G = GOVERNANCE

Remuneration committee
chairman's report

Fairness equality Aligning remuneration and human resource practices with our strategic objectives

Maria Richter Chairperson: Remuneration and
Human Resources Committee

Dear Shareholders,

As the new Chairperson of the Remuneration and Human Resources Committee (the committee), I am pleased to continue the important work of ensuring clear alignment of AngloGold Ashanti’s remuneration and human resource practices with its strategic objectives. Remuneration is a rapidly evolving discipline, particularly with respect to executive fair and responsible pay for performance, gender diversity, talent management and – especially relevant for our business – the development and retention of local skills in the jurisdictions in which we have operations or projects.

Engagement with shareholders is invaluable in ensuring that the linkage between strategy and incentive outcomes is clearly understood. It is also very important that the views of the shareholders are taken into account in the development and implementation of our remuneration policy. My predecessor valued these engagements and I have committed to continuing that tradition, engaging with shareholders – outside of voting season – to ensure that we receive unfiltered input on all matters relating to our remuneration and human resources practices.

Continuous improvement is fundamental to long-term success in mining and remaining open to enhancement of our remuneration practices is no exception. In line with King IV and the JSE Listing Requirements, we are reporting for the first time the executive management team’s remuneration in Single Total Figure Remuneration format. This further improves transparency and accountability to shareholders.

I am also pleased to report that the committee observed management’s continued delivery of the Company’s strategy during 2019. Clear advances were made towards de-risking the asset portfolio, while delivering significant improvements in safety, cash flows and returns. Meaningful progress was made in the broad area of sustainability, as well as in capital allocation and balance sheet management, providing a solid foundation upon which AngloGold Ashanti can continue to improve its asset base over time.

Performance on safety, health and the environment

Success for any mining company relies on the safe operation of its mines, the good health of employees and host communities, and careful stewardship of the environment.

AngloGold Ashanti, as part of the global community, is experiencing the covid-19 pandemic. As safety is our first value, we will continuously focus on the safety of our employees, which is aligned to our shareholders’ interests. We will monitor the developments of this pandemic, engaging shareholders and other stakeholders accordingly.

I am most proud that AngloGold Ashanti passed the calendar year without a workplace fatality for the first time ever and extended its fatality-free record to 633 days. Tragically, we have since lost four of our colleagues in two separate incidents that occurred in March 2020 at the Mponeng mine. This places even greater focus on our commitment to safety and to working on the eradication of all injuries and accidents across our mines. Our commitment to excellence will however continue with much diligence and dedication in the areas of safety, health and environment which is underpinned by our Deferred Share Plan (DSP), the variable pay programme with 20% of the total annual bonus used to reward the positive outcomes of this basket of sustainability metrics.

Management performance and achievements

It has been a memorable first year as Chairperson of this committee and I am proud to share management’s performance and achievements:

  • Free cash flow increased by 90% as annual guidance was achieved across key operating metrics for the seventh straight year
  • The Obuasi redevelopment project poured first gold on time and within budget and remains on track to mine at a rate of 2,000t a day during 2020, climbing to 4,000t a day by year-end. The mine will produce gold at an average run-rate of 350,000oz – 400,000oz annually for the first ten years, and more than 400,000oz annually over the life of mine at an all-in sustaining cost of around $800/oz
  • The capital allocation framework, with clear leverage and return targets, guided the decision to initiate processes to sell assets in South Africa, Argentina and Mali. In December 2019, AngloGold Ashanti announced the sale of its interest in the Sadiola mine, in Mali, to Allied Gold Corp, while an agreement to sell the remaining South African producing assets and related liabilities to Harmony Gold Mining Company Limited was reached in February 2020
  • AngloGold Ashanti’s market capitalisation increased by almost 80% in 2019, as the share price outpaced the gold price and its international peer group. The American Depositary Receipts, the Company’s most liquid publicly traded security, gained 76% in 2019 versus a 39% gain for the Van Eck Vectors Gold Miners ETF, a basket of 47 gold shares, and an 18% rise in the price of bullion over the year

The committee commends the management team, led by the CEO Kelvin Dushnisky, for intensifying its dual focus on protecting – and indeed, improving – margins while working to maintain and strengthen the social licence to operate. This approach is consistent with the remuneration policy which aims to discourage excessive risk taking, while recognising efforts to improve performance with respect to factors within management’s control that will drive value creation over the short-, medium- and long term, in an ethical, sustainable and responsible manner.

Notwithstanding the above achievements, production, all-in sustaining costs, future optionality – particularly in the area of Mineral Resource additions – community and environmental elements provide us with further opportunities for improvement as evidenced in the DSP 2019 performance outcomes in the remuneration report, page 149 of the <IR>.

Given the satisfactory performance in 2019 across financial, operating and safety metrics, the committee is satisfied with the remuneration outcomes of the DSP.

In terms of the 2017 Long-Term Incentive Plan (LTIP) (one of the prior year schemes replaced by the DSP in 2018), the strong growth in our share price and continued focus on the key value of safety yielded a solid performance of 94.46%, payable in March 2020. This is the final pay-out of the LTIP scheme. (Further details are set out in the remuneration report, page 148 of the <IR>.)

Competitive remuneration

As a large gold mining company with a complex suite of assets across developed and emerging markets, AngloGold Ashanti requires competitive remuneration structures to attract and retain scarce skills and expertise. This is fundamental to our strategy. It is also imperative to ensuring that we are able to compete and flourish in a volatile global mining industry, with increasingly exacting requirements from shareholders, civil society, regulators and our host governments. These remuneration structures are well considered and have clear guardrails, which are detailed in the 2019 remuneration policy and structure on page 126 of the <IR>.

Disclosure and transparency

The remuneration policy and implementation report were tabled for two separate, non-binding advisory votes at the Annual General Meeting (AGM) held on 9 May 2019, in line with the JSE Listings Requirements and King IV recommendations. The table below details the results of the 2018 AGM (held on 9 May 2019) which reflect shareholder concerns over the structure of the CEO’s signon award, together with results of shareholder voting at the 2017 and 2016 AGMs.

VotesForAgainstWithheld
Remuneration policy
09 May 201998.311.690.40
16 May 201898.351.650.21
16 May 201798.231.770.60
Remuneration implementation report
09 May 201958.5141.490.40
16 May 201898.961.040.21
16 May 201798.311.690.30

Shareholder engagement

This poll alongside showed 98.31% of shareholders voted in favour of the remuneration policy compared with 58.51% for its implementation.

I subsequently engaged with investors representing over 30% of the shareholder base with the aim of better understanding their perspectives and to ensure that our remuneration practices and reporting reflect their views. Following these meetings – which were supportive and constructive – we have further enhanced the detail of our disclosure, including additional information related to the CEO’s joining remuneration in 2018, which can be found in the remuneration report, page 138 of the <IR>. The table below summarises the key themes from shareholder engagements, and our responses.


Shareholder feedbackRemuneration committee response
Concern over lack of performance criteria attached to the CEO’s sign-on award

While the payment of $4.2m was disclosed in the 2018 Remuneration report, it was incorrectly described as a share buy-out. The correct position is that, at the time of the negotiations, Mr Dushnisky expected corporate activity under discussion at the time by his former employer that would entitle him to a substantial contractual severance payment. He was prepared to wait for this activity to materialise and for the payment to become due, after which time he would join AngloGold Ashanti. However, in light of AngloGold Ashanti’s requirement that he start immediately after the departure of the former CEO, the parties agreed to a value that took into account Mr Dushnisky’s expected loss of compensation and his willingness to start at the earlier date.

The committee determined that it would be in the best interests of our shareholders for the negotiated sign-on award to be both staggered over three years and have a significant proportion payable in AngloGold Ashanti shares, to create immediate alignment with shareholders’ interests. Should the CEO leave AngloGold Ashanti within a certain period of time, a claw-back clause was agreed. We regard the retention component of the sign-on award as an essential part of our retention strategy.

Further details of the CEO’s remuneration are included in the remuneration report, on page 152 of the <IR>.

Lack of transparency on the sign-on award of CEO

The committee is committed to providing greater transparency with respect to all aspects of remuneration and is introducing enhancements to the remuneration policy. The proposed enhancements are included on page 122 of the <IR>. We would also like to emphasise the following elements of our current recruitment policy:

  • Appointees will not be paid more than what they would have lost at their previous company;
  • A time period is applied to a buy-out with a minimum claw-back; and
  • We will provide full disclosure of any buy-out.

I am grateful for the opportunities to hear directly from the shareholders. The committee has enjoyed their strong support for the overall remuneration policy which was revised and implemented in 2018 and adheres to South African corporate governance recommendations. The committee believes that these remuneration practices have balanced the needs of shareholders and employees and served both constituencies well over time.

AngloGold Ashanti’s remuneration policy and implementation report will be tabled for separate non-binding advisory votes by shareholders at the upcoming AGM, as recommended by King IV. If either, or both, are voted against by 25% or more of the voting rights entitled to be exercised by shareholders at the AGM, the committee will embark on an engagement process with dissenting shareholders to address legitimate and reasonable objections, where appropriate.

Fostering an equitable workplace

The Company continues to focus on the development of an equitable workplace and is committed to equal pay and gender equity in line with the JSE Listings Requirements, King IV guidelines and our diversity policy.

Furthermore, the Company continues to develop the leadership succession pool and has implemented strategies to attract, motivate and retain a skilled workforce through fair, responsible, transparent and competitive remuneration. The attraction and retention of suitable local candidates to replace expatriates are done through labour planning processes, recruitment from the local market and bursar and graduate trainee schemes. The group talent, succession management, training and development processes at all of our operations ensures that we address localisation across our global footprint.

The committee is constantly looking at ways to enhance our remuneration policy in line with shareholders' interests and corporate best practice.

Enhancements to the remuneration policyWhat is the impact of the change?
  • Tightened recruitment eligibility criteria
  • Enhanced the malus and claw-back provisions, see page 18 in the <NOM>
  • Increased minimum shareholding requirements for members of the Executive Committee, see page 22 in the <NOM>
  • Enhanced performance management review process, see page 16 in the <NOM>
  • Aligns with corporate best practice
  • Further reinforces alignment between executive management and shareholders' interests
  • Further reinforces alignment between executive management and shareholders' interests
  • Aligns Executive Committee performance and pay

Focus areas 2019

In addition to management’s performance achievements for 2019, the committee’s key focus areas included the following:

  • Enhancing our relationships with our shareholders
  • Ensuring pay for performance
  • Enriching the workplace by building on our diversity initiatives
  • Managing our talent successfully by identifying and placing internal successors into executive roles
  • Successfully continuing to execute the Chairman’s Young Leaders Programme and enhancing development opportunities
  • Building the relationship with our employees through the engagement survey. See <People are our business>

Focus areas 2020

  • Enhancement of our remuneration policy by focusing on the following:
    • Confirming that our DSP metrics are still in line with shareholders' interests and global best practice
    • Addressing minimum shareholding requirements for the Executive Committee (details are included on page 22 of the <NOM>.
    • Performance management review enhancements (details are included on page 16 of the <NOM>)
  • Continued focus on succession planning
  • Continued engagement with shareholders
  • Continued focus on the implementation of our diversity and inclusion framework.

Expression of gratitude

In closing, I would especially like to thank the members of the committee for a warm welcome and their support; our shareholders for their constructive engagement and considerable feedback; and our management team who have been relentless in their efforts to create value for all stakeholders.

Maria Richter
Chairperson: Remuneration and Human Resources Committee

27 March 2020