REMUNERATION REPORT |
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| CORPORATE GOVERNANCE |
Philosophy
Hyprop is an internally managed REIT, making employee skills essential
to our sustainability. Our remuneration philosophy therefore supports
our strategic objectives and encourages individual performance. It
emphasises the contribution of our employees to building long-term
value through fair and balanced remuneration.
The policy is based on several key principles:
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Hyprop’s success depends on attracting talented, experienced and
motivated individuals who can execute our business strategy to
achieve our vision and mission. We use both short and long-term
incentives to support this goal |
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Target-based short-term incentives (STIs) are strong drivers of
performance. A significant portion of senior management reward
is therefore variable, based on realistic performance targets, and
individual contributions to the growth of their division and the
wider company. We also reward employees who deliver superior
performance in line with our strategic goals. Special bonuses may
be considered as additional awards in exceptional circumstances |
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Long-term incentives (LTIs) are aligned to Hyprop’s strategic
objectives and the investment interests of shareholders. |
Policy
The remuneration and nomination committee is responsible for
implementing the remuneration policy to ensure:
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Salary structures and policies motivate superior performance,
and are linked to realistic performance objectives that support
sustainable growth |
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Stakeholders are able to make informed assessments of reward
practices and governance processes |
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Compliance with all applicable laws and regulatory codes. |
Non-executive directors
Our policy is to remunerate non-executive directors competitively for
their service while understanding the required time commitment. Fees
are benchmarked against a peer group of JSE-listed companies, and
there are no contractual arrangements to compensate for loss of office.
The remuneration and nomination committee reviews these fees
annually and makes its recommendations to the board which, in turn,
proposes fees for approval by shareholders at the annual general
meeting.
Non-executive directors do not receive STIs nor do they participate in
any LTI schemes except if they previously held executive office and are
entitled to unvested benefits from this period. Hyprop pays no pension
contributions for non-executive directors.
Executive directors and senior executive remuneration
Our executive directors are permanent employees and their
employment agreements include a notice period, but no restraints of
trade. Hyprop aims to be an employer of choice: to attract and retain
individuals of high calibre, we offer competitive remuneration packages
and review these annually.
Our remuneration structure includes:
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Base salary
All basic salaries are market-related, benchmarked against industry
norms and adjusted for an employee’s experience, qualifications,
responsibilities and nature of work. These are reviewed annually.
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STIs
An annual performance bonus aligns short-term rewards with
annual performance and supports retention. Performance reviews
are weighted significantly to output. The executive committee
sets key performance deliverables (KPDs) annually at property and
company levels. These are formally measured and include:
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Net income growth |
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Performance against budget |
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Increase 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 |
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Documentation administration. |
Exceptional performance is rewarded with higher incentives, after
considering recommendations from general managers, regional
executives and executive directors.
The maximum bonus for senior management is six months’ salary,
at the committee’s discretion. Bonuses for executive directors
are aligned with strategic objectives and are at the committee’s
discretion.
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LTIs
These reward long-term decisions supporting dividend and capital
growth. They are also designed to align employee behaviour with
shareholders’ interests and to ensure long-term retention of staff.
The LTI comprises a performance and a retention component. The
split between performance shares and retention shares is 70% : 30%
for all participants. |
Performance conditions relating to the performance component of the LTI is shown below:
| Performance condition |
Detail |
Weighting |
Threshold |
On target |
Stretch |
| Growth in distribution/
dividend per share relative
to peer group* |
Simple growth in distribution per share at the end of the
performance period compared to the prior financial year. |
40% |
95% |
95% |
110% |
| Share price performance
relative to peer group* |
Growth in the share price from the start to the end of the
performance period. |
40% |
95% |
105% |
120% |
| Strategic component |
Determined by the remuneration committee in line with
circumstances and projects at the time of the award. It is
measured over the performance period of three years, and
may include project-related or general business activity.
Where considered appropriate, the committee has the
discretion not to apply the strategic component, in which
case this 20% weighting will be split equally between the
other two performance conditions. Achieving each of
the performance conditions and consequent vesting of
performance units occurs severally. |
20% |
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* The peer group comprises the five largest South African REITs by market capitalisation listed on the JSE
The first awards were offered to executives, senior managers, operational and financial managers and staff with specific core, critical or strategic skills in
2014. Some 13% (27 employees) of the total staff complement will participate in the scheme, which is limited to 2% of the current shares in issue with an
initial vesting period of three years from January 2014.
Participants do not pay for the shares. They are also not eligible for dividends until the end of the initial vesting period.
Retention scheme terms
Retention shares vest five years after initial allocation, subject to continued employment for the duration of the vesting period.
Terms of service
Minimum terms and conditions for employing executive directors are governed by South African legislation. If an executive director’s services are
terminated, the committee oversees the settlement of terms, assisted by labour law advisers.
Remuneration of non-executive and executive directors
For breakdown of remuneration of non-executive and executive directors please see .
