as far as is feasible, but both the board and the committee retain the right to use their discretion to deviate from this policy in exceptional circumstances.

As in previous years, a self-assessment of the committee was conducted in July 2010 to evaluate the committee’s effectiveness against the objectives of the committee’s charter and to highlight and therefore focus on areas where its performance could be enhanced. High-level feedback confirmed the following:

  • Committee performs its responsibilities according to its charter and often exceeds the objectives that have been set.
  • There is good interaction between the board and the committee.
  • Committee meetings are productive and well-facilitated, with appropriately robust discussions and debate.
  • The remuneration of executives is well-researched, with good benchmark information against industry standards.

ADVICE TO THE COMMITTEE

The committee has full access to independent executive remuneration consultants, and has utilised the services of Vasdex Associates (Pty) Limited.

The Old Mutual plc Remuneration Unit also provided the committee with advice, specifically around international remuneration practices and trends.

The committee is informed of market-related remuneration information based on a number of independent remuneration surveys in which the group participates. These include PWC Remchannel, the Global Remuneration Solutions Top Executive Remuneration Survey, the LMO Executive Remuneration Survey and a number of smaller niche remuneration surveys. Specialists within the Group Remuneration Services Department collate and analyse the information sourced from external service providers.

EDUCATION OF COMMITTEE MEMBERS

As part of the ongoing education of directors, an in-depth session on key remuneration practices was conducted by Vasdex Associates.

REMUNERATION GOVERNANCE

Following the global financial crisis, the financial services industry has experienced significant challenges in the governance and management of total remuneration. To this end the group has actively implemented a number of initiatives aimed at ensuring compliance with regulatory and statutory frameworks. The board and the committee support these initiatives and are of the opinion that Nedbank Group is compliant with these requirements.

The committee assists the board in discharging its corporate governance duties related to remuneration strategy, policy and practices. The board ensures that the committee is:

  • constituted in a way that enables it to exercise competent and independent judgement on remuneration policy and practices, while also considering the management of risk, capital and liquidity;
  • independently engaged by the Group Risk and Capital Management Committee for specific risk-related decisions;
  • functioning in compliance with statutory requirements, codes of relevant best remuneration practice as well as applicable regulatory requirements; and
  • continuously evolving in terms of risk-adjusted remuneration practices.

In terms of remuneration governance the key roles of the committee are:

  • actively to oversee the remuneration policy and practices, independently from the Nedbank Group executive management team;
  • to ensure that the remuneration policy and practices operate as agreed;
  • to regularly review remuneration outcomes, risk and performance measurements, and risk outcomes to ensure consistency with intentions;
  • actively to oversee all components of remuneration on an individual basis for executive directors and members of the Group Exco; and
  • to approve the overall Nedbank Group short-term and long-term incentive pools.

As highlighted in a number of regulatory compliance requirements, the independence of staffmembers in the financial and risk control environment is critical. In response to this requirement, the committee ensures that all staffmembers engaged in the financial and risk control environments are independent, have appropriate authority, and are remunerated in a manner that is sufficiently independent of the business areas they oversee and commensurate with their key role in the group. Effective independence and appropriate authority of such staff is necessary to preserve the integrity of financial and risk management’s influence on reported results and individual remuneration.

For such roles the committee oversees that their remuneration is adequate to attract and retain qualified and experienced staffmembers. Their performance measures as per their balanced scorecards are based principally on the achievement of the objectives of their respective functions.

All the Nedbank Group remuneration components are aligned with risk outcomes. The committee ensures that the underlying remuneration practices support and are in compliance with the overall intent, while ensuring that the relevant risks are identified and mitigated accordingly. In terms of the pool size and individual allocation of variable remuneration, an appropriate range of risks are considered, in particular:

  • the cost and quantity of capital required to support the business risk profile; and
  • the cost and quantity of the liquidity and interest rate risk assumed in the conduct of business

REMUNERATION PHILOSOPHY

The overall purpose of total remuneration in Nedbank Group is to attract, retain, motivate and reward all its people appropriately. The total remuneration philosophy is aimed at encouraging sustainable long-term performance of the group and at all times aligning performance with the strategic direction and specific value drivers of the business, as well as the interests of stakeholders, in a manner that does not encourage excessive risk-taking.

The group defines total reward as a combination of all types of rewards, including financial and
non-financial, indirect and direct, intrinsic and extrinsic rewards, and its total remuneration policy forms part of total reward and supports the Nedbank Employee Value Proposition (EVP).

The group’s market position is to pay for performance, while ensuring that there is a distribution of remuneration around the market median when performance is on par with predetermined financial and non-financial targets. To this end all staffmembers have balanced scorecards in place, which is a key input into determining individual remuneration.

The key principles underpinning the remuneration policy are:

  • The governance and management of remuneration in the group by the committee, Group Exco and management to ensure statutory and regulatory compliance as well as alignment with codes of good remuneration practice.
  • Supporting the Nedbank EVP by offering an appropriate mix of total reward for its various employee groups that will attract, motivate and retain talented employees, and will stimulate employee satisfaction and engagement.
  • Transparency of and regular communication to all staff on remuneration.
  • Paying for performance, while ensuring appropriate distribution around the desired market position and reflecting the skills in demand.
  • Managing remuneration and ensuring fairness, and internal and external equity.

The committee is confident that the remuneration policy aligns the interests of management with shareholders and ensures that proper risk and performance-based remuneration is applied.

See here for the complete remuneration policy. The policy is supported by all committee decisions, scheme rules, approved practices and operational procedures.

COMPONENTS OF TOTAL REMUNERATION

GUARANTEED PACKAGE
All staffmembers of Nedbank Group are remunerated on a total-cost-to-company basis (‘the guaranteed package’), which includes a basic salary, 13th cheque (if selected), allowances and contributions to benefit funds, except for staffmembers employed in some non-SA countries where the practice is still to pay a basic salary plus benefits.

Contributions from the guaranteed package (GP) can be made to the Nedgroup Medical Aid Scheme, a postretirement medical aid fund, a retirement fund (compulsory), a disability fund and a death benefit scheme. A car allowance/company car contribution may be structured into the package where the employee is required to travel on group business, subject to the requirements of the relevant tax authorities.

Annual increases in guaranteed remuneration are performance- and market-related, based on the local rate of inflation, increases awarded by the relevant peer group, individual performance and affordability. To maintain appropriate remuneration competitiveness relative to the labour market individual remuneration is reviewed regularly and annual increases take effect on 1 April.

For South Africa, most non-managerial staffmembers are covered under a collective bargaining agreement with SASBO and IBSA respectively. In April 2010 the non-managerial remuneration bill was increased by 8,5%, and the managerial and executive remuneration bill by 6,5% and 5% respectively.

RETIREMENT SCHEMES
The majority of staffmembers as well as all appointees since 1 January 1994 are members of the Nedgroup Defined-contribution Pension or Provident Fund, with a flexible investment choice. At
31 December 2010 a total of 7 100 staffmembers are members of the Defined-contribution Pension Fund and 17 078 members of the Defined-contribution Provident Fund.

Nedbank Group also has the closed defined-benefit Nedgroup Pension Fund with 364 active members and 2 933 pensioners at 31 December 2010. The Nedgroup Pension Fund is fully funded with an actuarial surplus.

SIGNON BONUSES
In February 2010 the committee approved a signon bonus pool from which the Chief Executive could allocate bonuses, at his discretion, on recommendation of the responsible Group Exco member to prospective staffmembers who meet specific eligibility criteria. The intention of a signon bonus is to act as a recruitment incentive to aid in talent attraction and compensate for potential loss of benefits from the previous employer. For the financial year ended 31 December 2010 R5,4 million was allocated to key staff, with such allocations having been reviewed and ratified by the committee.

SHORT-TERM INCENTIVE SCHEMES
Short-term incentives (STIs) are intended to encourage particular behaviours and obtain desired results within the agreed risk appetite framework. In the Nedbank Group environment the STI scheme is also referred to as the annual performance bonus. Nedbank Group’s STI schemes are structured to support collaborative work across different clusters. The committee has agreed a set of principles and all group and cluster incentive schemes are designed according to those principles.

Performance is measured at a group and business unit level against agreed targets after the finalisation of the audited year-end results.

The incentive pools for all support clusters are based on a combination of performance relative to the targets in respect of economic profit (EP), headline earnings and cluster specific non-financial performance scorecards.

In the income-generating clusters incentive pools are structured with a weighting linked to the group, cluster and, where appropriate, divisional performance. The five income-generating clusters within Nedbank (Capital, Corporate, Business Banking, Retail and Wealth) are measured against a
combination of performance targets namely EP, headline earnings and non-financial targets. As in previous years, the committee continues to institute a control limit whereby there may be no more than a 10% variance between the group topdown performance calculation and the independent bottomup cluster performance calculations.

Distribution of these STI pools is on a discretionary basis and is aligned with market practice and utilises individual performance relative to the agreed deliverables and in the performance management process. To take full cognisance of long-term sustainability of performance a portion of the STI earned above a threshold is deferred and remains at risk over a future settlement period.

The year-on-year change in the STI pool was broadly aligned with the change in headline earnings. The scheme incorporates non-financial metrics and thus the 2010 pool has an element of additional reward as a result of the outperformance of the group against its non-financial targets. However, the 2010 STI pool is still smaller than the 2007 STI pool.

The table below shows the STI pools for the 2009 and 2010 financial years:

 
FY2009
FY2010
Year-on-year
% change
Headline earnings
4 277
4 900
+15%
EP
57
(289)
n/a
STI
833
981
+18%


While economic conditions have improved since 2009, the global recovery remains muted and uneven. Financial targets, which were set taking into account the deteriorating macroenvironment, were largely met during 2010.

All individual STI payments in excess of 200% of GP are individually motivated by the respective Group Exco members and individually signed off by the committee. For the 2009 financial year the committee approved 11 STI payments in excess of 200% of GP.

Refer to the table below for the distribution of the STI/GP ratio for all staffmembers for financial year 2009. The data for financial year 2010 will be included in the 2011 Remuneration Report:

STI DEFERAL SCHEME
In line with best practice, from financial year 2009 the group implemented a scheme for the compulsory deferral of STI awards earned in excess of R1 million.

For financial year 2010 STIs, payable in 2011, the committee agreed to offer the following deferral choices:

Basis of the deferral
25% between R1 and R3m and 50% in excess of R3m
Cash Deferral Scheme
Compulsory Bonus Share
Scheme
Deferment period
30 months – cash earns interest
at a prime-linked call deposit rate.
36 months.
Maximum potential matching
No matching option.
Matching will apply to the
number of shares remaining at
the end of the 36-month vesting
period, subject to the following
two conditions:
0,5:1 still in employment.
0,5:1 performance target being met.
Release of forfeiture obligation
Release and payment after
6/18/30 months in equal
tranches.
Release from forfeiture after
6/18/30 months in equal
tranches and matching only after
36 months.


For the scheme applicable to financial year 2009, 35% of participants selected the Cash Deferral Scheme and 65% of participants selected the Compulsary Bonus Share Scheme.

The committee also introduced a cash-settled compulsory STI deferral for all staffmembers employed in the United Kingdom earning a short-term incentive in excess of R1,5 million. No United Kingdom staffmembers earned STIs in excess of the threshold for financial year 2009, payable in 2010.

During the last quarter of 2010 the committee approved the rules applicable to the financial year 2011, with STI allocations payable in 2012. The changes are that 50% of STIs earned in excess of R1 million will be deferred into the Compulsary Bonus Share Scheme and that no cash option will be made available.

For all deferral options, the deferred amount will be forfeited should the employee resign before the end of the release of forfeiture obligations as well as in cases where, in the sole opinion of the board, material irregularities in or misrepresentation of financial results come to light during the deferral period. The board will have absolute discretion as to the nature of any action to be taken against the individual, or grouping of individuals, who may be affected by the transgression. The deferral policy will be reviewed annually.

DEFERED SHORT-TERM INCENTIVE

The Chief Executive is granted a pool by the committee for the financial year, within which he may make discretionary deferred short-term incentive (DSTI) allocations to specific individuals where their retention is a concern. All DSTI payments are individually motivated by the responsible Group Exco member and individually approved by the Chief Executive. All allocations are reviewed by the committee.

The Chief Executive and members of the Group Exco are excluded from participating in the scheme, except in circumstances where they received an allocation prior to their appointment as a Group Exco member.

During 2010 a total of R23,7 million was allocated and paid to specific staffmembers.

Participants leaving the service of the group before the termination date of the agreed deferral period are required to reimburse Nedbank Group the gross initial amount awarded.

LONG-TERM INCENTIVES

Long-term incentives (LTIs) are awarded with the primary aim of retaining key staffmembers and aligning performance with the interests of shareholders. The allocation of LTIs is discretionary and based on the
following key eligibility criteria:

  • Talent management strategy and succession plans
  • Retention of key talent/scarce skills
  • Transformation objectives
  • Higher potential/performance
  • Leadership pool
  • Cluster strategy and individuals key to driving the business strategy

All LTI allocations were motivated by the Group Exco and approved by the committee.

Criteria and the quantum of allocations are benchmarked annually against market practices. Furthermore, scheme rules and the application thereof are annually evaluated to ensure compliance with legislative and regulatory requirements.

1994 Nedcor Group Employee Incentive Scheme
The scheme is closed for new participants and will be terminated when all outstanding options have been exercised.

At 31 December 2010 there were five participants and 43 500 Nedbank Group share options outstanding.

2005 Nedbank Employee Share Scheme
The above scheme consists of three subschemes, namely the Option Scheme, Restricted Share Scheme and the Matched Share Scheme.

The Option Scheme
No allocations were made during 2010.

At 31 December 2010 there were 135 participants and 708 979 Nedbank Group share options outstanding. All remaining share options issued under this scheme were issued with time- and performance-based vesting criteria.

Restricted Share Scheme
During 2010 the committee issued restricted shares to eligible participants. An allocation under this scheme may be granted, subject to committee approval, under the following circumstances:

  • On-appointment Restricted Share Plan (RSP) allocations for internal and external appointments
    On-appointment restricted share allocations are offered at the discretion of the committee to new senior managers and also to staffmembers who have been appointed to more senior positions and have been recommended for an allocation by the Group Exco. The committee amended its policy in 2011 so that on-appointment allocations take place biannually, up to 10 trading days after the announcement of the annual and interim financial results. The vesting period for on-appointment allocations is three years from the date of allocation, subject to the achievement of corporate performance targets (for performance shares only).
  • Annual RSP allocations
    Annual restricted share allocations apply to qualifying staffmembers in terms of criteria approved by the committee. The committee amended its policy in 2011 so that allocations take place annually up to 10 trading days after the announcement of the annual financial results.

As approved by shareholders at the Nedbank Group annual general meeting held on 4 May 2010, the maximum number of Nedbank Group ordinary shares that could be allocated from that date in terms
of the existing Nedbank Group employee share incentive schemes is 49 717 637, of which 3 362 828 had been allocated to staff at 31 December 2010.

At 31 December 2010 share options and restricted shares in issue under the Nedbank Group employee schemes (vested and unvested) were 11 712 513.

During 2010 all on-appointment and annual RSP allocations were issued on the following basis:

  • 50% performance shares: restricted shares with corporate performance targets
  • 50% retention shares: restricted shares without corporate performance targets


Annual allocations were made to 1 625 staffmembers on 2 and 3 March 2010. On-appointment allocations were made to a total of 114 staffmembers on 2 and 3 March 2010 and on 5 and 6 August 2010. All RSPs are issued in terms of the approved rules of the scheme at no cost and participants are entitled to receive dividends. In 2010 a total of 4 358 878 restricted shares were issued.

Corporate performance targets
The committee approved the use of a combination of equally weighted internal absolute and external relative corporate performance targets for the performance shares awarded in 2010. The details of these targets are as follows:

Return on equity (ROE) above cost of equity (COE)
ROE is measured as the simple average published ROE (excluding goodwill) over a three-year period compared with the simple-average COE over the same period. Vesting occurs according to the following sliding scale:

Vesting ratios (for 50% of the allocation) based on ROE (excluding goodwill)
COE
+ 0% or worse
COE
+ 1,25%
COE
+ 2,5%
COE
+ 3,75%
COE
+ 5%
COE
+ 6%
COE
+ 7%
COE
+ 8% or better
0%
25%
50%
75%
100%
110%
120%
130%


The target of COE + 5% is aligned to the published Nedbank Group medium- to long-term performance targets.

Share price relative to Fini 15
The three-year performance of relative share price movement against movement in the Fini 15 is used as the relative external measure. Vesting occurs according to the following sliding scale:

Vesting ratios (for 50% of the allocation) based on share price relative to Fini 15
Fini 15
- 20% or worse
Fini 15
- 15%
Fini 15
- 10%
Fini 15
- 5%
Fini 15
Fini 15
+ 10%
Fini 15
+ 20%
Fini 15
+ 30% or better
0%
25%
50%
75%
100%
110%
120%
130%


Current best practice regarding good governance of remuneration indicates that corporate performance targets may not be altered once they have been set.

Matched Share Scheme
The Matched Share Scheme is used both for the compulsory deferral of certain STI payments as well as the voluntary deferral of a certain amount of the STI granted. Staffmembers have an opportunity to allocate up to 50% of their after-tax STI towards the acquisition of Nedbank Group shares or to deposit Nedbank Group shares to the equivalent value into the trust that administers this scheme. The incentive to do so is a matching of this investment to the equivalent value on a one-for-one basis. The scheme’s obligation to deliver or procure the delivery of the matched shares rests on two conditions, namely that:

  • staffmembers are still in the service of the group on the vesting date (three years after acquisition) for 50% of the matched shares; and
  • the group has met an agreed performance target over a three-year period for the remaining 50% of the matched shares.

The number of participants who committed shares under the Matched Share Scheme at 31 December 2010 is noted below:

2010 2009 2008

263

The number of shares held in the
scheme totals 649 447.
247

The number of shares held in the scheme totals 583 048.
412

The number of shares held in the scheme totals
595 170.

 

During 2010 a total of 67 127 shares were allocated to participants of the 2007 Matched Share Scheme as the time-based vesting criteria had been met. The corporate performance condition was not met.

Although the Matched Investment Plan is available as a further matching scheme, it was not offered as an option to staffmembers in 2010. The committee retains the discretion to implement the Matched Investment Plan based on business and market conditions.

Phantom Cash-settled Restricted Share Plan
During 2007 the committee approved the Phantom Cash-settled Restricted Share Plan for key staffmembers in the United Kingdom. The design principles and rules mirror the RSP (2005 Nedbank Employee Share Scheme). A total of 19 UK staffmembers participated in the scheme during 2010 and 67 076 phantom shares were allocated during this period.

Nedbank Africa subsidiary schemes
No allocations were made in 2010.

NEDBANK EYETHU EMPLOYEE SCHEMES

Nedbank Group implemented its black economic empowerment (BE) staff schemes in August 2005. The following schemes were approved at the time:
  • the Black Executive Trust;
  • the Black Management Scheme;
  • the Broad-based Scheme; and
  • the Evergreen Trust.

Share and share option allocations have been made to new and internally appointed staffmembers since the inception of the schemes, in accordance with the scheme rules and the respective trust deeds.
In 2010 two black staffmembers were selected as new participants of the Black Executive Trust. These participants are in senior management positions with groupwide impact, were identified by the Group Exco and approved by the committee and trustees.

At 31 December 2010 a total of 40 black staffmembers were participants in the scheme.

In 2010 altogether 324 black staffmembers in management positions were identified by the Group Exco and approved by the committee and trustees as participants in the Black Management Scheme. At 31 December 2010 a total of 1 708 black staffmembers were participants in the scheme.

On 27 July 2010 the Eyethu Broad-based Scheme vested. This was an important milestone in the group’s broad-based BEE transaction and proved to be a huge success both to the group and the participants. The scheme was a once-off share grant to all permanent Nedbank Group staffmembers who met the eligibility criteria at the inception date of the scheme. A trading restriction of five years applied to shares issued under this scheme. In total 14 699 staffmembers were beneficiaries and received a total award of R182 million. During the five-year period the group also paid a total of R36,8 million in dividends to all participants. The Evergreen Trust was created with the specific purpose of improving the living standards and personal circumstances of black permanent staffmembers at the lower income levels by providing grants and/or benefits to qualifying staffmembers. At
31 December 2010 a total of 39 beneficiaries are in the process of completing their grade 12 qualification, equivalent to a NQF3, to whom funding for studies were granted by the trust.

NEDBANK AFRICA EMPOWERMENT SCHEMES

In January 2010 Nedbank Swaziland launched its empowerment employee scheme, namely Sinakekelwe Employee Share Scheme. This included a black management and a broad-based scheme. At 31 December 2010 there were 48 and 208 participants respectively.

No allocations were made under the Nedbank Namibia Ofifiya Black Management Scheme in 2010.

EMPLOYEE DIRECTORSHIPS

In all instances where employees are members of external boards all fees earned accrue to Nedbank Group.

EXECUTIVE DIRECTORS

INCREASES IN GUARANTEED PACKAGE
On 1 March 2010 Mike Brown was appointed as Chief Executive following the retirement of Tom Boardman as Chief Executive on 28 February 2010. Mike Brown’s GP was adjusted to R5 750 000 per annum with effect from 1 April 2010. This increase took into account an annual increase in line with CPI, a market adjustment based on his performance and his remuneration levels relative to his peer group and also considered remuneration data obtained from a number of surveys. The GP was considered and recommended by the committee, approved by the board and ratified by Old Mutual plc.

The Chief Operating Officer Graham Dempster’s GP was adjusted to R3 675 000 per annum and that of Chief Financial Officer Raisibe Morathi GP to R2 850 000 per annum, both effective from 1 April 2010. The same considerations as for the Chief Executive were applied and the new GPs were recommended by the committee and approved by the board.

RETIREMENT SCHEMES
All executive directors are members of the Nedgroup Defined contribution Pension or Provident Funds. There are no defined-benefit liabilities in respect of the executive directors. Contributions to the
retirement funds form part of the GP.

SERVICE CONTRACTS
Tom Boardman’s service contract as Chief Executive expired on 28 February 2010. Mike Brown’s appointment as Chief Executive became effective on 1 March 2010, with a notice period of 12 months and retirement age of 60 years. This notice period and retirement age apply to all other executive directors.

TERMINATION ARRANGEMENTS
In the event of their services being terminated as a no-fault termination, executive directors will be entitled to a severance pay equal to two weeks’ GP per completed year service.

No executive director or staffmember has any additional severance agreements in place. Entitlements for previous LTI grants on termination are dealt with under the relevant scheme rules.

SHORT-TERM INCENTIVE SCHEMES TARGETS
The current target and maximum STI awards applicable to the Chief Executive and executive directors are:

  • Target STI as a percentage of GP = 150%
  • Maximum STI as a percentage of GP = 250%
     

The drivers of the annual STI pools are based on performance against the following set of measures:

  • Group headline earnings versus target (50% of the primary financial performance).
  • Group EP versus target (50% of the primary financial performance).
  • In addition, individual performance metrics apply (an additional modifier adjustment up or down of 22,5% of GP).
     

Individual performance is measured on a balanced scorecard against financial, clients, internal processes, transformation and organisational learning dimensions versus targets.

The broad objectives for each of these dimensions for the Chief Executive were as follows:

  • Financial – achieve the 2010 financial targets in a sustainable way that allows for appropriate growth in 2011.
  • Clients and relationships – position Nedbank Group for sustainable quality growth, identify strategic growth opportunities, focus on increasing levels of sustainable non-interest revenue (NIR), enhance
    stakeholder relationships, brand position and client service, lead in corporate social responsibility and sustainability, and position Nedbank Group as a green and caring bank.
  • Management and Internal process – identify and implement strategic initiatives that enhance productivity, manage risk conservatively through the cycle and manage impairments/collections.
  • Transformation – position Nedbank Group as South Africa’s most transformed company.
  • Organisational learning and leadership – establish a cohesive and high-performing Group Exco.
     

The following table presents the basis on which the STI awards have been determined based on the assessment of the group headline earnings and EP performance for the financial year, as well as performance of each executive director against his or her agreed individual balanced scorecards:

  Target
%
of GP		 % of GP
achieved
for
financial
targets		 % of GP
achieved
for
nonfinancial
targets		 Final STI
% of GP		 Final STI
% of
target
 
A
B
C
D = B+C
E = D/ A
MWT Brown
150%
111,3%
10,4%
121,7%
81%
GW Dempster
150%
111,3%
11,1%
122,4%
82%
RK Morathi
150%
111,3%
11,5%
122,8%
82%


There is a mandatory deferral of any STI awards in excess of R1 million and an additional voluntary deferral that may be elected up to a maximum 50% of the total award.

The committee was satisfied with the performance levels achieved by the executive directors during a challenging year.

TOTAL REMUNERATION

The year-on-year change in total remuneration for all executive directors was 4%. The year-on-year change for each individual director is not directly comparable due to changes in roles over the periods under review as outlined below:

  • The current Chief Executive was the Chief Financial Officer until June 2009, whereafter he was appointed as the Chief Executive Designate for the remainder of 2009. The 2009 STI award of R4,25 million thus reflects these two roles, while the 2010 award of R7 million reflects a two-month
    period as Chief Executive Designate and a 10-month period as Chief Executive.
  • The current Chief Operating Officer was the managing director of Nedbank Corporate until July 2009, and was thereafter appointed as an executive director and as the Chief Operating Officer. The full STI 2009 award of R4 million reflects these two roles, while the disclosed 2009 STI of R1,667 million is based on a pro rata amount of the full R4 million award for the period as an executive director. The R4,5 million award for 2010 reflects a full 12-month period as Chief Operating Officer and executive director.
  • The Chief Financial Officer was appointed to both boards on 1 September 2009. The R1 million STI award for 2009 was thus only based on a four-month employment period. The R3,5 million awarded for 2010 was based on a full 12-month period as Chief Financial Officer and executive director.
     

The remuneration of executive directors for the year ended 31 December 2010 was as follows:

Table 1: Executive directors’ remuneration – year to 31 December 2010

Name
  Basic salary and
other benefits*
(R000)
   Defined-contribution
retirement fund
(R000)
       Guaranteed
remuneration
(R000)
  Performance
bonus for
FY2010
(R000)
       Total
(R000)
   2010 – 2009
% change****
TA Boardman**
1 267
61
1 328
1 328
(91)
MWT Brown
4 790
669
5 459
7 000+
12 459
63
GW Dempster***
3 090
547
3 637
4 500++
8 137
160
RK Morathi
2 446
341
2 787
3 500+++
6 287
237
Total
11 593
1 618
13 211
15 000
28 211
4
*
 This salary includes contributions to the medical aid, postretirement medical aid subsidy, disability insurance and car allowance/company car benefits structured into the package. No additional benefits are offered to executive directors.
**
 Retired on 28 February 2010, as part of the termination policy TA Boardman encashed all available leave.
***
 A dependent family member of GW Dempster received a study grant of R8 000.
****
 The year-on-year % increases reflect the appointment of MWT Brown as Chief Executive Designate in July 2009 as well as his appointment as Chief Executive on 1 March 2010. GW Dempster was appointed as Chief Operating Officer in August 2009 and RK Morathi as Chief Financial Officer in September 2009, and their respective bonuses reflect a full 12-month performance in 2010 and for 2009 a pro rata period from their dates for appointment as executive directors.
+
 Bonus relates to performance in 2010, where a minimum of R2,5 million will be deferred in terms of the STI deferral scheme.
++
 Bonus relates to performance in 2010, where a minimum of R1,25 million will be deferred in terms of the STI deferral scheme.
+++
 Bonus relates to performance in 2010, where a minimum of R750 000 will be deferred in terms of the STI deferral scheme.


See here for the full LTI holdings of the executive directors.

TA Boardman earned R21 961 for board membership of Mutual & Federal up to 28 February 2010, which fees were ceded to Nedbank Group, while still employed by Nedbank Group. He also acted as non-executive director for Fairbairn Trust Company, for which he received no remuneration.

Table 2: Executive directors’ remuneration – year to 31 December 2009

Name
  Basic salary and
other benefits*
(R000)
  Defined-contribution
retirement fund
(R000)
       Guaranteed
remuneration
(R000)
  Performance
bonus for
FY2010
(R000)
      Total
(R000)
2009 – 2008
% change
TA Boardman
4 697
354
5 051
9 500**
14 551
40
MWT Brown
4 697
417
3 401
4 250***
7 651
31+++
GW Dempster+
1 239
219
1 458
1 667****
3 125
–
RK Morathi++
761
106
867
1 000
1 867
–
Total
9 681
1 096
10 777
16 417
27 194
–

*
 This salary includes contributions to the medical aid, postretirement medical aid subsidy, disability insurance and car allowance/company car benefits structured into the package. No additional benefits are offered to executive directors.
**
 Bonus relates to performance in 2009 as well as recognition of TA Boardman’s role during his tenure as Chief Executive, where a minimum of R3,750 million will be deferred in terms of the STI deferral scheme.
***
 Bonus relates to performance in 2009, where a minimum of R1,125 million will be deferred in terms of the STI deferral scheme.
****
 Bonus relates to performance in 2009, where a minimum of R1 million will be deferred in terms of the STI deferral scheme. The bonus indicated in the table reflects a pro rata portion of the total bonus received of R4 million in his roles as managing director of Nedbank Corporate and Chief Operating Officer for 2009.
+
 GW Dempster was appointed as Chief Operating Officer and executive director to both boards from 5 August 2009. As part of the Nedbank employee benefits, GW Dempster encashed leave to the value of R99 617. Furthermore, a dependent family member received a study grant of R8 000.
++
 RK Morathi was appointed as Chief Financial Officer and executive director to both boards from 1 September 2009. She received a relocation payment of R216 667 based on the terms and conditions of Nedbank’s relocation policy.
+++
 The bonus awarded in 2009 took into account both MWT Brown’s role as Chief Financial Officer up until 30 June 2009 and as Chief Executive designate for the rest of the year.


REMUNERATION ADJUSTMENTS
The table below indicates the GP adjustments from April 2010 to April 2011 and the LTI allocations awarded in April 2011 to the executive directors:

Name
GP at April 2010
(R000)
GP at April 2011
(R000)
2010 – 2011
% change
LTI allocation
with CPTs
LTI allocation
without CPTs
MWT Brown
5 750
6 000
4,2
3 000
3 000
GW Dempster
3 675
4 000
8,8
2 000
2 000
RK Morathi
2 850
3 150
10,5
2 000
2 000

 

TOP THREE EARNERS

For 2010 the top three earners in the group, excluding the executive directors, were:

Name
Basic salary and
other benefits*
(R000)
Defined contribution
retirement fund
(R000)
Guaranteed
remuneration
(R000)
Performance
bonus FY2010
(R000)
Total
(R000)
Group Exco member
2 644
468
3 112
4 500+
7 612
Group Exco member
2 965
390
3 355
3 900++
7 255
Group Exco member
2 545
355
2 900
4 000+++
6 900
Total
8 154
1 213
9 367
12 400
21 767
*
 This salary includes contributions to the medical aid, postretirement medical aid subsidy, disability insurance and car allowance/company car benefits structured into the package.>
+
 Bonus relates to performance in 2010, where a minimum of R1,25 million will be deferred in terms of the STI deferral scheme.
++
 Bonus relates to performance in 2010, where a minimum of R950 000 will be deferred in terms of the STI deferral scheme.
+++
 Bonus relates to performance in 2010, where a minimum of R1 million will be deferred in terms of the STI deferral scheme.


See here for the full LTI holdings of the top three earners.

NON-EXECUTIVE DIRECTORS

The terms of engagement of the non-executive directors (excluding the Chairman) cover a period of three years, as determined by the rotation requirements of the Nedbank Group articles of association. A non-executive director is required to retire at age 70, unless the board determines otherwise. Any non-executive director serving for a period in excess of nine years is required to retire from the board.

The Chairman’s appointment was effective from 4 May 2006. In terms of the articles of association the Chairman is reelected annually by the board.

In March 2010 TA Boardman, who retired from the group, accepted the invitation from the board to serve as a non-executive director of Nedbank Group and Nedbank Limited. He will not be classified as an independent director for three years as he has recently served as an executive of the group.

REMUNERATION

The committee and the board debated the principle of splitting non-executive director fees to reflect a retention and attendance fee. The board is of the view that, irrespective of the attendance of meetings, directors are accountable for decisions taken and would do the necessary board preparation. As a
result the board agreed to retain a single fee for non-executive directors.

Board and board committee meeting attendance is recorded in the Enterprise Governance and Compliance Report here.

Non-executive directors’ remuneration for the years ended 31 December 2010 and 31 December 2009 was as follows:

Name Appointment
date		 Termination
date		 Note Board
meeting fees
(R000)		 Committee
meeting fees
(R000)		 2010
(R000)		 2009
(R000)
CJW Ball     1, 2 438 784 1 222 1 303
MA Enus-Brey     1 272 415 687 576
NP Mnxasana     1 319 324 643 535
RM Head   February 2010 2, 4 35 23 58 458
ML Ndlovu   October 2009 2       509
GT Serobe     2, 5, a 586 199 785 665
JB Magwaza   November 2009 3       545
JVF Roberts December 2009   4 294 50 344 26
DI Hope December 2009   4, b 294 181 475 30
R Harris   March 2009 4       89
TA Boardman March 2010   2, c 362 157 519  
JK Netshitenzhe August 2010   e 114 37 151  
MI Wyman August 2009     272 176 448 123
WE Lucas-Bull August 2009     272 468 740 161
PJ Moleketi August 2009 March 2010 d 44 37 81 136
TCP Chikane       272 344 616 499
B de L Figaji       272 323 595 474
MM Katz   November 2009         542
RJ Khoza           3 439 3 300
A de VC Knott-Craig       272 256 528 323
ME Mkwanazi   November 2009         444
Total       4 118 3 774 11 331 10 738

1
Includes fees for board, subsidiary board and committee memberships (including Imperial Bank) for the years 2009 and 2010.
2 Includes fees for board and committee memberships (including Mutual & Federal) for the years 2009 and 2010.
3 Includes fees for board and committee memberships (and additional services to Mutual & Federal) for the year 2009.
4 Fees for RM Head, JVF Roberts, R Harris and DI Hope are paid to Old Mutual (SA) Limited for 2009 and 2010.
5 Includes fees for board and committee memberships [including Old Mutual Life Company (South Africa)] for the year 2009.
a In November 2009 GT Serobe terminated her service from the Group Risk and Capital Management Committee.
b DI Hope was appointed on the Group Remuneration Committee and Group Finance and Oversight Committee.
c In March 2010 TA Boardman was appointed as a member of the Group IT Committee and Group Credit Committee.
d In March 2010 PJ Moleketi resigned as a member of the Group IT Committee, Group Audit Committee and Group Transformation and Sustainability Committee.
e In October 2010 JK Netshitenzhe was appointed as a member of the Group Risk And Capital Management Committee.

 

NON-EXECUTIVE DIRECTORS’ FEES
The board and committee fees for non-executive directors for committee membership are as follows:

 
Annual fee
2010
R
Proposed (with
effect from
1 July 2011)***
R
2010-2011
% change**
Boards
3 578 000
3 775 000
5,5%
Chairman of the board*
112 000
118 400
5,7%
Senior independent director****
152 000
161 000
5,9%
Nedbank Group Limited
128 000
135 000
5,5%
Nedbank Limited
 
Committees
Group Audit Committee
120 000
126 000
5,0%
Group Finance and Oversight Committee
21 000
22 000
4,8%
Group Remuneration Committee
75 000
80 000
6,7%
Group Risk and Capital Management Committee
105 000
110 000
4,8%
Executive Credit Committee
100 000
105 000
5,0%
Group Credit Committee
70 000
73 000
4,3%
Group Directors’ Affairs Committee
49 000
52 000
6,1%
Group IT Committee
49 000
52 000
6,1%
Group Transformation and Sustainability Committee
70 000
73 000
4,3%

*
The Nedbank Group Chairman’s fees include his fees for board, subsidiary board and committee memberships.
**
 Based on 2010 fees, the increase (%) is applied in order to align the board fees with local market practices.
***
 Subject to shareholders’ approval at the annual general meeting on 6 May 2011.
****
 An additional fee of 40% of the Nedbank Group Limited and Nedbank Limited Board member fees is paid to the senior independent director.

 

Committee chairmen (other than the Chairman of the Nedbank Group Directors’ Affairs Committee) receive double the member fees. Fees payable to the non-executive directors and the Nedbank Group Chairman are reviewed annually and adjustments are considered by an independent subcommittee of the Group Remuneration Committee. The above increases are effective from 1 July 2011, subject to shareholders’ approval at the 6 May 2011 annual general meeting.

NEDBANK EYETHU NON-EXECUTIVE DIRECTORS’ TRUST

This trust held 984 640 Nedbank Group ordinary shares at 31 December 2010, of which a total of 768 575 shares were allocated to six participants. No allocations were made during 2010 and the committee agreed that no future allocations will be made. The scheme will run its normal course, after which the trust will be dissolved.

It was announced on 28 December 2010 that the end of the lock-in period for certain of these schemes is 1 January 2011. These include the Aka-Nedbank Eyethu Trust and the Nedbank Eyethu Non-executive Directors’ Trust (collectively, ‘the maturing schemes’). Accordingly, shareholders were advised that Nedbank Group intends to exercise the call options that were granted to it by the maturing schemes to repurchase Nedbank Group ordinary shares. The transaction was finalised and announced on 6 January 2011.

DIRECTORS’ INTERESTS

At 31 December 2010 the directors’ interests in ordinary shares in Nedbank Group were as follows:

  Beneficial direct Beneficial indirect
Number of shares 2010 2009 2010 2009
CJW Ball 10 000 10 000    
TA Boardman 65 662 81 100 251 715 251 715
MWT Brown 54 379 49 940 327 430 235 815
TCP Chikane     95 319 92 213
GW Dempster 11 881 11 881 215 229 169 584
MA Enus-Brey+     2 113 2 076
B de L Figaji     125 933 121 879
DI Hope        
RJ Khoza++     1 374 1 374
A de VC Knott-Craig        
WE Lucas-Bull        
NP Mnxasana     51 242 49 572
RK Morathi     91 472  
JK Netshitenzhe*        
JVF Roberts        
GT Serobe+++     1 296 1 296
MI Wyman        
Total 141 922 152 921 1 163 123 925 524
*
 Appointed to the board during 2010.
+
 Excludes 4 996 918 and 5 202 795 shares held by the Brimstone-Mtha Financial Services Trust in 2009 and 2010 respectively.
++
 Excludes 2 062 082 and 2 130 822 shares held by the Aka-Nedbank Eyethu Trust in 2009 and 2010 respectively.
+++
 Excludes 5 017 632 and 5 233 594 shares held by the Wiphold Financial Services Number Two Trust in 2009 and 2010 respectively.

 

At 31 December 2010 the directors’ interests in the non-redeemable non-cumulative preference shares of R0,001 each in Nedbank Limited were as follows:

  Beneficial direct Beneficial indirect
Number of shares 2010 2009 2010 2009
CJW Ball 144 300 144 300    
TA Boardman     85 000 85 000
MWT Brown        
TCP Chikane        
GW Dempster        
MA Enus-Brey+        
B de L Figaji        
DI Hope        
RJ Khoza++        
A de VC Knott-Craig        
WE Lucas-Bull        
NP Mnxasana        
RK Morathi        
JK Netshitenzhe*        
JVF Roberts        
GT Serobe+++        
MI Wyman        
Total 144 300 144 300 85 000 85 000
*
 Appointed to the board during 2010.


None of the above directors had any non-beneficial indirect or non-beneficial direct interest in Nedbank preference shares during the year under review.

REMUNERATION POLICY

The policy is quoted below:

‘OBJECTIVE AND PHILOSOPHY
The overall purpose of total remuneration in Nedbank Group is to attract, retain, motivate and reward all our people appropriately. Our total remuneration philosophy is aimed at encouraging sustainable long-term performance of the group and at all times aligning performance with the strategic direction and specific value drivers of the business, as well as the interests of stakeholders, in a manner that does not encourage excessive risk-taking.

The group defines total reward as a combination of all types of rewards, including financial and non-financial, indirect and direct, intrinsic and extrinsic rewards, and its total remuneration policy forms part of total reward and supports the Nedbank Employee Value Proposition (EVP). The group’s market position is to pay for performance, while ensuring that there is a distribution of remuneration around the market median when performance is on par with predetermined financial and non-financial targets. To this end, all staffmembers have balanced scorecards in place, which is a key input into determining individual remuneration. In designing the remuneration policy, the group takes cognisance of best practice, the applicable statutory legislation as well as adherence to codes of good remuneration and governance practices.

SCOPE
This document translates the Nedbank Group Board’s (the ‘board’) on how remuneration should be managed in Nedbank Group. As such, it:

  • carries the approval of the board with management carrying the responsibility to implement the policy;
  • documents the requirements for how total remuneration should be managed in its various businesses;
  • forms part of the group’s operating philosophy, policies and standards;
  • applies to all Nedbank Group companies, including international subsidiaries, subject to local statutory requirements and practices; but does not include companies in which Nedbank Group has a private equity investment; and
  • is supported by detailed operating policies and procedures available at local and business unit level.

 

TERMINOLOGY
Interpretation
For the purposes of this policy:

  • the masculine gender shall include the other gender, and vice versa, and the plural shall include the singular, and vice versa; and
  • the terms must, is/are to, is/are required to, needs/need to and has/ have to are used interchangeably and shall have the same degree of obligation.

 

REMUNERATION PRINCIPLES

  • The governance and management of remuneration in the group by the Group Remuneration Committee (RemCo), the Group Executive Committee (Group Exco) and management to ensure statutory and regulatory compliance as well as alignment with codes of good remuneration practice.
  • In support of the EVP, the group has implemented an appropriate mix of total reward for its various employee groups that will attract, motivate and retain talented employees, and will stimulate employee satisfaction and engagement.
  • The RemCo has access to independent remuneration consultants who provide independent advice to ensure that remuneration in the group is in line with current market practices and complies with legislation.
  • The management of remuneration supports and reinforces the group’s desired culture and agreed values.
  • The group’s remuneration policy should be transparent and is communicated to all staff.
  • Confidentiality of an individuals’ personal remuneration information will be respected and at all times dealt with in terms of statutory requirements.
  • All remuneration practices will be aligned with by the principles of equity and equality, and implemented on the basis of differentiation in respect of performance.
  • In the management of remuneration, internal and external equity are key considerations.
    – Under the principle of internal equity, all staffmembers will be rewarded fairly and consistently according to their roles, individual worth and experience, also taking cognisance of the group, business unit’s and individual performance.
    – To achieve external equity, the group will monitor the relevant job markets continuously to ensure a competitive total reward positioning, within the parameters of affordability.
  • The group annually assesses its remuneration distribution to ensure fair application and employment practices.
  • All remuneration practices comply with applicable statutory requirements.
  • Premiums for race, gender, specialist skills and other market drivers should be accommodated within broad remuneration ranges.
  • Performance management is applied and serves as input into the management of individual remuneration.
  • The group will provide employees and their dependants with an appropriate level of employee benefits within legislative requirements.
     
Total remuneration: all permanent staff (including executive directors)
Guaranteed package (GP)
 
  • All RSA staff are remunerated on a ‘total cost to company’ (TCC) approach. It is the intention of the group to implement this approach, where appropriate, in the non-RSA countries.
  • The group will determine annually the GP applicable to all positions. Earning ranges are benchmarked against market median information, allowing a reasonable range to accommodate different levels of
    competence, performance and applicable market drivers.
  • The group’s remuneration position is to pay for performance, while ensuring appropriate distribution around the market median and reflecting the skills in demand.
  • Employees can structure their GP within the framework of applicable policies and statutory requirements.
  • Annual adjustments, as defined in the appropriate relationship agreement, will be agreed with the relevant recognised unions on an annual basis.
  • The RemCo is responsible for approving the overall mandate for the annual remuneration review . Adjustments for the members of the Group Executive Committee are recommended by the Chief
    Executive to the RemCo and approved by the Nedbank Group Board.
  • The Chief Executive’s adjustment is approved by the Nedbank Group Board and ratified by the ultimate holding company.
  • Remuneration adjustments outside of the annual remuneration review exercise may be considered under exceptional circumstances and will be subject to the agreed authorisation.


Job evaluation and market benchmarking:

  • Jobs are sized or benchmarked, using the appropriate methodologies, and matched to the respective market job and earnings range.
  • Job evaluations and market benchmarks are managed by the appointed job family committees, which are mandated with a specific charter.
  • Job profile changes are proposed by the line manager and then approved by the appropriate job family committee.
  • Employees have sight of their market match and earnings range.


Employee benefits

  • All employees have access to the same employee benefits, subject to the statutory requirements and local practices.
  • Employees have access to the following benefits:
    – leave;
    – retirement funding;
    – healthcare;
    – disability cover; and
    – death cover.
  • Depending on the requirements of a role, the company may allow for certain job-specific structures and/or allowances.
  • The service contracts of executive directors are aligned with those of general staff and do not include any golden-parachute arrangements.


Short-term incentive schemes (STIs):

  • STIs will be designed to reward performance both in terms of financial and non-financial performance, desired behaviours and deliverables within an agreed risk framework.
  • The RemCo has full and final discretion on all the group STI arrangements, including the approval of the final group pool and also ratifies specific allocations on an annual basis.
  • The group operates a Compulsory STI Deferral Scheme, the participation and forfeiture rules of which are determined by the RemCo on an annual basis.
  • The group operates a Voluntary STI Deferral Scheme, which allows eligible participants to receive additional matched shares upon selecting participation and meeting certain criteria.
  • A sign-on bonus scheme is used as a recruitment incentive to aid in the acquisition of potential candidates.
  • The RemCo approves STI pools on an annual basis and ratifies all short-term incentive allocations.
  • The RemCo approves all proposed STIs in excess of 200% of GP on an individual basis.


Long-term incentive schemes (LTIs):

  • LTIs are designed to retain key employees and to align their long-term performance with that of shareholders.
  • The RemCo considers and approves the LTI scheme arrangements.
  • The relevant legal and governance processes are followed in each jurisdiction to approve each scheme.
  • The group operates both an option (no further allocation since 31 December 2007) and a restricted-share scheme as share-based LTI.
  • The RemCo approves the corporate performance targets applicable to LTI awards.
  • All LTI awards are allocated in the form of performance shares and retention shares.
  • The RemCo approves all LTI allocations on an individual basis.
  • The group operates a Deferred Short-Term Incentive (DSTI) Scheme, which is a cash-based LTI scheme.
  • In countries where the group is not listed, a cash settled phantom arrangement, linked to corporate performance targets, is used as an LTI vehicle.


Ownership schemes:

  • As part of the broader black economic empowerment (BEE) initiative, RSA or in-country BEE schemes may also apply.

Total remuneration: non-executive directors

  • The fees of non-executive directors are reviewed annually, in terms of corporate governance regulations, and approved by shareholders at the AGM.

ROLES AND RESPONSIBILITIES

The Nedbank Group Board (the board)
The Board is ultimately responsible for the financial reporting and soundness of the group, including the remuneration policy. The board delegates responsibility for this policy to the RemCo, who will annually review the policy.

Group Remuneration Committee (the RemCo)
The RemCo is responsible for reviewing and approving the remuneration policy and the strategy related to all reward matters for the group, including executive and non-executive remuneration.

Group Risk and Capital Management Committee (the GRCMC)
The GRCMC will on an annual basis, receive feedback from the RemCo to ensure that the remuneration requirements and practices of the group comply with relevant codes of conduct and best practice, thereby ensuring alignment with the risk appetite and business plan of the group and not encouraging excessive risk taking.

Group Executive Committee (the Group Exco)
The Group Exco is responsible for amongst other things the proposal, and implementation, of remuneration strategies and policies for the group.

Group Rewards Department
Group Rewards Department will provide supporting frameworks, guidelines and tools to facilitate the process of remuneration management across the group, inclusive of providing line human resource managers with ongoing support and assistance.

Management
Management is required to:

  • conduct open and honest discussions with employees around employees’ individual remuneration;
  • ensure fair and equitable remuneration practices;
  • consult with Human Resources or Group Rewards Department in the event that guidance on remuneration practice is required; and
  • treat all remuneration data with a high level of confidentiality.


Line Human Resources

  • Line Human Resources managers are responsible for the remuneration practices at a business level, and support line managers appropriately to ensure that the group is a place where our people can thrive, and that remuneration principles are applied in a fair and equitable manner within the group.
  • Line human resources managers will work with line managers to manage remuneration expectations and plan for future strategic business growth.
  • Line human resources managers will upskill themselves and line managers to manage remuneration competently by having meaningful conversations with employees.’


EXECUTIVE DIRECTORS’ SHARE OPTION HOLDING

click to enlarge

Share options issued before May 2005 were issued in terms of the 1994 Nedcor Group Employee Incentive Scheme, with 50% vesting after three years from the date of grant and the remaining 50% after four years from the date of grant.

Share options issued after May 2005 were issued in terms of the Nedbank Group (2005) Share Option, Matched Share and Restricted Share Scheme, with 100% vesting after three years from the date of grant.

*
 Share options issued with performance-based vesting criteria. The rights issue options linked to these share options also have performance-based vesting criteria.
**
 No share options were issued in 2008 as a result of the introduction of the RSP.
***
 Prior to the expiry date of these options the committee approved a resolution declaring an ad hoc closed period for MWT Brown, restraining him from dealing in securities or options of the company. MWT Brown exercised 80 000 options 10 trading days after the lifting of the ad hoc closed period in line with the rules of the Nedbank Group (2005) Share Option, Matched Share and Resticted Share Scheme.

 

EXECUTIVE DIRECTORS’ RESTRICTED SHAREHOLDING

Nedbank issued restricted shares in 2008 with vesting thereof linked to the group meeting certain performance conditions. the SENS announcement of 3 March 2011 relating to executive directors and the Company Secretary confirmed that these conditions were not met and in terms of the rules of the scheme the restricted shares issued by the group in 2008 lapsed, including those issued to executive directors and those employees listed as top three earners who are not executive directors.

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EXECUTIVE DIRECTORS’ EYETHU SHARE OPTION HOLDING

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*
 Restricted shares and share options issued in terms of the Nedbank Eyethu Employee Scheme are subject to time-based vesting criteria with 33% vesting criteria after four years from date of grant, 33% vesting after five years from date of grant and 34% vesting after six years from date of grant.

SHARES PURCHASED/COMMITTED BY EXECUTIVE DIRECTORS UNDER THE MATCHED SHARE SCHEME FOR THE PERIOD 2008 – 2010

Name Number of shares Date of inception Strike price (R)
TA Boardman 20 000 31/03/2008 117,83
  21 100 31/03/2009 85,28
  4 351 31/03/2010 137,88
  16 318++ 31/03/2010 137,88
MWT Brown 8 878 31/03/2007+ 141,92
  13 155 31/03/2008 117,83
  11 051 31/03/2009 85,28
  4 351 31/03/201 137,88
  4 895++ 31/03/2010 137,88
GW Dempster 11 881 31/03/2008 117,83
  2 721 31/03/2010 137,88
  4 351++ 31/03/2010 137,88
TK Morathi 2 175 31/03/2010 137,88
+
 50% of the ordinary shares were matched on 31 March 2010 in terms of the rules of the Nedbank Group (2005) Matched Share Scheme.
++
 Participant in Compulsory Bonus Share Scheme.


There are zero options outstanding (2009: 100 000) that have been granted to executive directors in terms of the Nedcor Group (1994) Employee incentive Scheme and 1 044 497 instruments outstanding (2009: 457 765) that have been granted to executive directors in terms of the Nedbank Group (2005) Share Option Scheme, Matched Share Scheme and RSP.

TOP THREE EARNERS’ SHARE OPTION HOLDING

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TOP THREE EARNERS’ RESTRICTED SHAREHOLDING

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TOP THREE EARNERS’ EYETHU SHARE OPTION HOLDING

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TOP THREE EARNERS’ EYETHU RESTRICTED SHAREHOLDING

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SHARES PURCHASED/COMMITTED BY TOP THREE EARNERS UNDER THE MATCHED SHARE SCHEME FOR THE PERIOD 2008 – 2010

Function Number of shares Date of inception Strike price (R)
Group Exco Member 7 425 31/03/2008 117,83
  3 807+ 31/03/2010 137,88
Group Exco Member 4 243 31/03/2008 117,83
  2 931 31/03/2009 85,28
  4 786+ 31/03/2010 137,88
Group Exco Member 8 911 31/03/2008 117,83
  3 807+ 31/03/2008 137,88
       

+ Employee participant in the Compulsory Bonus Share Scheme.