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| Remuneration report |
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Statement from the Chairman of the Board Remuneration Committee - an overview |
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The remuneration report was prepared by the Remuneration Committee and approved by the board.
The board believes that a properly constituted and effective remuneration committee is key to improving the link between directors' pay and performance, with the ultimate aim of enhancing our competitiveness. The primary purpose of the committee is to determine our policy on the remuneration of executive directors and the remuneration package for each executive director. The committee is made up of non-executive directors, and executive directors are not involved in determining their own remuneration packages.
This report describes our remuneration policy (which has remained unchanged) and directors' remuneration for the 2008 financial year. |
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| During the period, in addition to its regular business, the committee continued to focus specifically on: |
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Talent management and the retention of senior management and executives. |
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The appropriateness of the various share option and long-term incentive plans currently in place, including inter alia, grant levels, dilution limits, performance criteria and vesting schedules. |
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| Key points to note for the period under review include: |
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Investec has posted an increase in attributable earnings of 14.6% from £300.7 million to £344.7 million. |
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Executive directors hold 1.8% and 2.6% of the issued share capital of Investec plc and Investec Limited, respectively.
Non-executive directors hold 0.8% and 4.3% of the issued share capital of Investec plc and Investec Limited, respectively Refer to the remuneration report. |
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Our total shareholder return was negative 44.8% for Investec plc in Pounds Sterling and negative 34.8% for Investec Limited in Rands. This compares to a negative return of 15.3% for the FTSE 350 General Finance Index. The group increased its dividend return by 18.9% in Pounds Sterling and 28.9% in Rand over the year. We have however, experienced a decline in our share price as a result of the global credit and liquidity crisis. This decline is not out of line with the fall in share prices of other UK universal and global investment banks. Since listing on the London Stock Exchange in 2002, Investec plc has outperformed the FTSE 350 General Finance Index. Refer to the graph on performance total shareholder return. |
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The report complies with the provisions of the 2006 London Combined Code, Schedule 7A of the UK Companies Act 1985, the UK Financial Services Authority Listing Rules, the South African King II “Code of Corporate Practice and Conduct” and the JSE Limited Listing Rules. Additional information has also been included to reflect the most common enquiries received.
Furthermore, the auditors are of the opinion that the auditable part of this report was properly prepared, in accordance with Schedule 7A of the UK Companies Act 1985.
The committee unanimously recommends that you vote to approve this report at the 2008 Annual General Meeting.
Signed on behalf of the board
George Alford
Chairman, Remuneration Committee
17 June 2008 |
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| Composition and role of the committee |
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| The members of the Remuneration Committee throughout the year were George Alford (Chairman), Geoffrey Howe and Sir Chips Keswick. The members are independent non-executive directors and are free from any business or other relationship which could materially interfere with the exercise of their independent judgement. The committee's principal responsibilities and objectives are to: |
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Determine, develop and agree with the board, the framework or broad policy for the remuneration of executive directors and executive management (comprising individuals discharging managerial responsibilities, who are the global heads of our core areas of activity and are members of our global operations forum). |
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Ensure that qualified and experienced management and executives will be provided with appropriate incentives to encourage enhanced performance and will be, in a fair and responsible manner, rewarded for their contribution to the success of the group and alignment with the corporate objectives and business strategy. |
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Review and approve the design of, and determine targets and objectives for any performance related pay schemes for directors and executive management and approve annual payouts under such schemes. |
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Determine, within the terms of the agreed policy, the total individual remuneration packages of executive directors and executive management including, where appropriate, bonuses, incentive payments and share scheme awards. |
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Oversee any major changes in our employee benefit structures. |
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Ensure that the comments, recommendations and rules within the UK and South Africa pertaining to director's remuneration are given due regard, in determining the packages of executive directors. The committee is authorised by the board to seek any information it requires from any employee in order to perform its duties. |
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| The committee's terms of reference are available on our website. |
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| Meetings |
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| The committee met eight times during the financial year with full attendance other than for one meeting which Sir Chips Keswick was unable to attend. The Company Secretary of Investec plc acts as Secretary to the committee. Executive directors do not attend these meetings, although the Chairman of the board has attended on one occasion. The Chairman of the committee reports on the activities of the committee at each meeting of the full board. |
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| Advisers to the committee |
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Where appropriate, the committee has access to independent executive remuneration consultants. The selection of the advisers is at the discretion of the committee Chairman, and Investec funds any expenses relating to the appointment of external consultants.
During the financial year, the committee continued to use the services of its advisers, Hewitt New Bridge Street, which amongst other things specifically reviewed and provided information on appropriate benchmark, industry and comparable organisations' remuneration practices.
Furthermore, we have used the services of Linklaters, which have advised on a number of issues pertaining to our incentive plans. Linklaters is one of Investec plc's legal advisers.
Certain specialist divisions within the group, for example, Human Resources and the Staff Shares division, provide supporting information and documentation relating to matters that are presented to the committee. This includes, for example, comparative data and motivations for proposed salary, bonus and share awards. The employees within these specialist divisions, which provide support to the committee, are not board directors and are not appointed by the committee. While executive directors have the right to address any meeting of the committee, they play no role in the determination of their remuneration package or that of any other executive director. |
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| Policy on executive directors' and employees' remuneration |
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Our philosophy is to employ the highest calibre individuals, who are characterised by integrity, intellect and innovation and who adhere and subscribe to our culture, values and philosophies. We strive to inspire entrepreneurship by providing a working environment that stimulates extraordinary performance, so that executive directors and employees may be positive contributors to our clients, their communities and the group.
We reward executive directors and employees for their contribution through payment of an industry competitive annual package, variable performance reward and ownership in the form of share incentive scheme participation. Overall rewards are considered as important as our core values of work content (greater responsibility, variety of work and high level of challenge) and work affiliation (entrepreneurial feel to the company and unique culture) in the attraction, retention and motivation of employees.
We have a strong entrepreneurial, merit and values-based culture, characterised by passion, energy and stamina. The ability to live and perpetuate our values, culture and philosophies in the pursuit of excellence is considered paramount in determining overall reward levels.
Both the type of people the organisation attracts, and the culture and environment within which they work, remain crucial in determining our success and long-term progress.
The key principles of our remuneration policy for executive directors and employees, which were consistently applied during the financial year, are as follows: |
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Reward programmes are designed and administered to align directors' and employees' interests with those of stakeholders. |
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Reward programmes are clear and transparent, in order to retain individual interest in, and identification with, our short and long-term success. |
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Total rewards comprise a fixed and variable component. |
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Total compensation (base salary, pension, benefits and incentives) is targeted to the relevant competitive market (see below) at upper quartile levels for superior performance. |
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A significant proportion of rewards, including annual and long-term incentive components, are explicitly linked to the performance of the business and the individual business units. We recognise the performance of the business and the individual. As indicated above, qualitative and quantitative issues form an integral part of the determination of reward levels. |
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Reward levels are targeted to be commercially competitive, on the following basis: |
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The most relevant competitive reference points for reward levels are based on the scope of responsibility and individual contributions made. |
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Appropriate benchmark, industry and comparable organisations' remuneration practices are reviewed regularly. |
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For executive directors, the FTSE 350 General Finance firms provide the most appropriate benchmark. |
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For employees, a combination of firms from the JSE Financial 15 and the FTSE 350 General Finance sector offer the most appropriate benchmark. |
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The committee also reviews on an individual basis data on other international banks with whom we compete. |
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The committee recognises that we operate an international business and compete with both local and international competitors in each of our markets. |
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In order to avoid disproportionate packages across areas of the group and between executives, adjustments are made at any extremes to ensure broad internal consistency. Adjustments may also be made to the competitive positioning of pay components for individuals, in cases where a higher level of investment is needed in order to build or grow either a business unit or our capability in a geography. |
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