Remuneration and performance

AngloGold Ashanti’ score leadership philosophy of “People are the business .... Our business is people” remained a key focus during the difficult times of the past year. Despite the economic and operating difficulties, the company strove to retain and motivate employees utilising fair, robust and appropriate remuneration and rewards for their contributions.

REMUNERATION PHILOSOPHY

At an executive level, AngloGold Ashanti’s policy is designed to assist us in competing in a global market. Regional and local remuneration benchmarking practices are applied when reviewing lower management levels and non-managerial staff in the organisation.

Remuneration is comprised of guaranteed and “at risk” or variable elements which vary in quantum and design, based on the organisational level and the area in which employees operate. All these remuneration elements are, however, directed towards retaining our employees. Our remuneration policy therefore focusses on:

  • Aligning the behaviours and performance of our senior executives and managers with the strategic goals of the organisation, by offering competitive incentive plans with performance goals in place to ensure that executives’ and managers’ interests align with those of shareholders;
  • Aligning the performance of non-managerial employees with tangible deliverables in terms of production and safety;
  • Benchmarking executive remuneration against a comparator group of global and South African mining and multi-national companies;
  • Benchmarking managers and non-managerial employees against the appropriate regional and local comparator groups;
  • Encouraging employees to operate in a high-performance culture and facilitating their development to enable them to deliver on performance requirements;
  • Ensuring that employees share in the performance of the organisation; and
  • Maintaining a continuous focus on ensuring that the correct governance frameworks are applied to all decisions and practices governing remuneration in AngloGold Ashanti.

AngloGold Ashanti’s remuneration policy is aimed at the retention of critical skills and experience.

BOARD REMUNERATION

Historically, AngloGold Ashanti paid different fees to South African, African (outside of South Africa) and foreign (outside of Africa) non-executive directors.

Over the past three years, the company has progressively taken all non-executive director fees to the lower quartile of the global market and, in so doing, has eliminated previous differences between South African and non-South African non-executive directors’ fees.

The benchmark data is provided to AngloGold Ashanti by the bespoke survey conducted by Mercer Consulting (South Africa) Pty Limited and the annual PwC survey of non-executive directors’ fees and practices. In 2013, increases in non-executive director’s fees were implemented in two stages; the first was an increase in African directors’ board fees in June to align with their international fellow-directors, followed by an overall realignment of board fees with the global market in October 2013. In 2014, the final alignment of board sub-committee fees for non-executive directors and a travel allowance applicable to all will be implemented upon shareholder approval.

Non-executive board members at AngloGold Ashanti do not participate in any incentive schemes nor do they receive share allocations.

ANGLOGOLD ASHANTI EMPLOYEE REMUNERATION

The following table provides an overview of benchmarking and the components of employee remuneration from the executive team through to the non-managerial staff:

  CEO, CFO (executive directors) and Executive Committee members Managers Non-managerial employees
Market benchmarking Global comparator group benchmark for both fixed and variable pay (bespoke benchmarking survey conducted by Mercer Consulting (South Africa) Pty Limited). The current comparator group consists of 11 companies which are aligned to AngloGold Ashanti in terms of size and geographic spread. Global, regional or local market benchmark, depending on the scope of the role and whether or not there is a skills shortage. Local market pay, determined mostly through bargaining units’ collective agreements and wage negotiations.
Market positioning Targeted at the market median; where there is a shortage of skills and/or key technical skills, pay is higher than the benchmark, targeted at the 75th percentile. Targeted at the market median; where there is a shortage of skills and/or key technical skills, pay is higher than the benchmark, targeted at the 75th percentile. Pay determined either through collective bargaining or targeted at the market median; where there is a shortage of skills and/or key technical skills, pay is higher than the benchmark, targeted at the 75th percentile.
Base salary Guaranteed pay set to attract and retain employees. Performance based, and aligned both to internal and external markets. Guaranteed pay for the attraction and retention of employees. Performance based, and aligned both to internal and external markets. Collective bargaining agreed pay and/or pay for the attraction and retention of employees. Performance-based where not aligned under collective bargaining agreements, and aligned both to internal and external markets.
Benefits (medical aid, retirement, annual leave tax support etc.) Legislatively compliant, aligned to the applicable global and local benchmarks.

Used to enhance the employee value proposition.
Legislatively compliant, aligned to the applicable global and local benchmarks.

Used to enhance the employee value proposition.
Legislatively compliant, aligned to the applicable global and local benchmarks.

Used to enhance the employee value proposition.
Short-term incentives The Bonus Share Plan (BSP) is AngloGold Ashanti’s short-term incentive initiative. It is a measurement of company, individual and business unit performances and takes into account financial and non-financial metrics. The BSP is delivered in cash and matching shares. It is awarded as a percentage of pay and is delivered as a cash bonus and matching shares which vest over a two-year period (50% on the first anniversary of the cash award and 50% on the second). Managers can receive either the BSP – as described for directors or executive committee members (at a lower percentage) – or cash bonuses in the form of production bonuses. These production bonuses are typically paid quarterly and reflect safety and production performance. Managers who receive cash payments as production bonuses will still qualify for matching shares under the BSP. The production bonuses are linked to safety and production at the sites and are awarded accordingly (either monthly or quarterly depending on level). Non-managerial employees in corporate functions will receive the cash element of the BSP. No shares are awarded at this level. There remain instances where groups of employees qualify for matching shares on historic grounds.
Long-term incentives The Long-Term Incentive Plan (LTIP) for AngloGold Ashanti is designed for executives and senior managers. It is a grant of shares with a three year cliff vesting and is subject to company performance conditions. Senior managers can qualify for the LTIP – this is determined by their job grading (Stratum) level. There is no LTIP for non-managerial employees.

The graph below illustrates the remuneration mix of all Executive Committee members, management and non-managerial employees.

[Average remuneration mix]

Notes:

  • Executive management is inclusive of the CEO and CFO.
  • Non-manager mix is derived from all South Africa Region Paterson C level and below employees.
  • Manager mix is an average of Paterson E band employees.
  • BSP matching shares are at 150% for executive management and 120% for managers.
  • LTIP shares are calculated on an estimated performance achievement of 49.43% (average for last three years).

To deliver on targets, AngloGold Ashanti needs to put in place the people, the managers, the processes and the strategies to enable delivery.

LINKING STRATEGY, PERFORMANCE AND REMUNERATION

The individual executive key performance indicators (KPIs) used to determine the individual portion of short-term incentives are aligned to the following performance deliverables:

  1. People are the business: To deliver on targets, AngloGold Ashanti needs to put in place the people, the managers, the processes and the strategies to enable delivery.
  2. Grow the business to support shareholder value: To deliver exceptional returns, AngloGold Ashanti needs to target cash flow and financial performance.
  3. Manage the asset base as an investment portfolio: To deliver sustainable returns and maximise shareholder value, AngloGold Ashanti needs to be able to sustain and grow the business.
  4. Create new business model to improve margins and deliver on the 15% return on equity target: AngloGold Ashanti must establish a business model that ensures it has a sustainable and growing business.
  5. Build a sustainable business: AngloGold Ashanti will not maintain its licence to operate unless it has a sustainable business model and unless it sees a potential competitive advantage in this model.

These metrics are defined in the personal KPIs for each executive, along with the company targets under the BSP and LTIP. These company metrics have been reviewed for 2014 and are detailed in the Annual Financial Statements 2013.

The individual performance metrics for the executives will be cascaded through the business to management and other staff who do not participate in production bonuses.

REMUNERATION IN 2013

In 2013, Mark Cutifani resigned as CEO and was replaced initially by two joint interim CEOs and, from May 2013, by Srinivasan Venkatakrishnan (Venkat). After a full market review and careful consideration of Mark and Venkat’s relative experience levels, it was decided to implement a lower salary for the new CEO.

This, coupled with Venkat’s decision to decline a cash bonus for 2013 and a salary increase in 2014, is testimony to the greater focus on reducing the pay gap between the highest and the lowest paid employees and on creating stronger levels of trust with employees and stakeholders.

The year 2013 was marred by a significant drop in the gold price, on-going labour unrest in South Africa and a decline in ore grades which impacted production. These factors affected the company’s performance in 2013 as can be seen in the significant decline in the short- and long-term incentives granted to employees. Although performance did not meet the targeted level, the effectiveness of the bonus metrics was demonstrated by the reduction in the value of incentives paid, which although improved compared with 2012, remain low. These results can be viewed in the Annual Financial Statements 2013.

There is a greater focus on reducing the gap between the highest and the lowest paid employees.

REMUNERATION OF GLOBALLY MOBILE EMPLOYEES

In remote areas or where there is a high demand for skills that are not available locally, AngloGold Ashanti deploys globally mobile employees to fill roles on a short- to medium-term basis. Included in the job description of these employees, is the development of the required skills locally (localisation).

Globally mobile employees are compensated in terms of AngloGold Ashanti’s expatriate remuneration which provides for benefits such as housing, schooling, international medical aid, international pension provisions, cost of living allowances and home leave trips. Where provided, these benefits may be delivered in the form of an allowance, depending on the location and the duration of the assignment.

COLLECTIVE BARGAINING AT ANGLOGOLD ASHANTI

In 2013, AngloGold Ashanti’s performance was affected by labour unrest in the South African mining sector. This unrest and its accompanying unprotected strikes increased the likelihood of the earlier downsizing at the South African operations. The company, however, remains fully committed to its employees and to the collective bargaining process as a way of resolving any differences with recognised unions and associations.

AngloGold Ashanti is open to working with its social partners to renew its commitment to, and to delivering on, its social compact with the mining industry as agreed in the South African Mining Charter. The company has come to an agreement with government and the majority of local South African trade unions that covers the importance of safety, freedom of association for all workers, transparency and honesty in all interactions, respect for the rule of law and rejection of intimidation. The agreement also reflects a collective commitment to effective dispute resolution and acknowledgement of the integrity of collective bargaining.

RESTRUCTURING IN 2013

The restructuring undertaken in 2013 entailed a significant redesign of the entire organisation with a strong focus on cost optimisation opportunities. Cost saving initiatives, together with the restructuring, resulted in a 37% reduction in the number of corporate and off-site regional roles (as at September 2013) by year-end equivalent to overall savings of $119m (annualised) in corporate costs.

Retrenchment packages offered to all employees globally were based on a standard set of principles while taking into account local legislative requirements and processes.

EMPLOYEE SHARE OWNERSHIP PLAN IN SOUTH AFRICA

The Bokomoso Employee Share Ownership Plan (ESOP) was launched in December 2006, in partnership with the unions represented at the time: the National Union of Mineworkers (NUM), Solidarity and United Association of South Africa (UASA). The ESOP was implemented to create an opportunity for AngloGold Ashanti and the unions to ensure closer alignment of the interests of South African-based employees and the company, and the seeking of shared growth solutions to build partnerships in areas of common interests.

Participation in the ESOP is restricted to those employees not eligible to participate in any other AngloGold Ashanti share incentive plan. Between the December 2006 launch date and December 2013, a total of $45.67m flowed to members of the ESOP. Of this $2.32m was paid in dividends, $37.5m as a consequence of the vesting of free and loan shares and $5.85m was due to the proceeds of a rights issue in 2008.