Adcock Ingram Integrated Report 2018

The Company encourages transparency and appreciates feedback from shareholders on the governance of remuneration. Dissenting shareholders were publicly invited via a Stock Exchange News Service (SENS) announcement to a meeting with the Committee to discuss their concerns ahead of the AGM. The Public Investment Corporation (SOC) Limited (PIC) attended the meeting and Sanlam Investment Management made a written submission. The Company confirmed during the meeting that it would disclose the STI performance on a historical basis and STI targets will include both financial and non-financial metrics. Currently non-financial targets for executive management are set at 10%, whereas senior management targets are set between 10% – 50% of the overall STI, which include transformation, new business development, factory efficiencies and performance, market share performance, critical control environment, etc. These non-financial targets are subject to annual variation depending on the strategic direction and short-term priorities of the business. Activities undertaken by the Committee during the year u u appointed 21st Century as an independent remuneration advisor to provide an expert opinion on Adcock Ingram’s remuneration practices, remuneration trends and best practices; u u reviewed the remuneration trends and surveys from the remuneration consultants; u u approved job evaluations and benchmarked grades for Management; u u approved the principles for total guaranteed package (TGP) salary increases for non-bargaining unit employees; u u approved the remuneration of the Executive Management, and the Company Secretary and Head of Legal; u u approved the STI for eligible employees; u u reviewed the performance of Management and recommended the STI and LTI to the Board for approval; u u considered the share option allocation for the retention of key talent; u u reviewed Executive Management’s recommendation for the remuneration of non-executive Directors (NED), including the Chairman, and recommended same for consideration and approval by shareholders at the AGM; u u conducted an annual self-evaluation review to identify areas for improvement; u u recommended the Gender, Race and Diversity policy for approval by the Board; u u reviewed its terms of reference to ensure alignment with the King IV principles and successfully recommended them to the board for approval; and u u approved the remuneration report (including the policy and implementation) before publication in the integrated report; Independent and external advice This year the Committee actively sought and engaged independent external advice on remuneration trends and market benchmarks. Independent remuneration advisors (21st Century) were engaged to provide an independent view on management remuneration and benchmarking to ensure both internal and external fairness and equity in management remuneration. The appointment of 21st Century will ensure consistent application of methodologies and principles, that will be reviewed periodically. The Committee is satisfied that these advisors were independent and objective. The Committee is satisfied that the remuneration policy has achieved its stated objectives. Future areas of Focus: u u Implementation of new PBLTIS for key management in critical roles; u u Enhance wellness offerings for Management and potential successors; and u u Implement retention plans for potential successors. An overview of the Group’s remuneration philosophy and policy Adcock Ingram’s remuneration philosophy aims to reward employees appropriately for their contribution and execution of the strategy of the Group. As an integral component of the employee value proposition (EVP), the remuneration policy has been designed to attract, engage, retain and motivate the diverse talent required to deliver sustainable growth. The remuneration policy aims to achieve alignment between the Group’s business strategy and the behaviours of all employees in relation to the values of the Group. The policy recognises and rewards individual contribution, performance and behaviour in the achievement of the Group’s goals. The remuneration policy and the implementation thereof, is focused on achieving a fair and sustainable balance between guaranteed packages and variable pay (STIs and LTIs). Adcock Ingram strives to pay variable pay at the market upper quartile (75th percentile) taking into account the following factors: u u Affordability; u u Performance; u u Transformation; u u Industry skills; and u u Internal equity. A bias towards variable pay is intended to drive extraordinary performance, employee engagement and retention. Participation in the STI and LTI schemes are dependent on individuals’ performance, criticality of the role and their level within the organisation. The remuneration policy is based on the following key principles: u u by attracting and retaining top talent, remuneration is geared to support the Group mission, vision and values; u u remuneration directly correlates with Adcock Ingram’s strategy, financial and operational performance and transformation imperative and is consistent with the organisation’s culture of fairness, transparency, integrity and equity; u u remuneration considers Adcock Ingram’s size, the complexity of the business, the various business streams, and the competitive landscape; u u remuneration is reviewed and benchmarked regularly through independent service providers to ensure that the Group remains competitive; u u the short-term incentive schemes aim to motivate exceptional performance; u u remuneration inspires and allows for differentiation as it rewards different levels of performance accordingly; and u u remuneration recognises Individual contributions, based on span of control, role, scope and responsibilities. Benchmarking Benchmarking is a robust indicator of fairness and a competitive reward system. The total guaranteed package (TGP) for management is targeted at the market median of the national market TGP data. A premium to the median TGP may be considered for retention of employees with scarce skills, niche experience, consistent outstanding performance and transformation considerations. STI will be benchmarked at the upper quartile of the national market median TGP, with actual awards guided by the following factors: u u affordability; u u benchmarking results; u u current remuneration; and u u relativity between grades. Benchmarking process: u u Remuneration for management was benchmarked against the national market data incorporating size and complexity; u u the outcome was compared to data from a group of JSE listed companies of similar size and complexity to Adcock Ingram; as well as to available data from an industry comparator group. Setting of Non-Executive Directors’ (NED) Fees The following factors are considered when determining the NED remuneration: u u Industry understanding; u u Specific knowledge and skills; u u Track record; u u Reputation; u u Experience and qualifications; and u u Network reach. ADCOCK INGRAM  Integrated Report 2018 51