Remuneration and performance
AngloGold Ashanti’s core leadership philosophy of “People are the business.... Our business is people” drives our remuneration approach to ensure an ongoing focus on retaining our employees in turbulent times through fair, transparent and competitive remuneration in the appropriate market.
Our policy is to align remuneration and rewards with our strategic goals.
At an executive level, AngloGold Ashanti’s policy is designed to assist us in competing in a global market. Particular focus is placed on ensuring that the market remains relevant with a full review of market comparators having taken place in 2014. 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 at retaining our employees. Our remuneration policy therefore focuses on:
- Remunerating in such a way that the behaviours and performance of our employees and executives are aligned, bringing together the strategic goals of the organisation, shareholders and employees
- Ensuring that the performance metrics are demanding, sustainable and cover all aspects of the business including both the key financial and non-financial drivers
- Structuring remuneration ensuring that our values are maintained and the correct governance frameworks are applied across our remuneration decisions and practices
- Applying the appropriate remuneration benchmarks
- Providing competitive rewards to attract, motivate and retain highly skilled executives and staff
With the appointment of a new Chairman in 2014, a review of the board structure and meeting attendance was conducted. This led to a revision of the sub-committees and their terms of reference. These sub-committees were consolidated from seven into five, and the role of the Lead Independent Director and Deputy Chairman was introduced. These changes resulted in a review of board and sub-committee fees and a change in their market positioning.
Benchmark data for director fees 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.
Non-executive board members at AngloGold Ashanti do not participate in any incentive schemes nor do they receive share allocations. See full details of non-executive pay for 2014 AFS.
ANGLOGOLD ASHANTI EMPLOYEE REMUNERATION
The following table provides an overview of benchmarking and the components of employee remuneration from the executive team through to 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 newly introduced comparator group consists of an increased group of 14 companies which is aligned with 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 and 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 and 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 and targeted at the 75th percentile.|
|Base salary||A competitive salary provided to executives to ensure that their experience, contribution and appropriate market comparisons are fairly reflected.||A competitive salary provided to employees to ensure that their experience, contribution and appropriate market comparisons are fairly reflected.||Collective bargaining agreed pay and/or competitive pay to attract and retain 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 with applicable global and local benchmarks. Used to enhance the employee value proposition.||Legislatively compliant, aligned with applicable global and local benchmarks. Used to enhance the employee value proposition.||Legislatively compliant, aligned with applicable regional and local benchmarks. Used to enhance the employee value proposition.|
|Short-term incentives||The Bonus Share Plan (BSP) is AngloGold Ashanti’s shortterm incentive initiative. It is a measurement of company, individual and business unit performances and takes into account financial and nonfinancial metrics. The BSP is awarded as a percentage of pay and is delivered as a cash bonus and deferred 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 an award of deferred shares under the BSP.||Non-managerial employees receive production bonuses that are linked to safety and production at the sites and are awarded accordingly (either monthly or quarterly depending on level). Nonmanagerial employees in corporate functions will receive the cash element of the BSP. No shares are awarded at this level. There remain instances where a limited number of employees qualify for 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 nonmanagerial employees.|
The graph below illustrates the remuneration mix of all Executive Committee members, management and non-managerial employees.
Average remuneration mix
(%) The percentages are with reference to the base salary
- Executive management includes the CEO and CFO.
- Non-manager mix is illustrated by an example of all Paterson C level and below employees in the South Africa region.
- Manager mix is an average of Paterson E band employees.
- BSP deferred shares are at 150% of BSP cash bonus for executive management and 120% of BSP cash bonus for managers.
- LTIP shares are calculated on an estimated company performance achievement of 38.57% (average for the last three years).
LINKING STRATEGY, PERFORMANCE AND REMUNERATION
The individual executive key performance indicators (KPIs) used to determine the individual portion of short-term incentives are aligned with the company’s strategic focus areas through the following deliverables:
- Focus on people, safety and sustainability – Safety: Improve safety performance and reduce fatalities; People: Develop and retain the people who are the business; and Sustainability: ensure that the we retain our social licences to operate
- Ensure financial flexibility – Being prudent and proactive in balance sheet management by improving earnings, returns and free cash flow; ensuring liquidity and headroom; and by mitigating refinancing risks
- Optimise overhead, costs and capital expenditure – Reduce direct operating costs, overheads and indirect spend and optimise annual total capital spend
- Improve portfolio quality – A strong focus on selecting only key projects that add value to the portfolio
- Maintain long-term optionality, albeit at a reasonable cost – Ramp-up the greenfield exploration programmes at selected international sites
These metrics are defined and further broken down into their specific elements of, for example, safety and health, environment, communities, people, production and costs in the personal KPIs for each executive, along with company targets under the BSP and LTIP. These company remuneration metrics have been reviewed for 2015 and are detailed in the Annual Financial Statements 2014.
The individual performance metrics for executives will be cascaded through the business to management and other staff who do not participate in production bonuses.
REMUNERATION IN 2014
Performance of the short-term incentive targets was very positive in 2014.
In 2014, Venkat declared that, in an attempt to reduce the pay gap between the highest and the lowest paid employees and to create stronger levels of trust with employees and stakeholders, he would not take either a salary increase or an annual cash incentive bonus. In order to continue with this sentiment and in recognition of the retrenchments that have taken place in AngloGold Ashanti during 2014, Venkat has again indicated that for 2015 he will not be accepting an annual salary increase.
Retention of the executive team at the time of transition from Mark Cutifani to Venkat was a key concern. Retention bonuses in the form of cash and shares were awarded to key members of the executive team at the time of Venkat’s appointment as CEO. These were realised with a payout following on from the end of the 18-month retention period in August 2014. The company extended the payout period for the CEO to March 2015.
Changes in the executive team in 2014 included the appointment of the new CFO, Christine Ramon, in October. Christine’s pay was set at a level similar to that of her predecessor Richard Duffy. The executive team was further optimised in number with the consolidation of the role of the Executive Vice President: Corporate Affairs into another executive officer’s portfolio and the departure of Yedwa Simelane.
The performance of the short-term incentive in the 2014 financial year was very positive owing to successes achieved across our safety and sustainability disciplines, production growth, delivery of new projects as well as the significant cost savings achieved.
Performance of the long-term incentive reflects the company’s performance over the past three years and the impact of the gold price, which declined markedly in 2012, no additions to the Ore Reserve and Mineral Resource, given the decline in price, lower share price and consequential impact on total shareholder return. The overall result was that the payout for this incentive was below target for 2014 at 37.4% of the targets set in 2012.
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 mediumterm basis. Included in the job description of these expatriate employees, is the development of the required skills locally (localisation). Throughout 2014 there was a concerted effort to reduce the number of these globally mobile employees through localisation, repatriation, retrenchment and other initiatives.
Globally mobile employees are compensated in terms of AngloGold Ashanti’s expatriate remuneration policy 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 South Africa, we have engaged with the unions on the economics of the gold mining industry, the gold market and the industrial relations statutory framework.
During 2014, we continued to work with organised labour representatives to engage them more meaningfully in dialogue on business issues. In particular, we have engaged with them on the economics of our industry, the gold market and on the legal and statutory framework regulating industrial relations in South Africa. All unions participate and are fully integrated into all statutory labour and ad hoc committees. We have identified and secured agreement for a core leadership team across all unions representing the workforce to undertake an entry-level fundamental management programme at a South African university during 2015. The aim of this initiative is to change the nature of the discourse with organised labour and to move closer to a relationship where we can identify joint business and labour aspirations and chart a pathway to achieving them. Formal recognition agreements are in place with AMCU, Solidarity and UASA while long-standing procedural agreements are in place regarding the NUM.
Towards the middle of 2015, under the auspices of the Chamber of Mines, we in the gold industry will begin biennial wage negotiations with our representative unions. The current labour environment differs markedly from that of 2013, and these negotiations will take place in an environment that has been influenced by a protracted five-month strike in the platinum sector, ongoing inter-union rivalry and competition for dominance and members between the NUM and AMCU.
In the Continental Africa region, union negotiations in Tanzania, Guinea and Mali during 2014 all continued normally with final wage agreements achieved in all locations. In Ghana, there were a large number of negotiations around Obuasi, which are addressed in the restructuring section below.
The Australasian and United States operations do not have collective bargaining agreements in place. Argentina and Brazil both have unions and, as in the Continental Africa region, successfully concluded wage negotiations in 2014.
RESTRUCTURING OF MINING OPERATIONS IN 2014
While there were limited retrenchments in most areas across AngloGold Ashanti in 2014 as compared with 2013, a significant retrenchment process was undertaken at the Obuasi operation in Ghana. In accordance with AngloGold Ashanti’s Amendment to the Programme of Mining Operations submission to the Ministry of Lands and Natural Resources, which was duly approved, agreement was entered into with the Ghana Mineworkers Union (GMWU) and approved by the Ministry of Labour to retrench the entire workforce of 4,312 full-time AngloGold Ashanti employees at a cost of $210m.
In addition to the agreements and approvals pertaining to the retrenchment and the payment of severance benefits to employees before the end of the fourth quarter, agreements were also entered into with the GMWU regarding the recruitment of some 650 fixed-term contract employees to fulfil roles and activities of the 2015/6 limited operating phase. These agreements provide for a fixed-term contract approach to employment, with salaries continuing to be indexed to the US dollar and increasing in line with US inflation at year-end. Furthermore, the organisational structure at Obuasi has been simplified. Unnecessary supervisory levels have been removed and salary ranges have replaced the previously rigid, multi-leveled salary scales and automatic annual service increments.
In the South Africa region, voluntary retrenchment was offered to employees at managerial and official level. In all, 531 employees applied for voluntary separation which has left labour costs below budget.
EMPLOYEE SHARE OWNERSHIP PLAN IN SOUTH AFRICA
The Bokamoso Employee Share Ownership Plan (ESOP) was launched in December 2006, in partnership with the unions represented at the time: the NUM, Solidarity and 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 was restricted to those employees not eligible to participate in any other AngloGold Ashanti share incentive plan. The ESOP came to an end in November 2014 when the last distribution was made to members. From the December 2006 launch date until completion, a total of $42.97m* was paid to members of the ESOP. Of this $2.32m was paid in dividends, $34.8m 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.
Currently, an extension to the Bokamoso ESOP is not being considered.