Remuneration policy
Remuneration Strategy and Policy
OVERVIEW AND PHILOSOPHY
Our remuneration philosophy is intended to promote the achievement of the company’s strategic objectives, encourage individual performance and reward sustainable value creation. Our philosophy emphasises the role of our employees in building long term sustainable value through fair and balanced remuneration.
Hyprop is an internally managed REIT.
The remuneration policy is based on the following key principles:
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A critical success factor for the company is to attract talented, experienced and motivated individuals, who can execute our business strategy, vision and mission. Both short- and long-term incentives are used to achieve this. |
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Delivery-specific short-term incentives are viewed as strong drivers of performance. A significant portion of senior management’s reward is variable and is based on the achievement of realistic performance targets together with the individual’s personal contribution to the growth and development of their immediate business, the applicable division and wider company. The company rewards employees who deliver superior performance in line with the company’s strategic goals. When warranted by exceptional circumstances, special bonuses may be considered as additional awards. |
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Long-term incentives are aligned to the strategic objectives of the board and the investment interests of unitholders. |
REMUNERATION POLICY
The remuneration committee is responsible for the implementation of the remuneration policy. The policy is designed to ensure:
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salary structures and policies motivate superior performance, and are linked to realistic performance objectives that support sustainable long-term growth; |
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stakeholders are able to make an informed assessment of reward practices and governance processes; and |
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compliance with all applicable laws and regulatory codes. |
GOVERNANCE
Board responsibility
The board has ultimate responsibility for the remuneration policy and may deviate from this policy if there are specific reasons to do so in an individual case. The remuneration and nomination committee operates in accordance with a board-approved mandate. The board may, when required or appropriate, refer matters for unitholder approval; for example, new and amended share-based incentive schemes and non-executive director and committee fees.
The board evaluates the effectiveness of the remuneration and nomination committee annually.
In terms of King III recommendations, the company’s remuneration policy is tabled for a non-binding advisory vote at the annual general meeting of the company.
Remuneration committee
In order to improve efficiencies, the remuneration and nomination committees are combined. The committee meets at least twice a year.
It is chaired by an independent non-executive director and comprises non-executive directors with a majority of independent non-executives. The CEO and any other director or executive may attend meetings by invitation, but are excluded from deliberations relating to their individual remuneration.
A formal charter codifies the tasks and responsibilities of the committee. Updates to the charter to effect application of King III recommendations, or other identified best practice, are approved during the year. The committee chairman attends the annual general meeting of the company to liaise with unitholders on matters under the ambit of the committee.
The committee:
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Reviews and recommends to the board the company’s remuneration philosophy and policies for directors and staff |
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Ensures that the remuneration strategy reflects the interests of stakeholders, is comparable to the general remuneration environment in the sector, and complies with relevant principles of good corporate governance |
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Considers whether the objectives of the remuneration policy have been achieved |
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Ensures that the ratio of fixed and variable pay, in cash, benefits and units, is aligned with the company’s strategic objectives |
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Reviews the effectiveness of recorded performance measures that govern the vesting of incentives |
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Ensures that all benefits, including retirement benefits and other financial arrangements, are justified and correctly valued |
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Considers the performance of the CEO and Financial Director, as directors and as executives, when determining their remuneration |
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Selects an appropriate peer group when comparing remuneration levels |
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Regularly reviews incentive schemes to ensure alignment with unitholder interests and that they are administered in terms of their rules |
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Advises on the remuneration of non-executive directors |
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Oversees the preparation of the remuneration report included in the integrated annual report, to ensure that it:
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is accurate, complete and transparent; |
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provides a clear explanation of how the remuneration policy has been implemented; and |
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provides sufficient forward-looking information to the board regarding the fees of non-executive directors so as to enable the board to propose to unitholders, for their consideration and approval, a special resolution in terms of section 66(9) of the Companies Act, 2008. |
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EXTERNAL ADVISORS
The committee utilises the services of independent advisors on an ad hoc basis.
REMUNERATION
Non-executive directors
Remuneration for non-executive directors comprises a base fee, predetermined annually and approved by unitholders at the annual general meeting. The remuneration and nomination committee reviews non-executive directors’ fees annually. Recommendations are made to the board, which in turn proposes fees for approval by unitholders at the annual general meeting. It is the responsibility of the remuneration and nomination committee to provide the necessary information to unitholders to enable them to appropriately consider the relevant resolution.
The company’s policy is to reward competitively for the role while being cognisant of the required time commitment. Fees are benchmarked against a peer group of JSE-listed companies. No contractual arrangements are entered into to compensate for loss of office.
Non-executive directors do not receive short-term incentives nor do they participate in any long-term incentive schemes except where non-executive directors previously held executive office and they remain entitled to unvested benefits arising from their period of employment. The company does not provide pension contributions to non-executive directors.
Full details of the non-executive directors’ fees are set out on .
Directors' and senior executives’ remuneration
Executive directors are permanently employed by the company. Employment agreements include a notice period and do not include restraints of trade. Hyprop aims to be regarded as an employer of choice. In order to ensure the attraction and long-term retention of high calibre individuals, the group offers competitive remuneration packages which are reviewed annually. All employees are evaluated according to the Patterson job grading system, with six grades defining the employee’s remuneration scale.
Hyprop’s remuneration structure includes:
Base salary
At all levels, basic salaries are market-related and benchmarked against industry norms with adjustments made for the employee’s particular experience, qualifications, responsibilities and nature of work. Base salaries are reviewed annually.
Short-term incentives (STI)
An annual performance bonus aligns short term rewards with annual performance and supports retention. Performance reviews of staff are weighted significantly to deliverables. Key Performance Indicators (“KPI”) measurements, agreed by the executive committee, are set annually at property and company levels and are formally measured.
These include :
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Net income growth |
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Performance against budget |
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Increases in trading densities |
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New/renewed leasing rental values achieved relative to budget |
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New/renewed leasing escalations achieved |
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Tenant arrear collections and management |
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Tenant deposit and bank guarantee management o Documentation administration |
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Internal audit outcomes |
Exceptional performance is rewarded with higher incentives. Recommendations from general managers, regional executives and executive directors are taken into account in this regard. The maximum bonus for senior management is six months’ salary and is at the committee’s discretion. Bonuses for executive directors are aligned with strategic objectives and are at the committee’s discretion.
Long-term incentives (LTI)
These are designed to reward long term decisions intended to drive distributions and capital growth. They are also designed to align employee behaviour with unit holders’ interests. Hyprop’s current LTI structure comprises a phantom share scheme however, no annual allocations have been made since 2008.
In addition, Hyprop’s employees are members of a defined contribution pension fund which has death, disability and funeral benefits.
The company recognises the importance of career development. Through consultation with employees, development needs are identified and, where appropriate, training and other relevant plans are implemented.
The remuneration of executive, non-executive directors and the top three earning employees is disclosed in the integrated report.
Terms of service
The minimum terms and conditions applied to executive directors are governed by South African legislation.
In exceptional situations of termination of executive directors’ services, the committee assisted by labour law advisers, oversees the settlement of terms.
Directors’ interests and related party transactions
Directors’ interests and related party transactions are disclosed in the integrated report. |
