Remuneration report

Remuneration policy

The Remuneration Committee sets and monitors executive remuneration for the company, in line with the executive remuneration policy. This policy has as its objectives to:

  • attract, reward and retain executives of the highest calibre;
  • align the behaviour and performance of executives with the company's strategic goals, in the overall interests of shareholders;
  • ensure the appropriate balance between short-, medium- and long-term rewards and incentives, with the latter being closely linked to structured company performance targets and strategic objectives that are in place from time to time; and
  • ensure that regional management is competitively rewarded within a global remuneration policy, which recognises both local and global market practice.

The company aims to be the leading gold mining company in the medium term and the leading mining company in the long term. In order to achieve this, the company must be in a position to attract the best talent available in the industry and its remuneration package must therefore be comparable to those of the leading mining companies globally. The remuneration policy is devised to support this business strategy.

In particular the Remuneration Committee is responsible for:

  • the remuneration packages for executive directors and other members of the executive committee of the company including, but not limited to, basic salary, performance-based short- and long-term incentives, pensions, and other benefits; and
  • the design and operation of the company's share option and other share incentive schemes.

The following principles are applied to give effect to the remuneration policy and to determine executive remuneration:

  • To attract, reward and retain executives of the highest calibre, executive remuneration is benchmarked against a comparator group of global and selected South African mining and multi-national companies. The most recent benchmarking exercise conducted by independent consultants indicates that the total remuneration of the executive directors is close to the median of the comparator group, but the remuneration of the Executive Vice Presidents (EVPs) lags that of the peer group. Specific cash-based retention plans (settled after a three-year period) have been put in place to address this issue. However, a systemic adjustment of the remuneration levels for executives and senior management is required to ensure that the company’s remuneration levels are consistent with global pay levels, and that the company can compete effectively in the global market.
  • To ensure the appropriate balance between short-, medium- and long-term incentives, annual remuneration is a combination of base pay and short- and long-term incentives, with salary comprising about 35% – 45% of annual remuneration if the bonus and LTIP targets are achieved.
  • To align the behaviour and performance of executives with the company’s strategic goals, all incentive plans align performance targets with shareholder interests. The quantum of the short-term incentive and related bonus shares is determined with respect to current performance, while the vesting of the LTIP awards is determined with respect to company performance over the three years following the date of grant.

During 2009, the key remuneration decisions taken were as follows:

  • In 2009, the Chief Executive Officer’s initial two-year contract was replaced by a contract with a twelve-month notice period and his remuneration package restructured in accordance with the conditions of employment for permanent employees.
  • The Chief Financial Officer’s offshore payment was increased to cater for tax payable on this amount from 1 April 2009.

As a result of the benchmarking exercise mentioned above, adjustments in excess of South African inflationary increases were made to close the gap between the basic salaries of EVPs and the comparator group median. The outcome of this review, as it affects EVP basic salaries, is explained further in this report.

In addition, PricewaterhouseCoopers was engaged to assess specifically, the company’s compliance with King III from a remuneration perspective. Some steps will be taken in 2010 to align with the King III requirements in part, but work on this will be ongoing through 2010 to ensure compliance by 2011.

At the annual general meeting of shareholders to be held on 7 May 2010, shareholders will be asked to approve the policy as outlined in this report and that the board of directors be authorised to do all such acts as may be necessary to implement the remuneration policy for 2010 as summarised herein.

For full details on the Remuneration Committee, refer to Directors' report.

Executive remuneration

Executive remuneration takes into account remuneration paid to members of the Executive Committee. For Full details on the Executive Committee, refer Board and management.

Executive directors’ remuneration and the remuneration paid to the other members of the Executive Committee currently comprise the following elements:

  • Basic salary;
  • Pensions and risk benefits;
  • Other benefits;
  • Retention award;
  • Short-term incentive; and
  • Long-term incentive.

Each component is described in more detail below:

  • Basic salary is subject to annual review by the Remuneration Committee and is reviewed with reference to the market data of a group of comparator companies in the South African and relevant international markets. The median of the comparator group is the primary point of reference for the remuneration policy. However, the transition from a primarily South African company to a global company has resulted in the actual remuneration of management below the executive director level, lagging significantly. The individual salaries of executive management are reviewed annually in accordance with their own performance, experience, responsibility and company performance.
  • Pensions and risk benefits: There is a range of retirement funds to which executive management belong, which is dependent on the country in which they work and the individual’s nationality. For example, South African executive management belong to the AngloGold Ashanti Pension Fund while executive management who are non-South African citizens but working in South Africa have the option of electing a retirement benefit in their country and currency of choice, in which case, the company contributes an amount equal to the contribution made for other AngloGold Ashanti executives. Death and disability cover reflects best practice amongst comparable employers in South Africa.
  • Other benefits: Executive management are members of an external medical aid scheme, which covers the individual and his or her immediate family.
  • Bonus Share Plan (BSP) is a short-term incentive plan under which award levels are determined with reference to the achievement of a set of stretched company and individual performance targets. For 2009, the company targets were based on performance measures including:
    • earnings per share (EPS);
    • cost control;
    • resource to reserve conversion; and
    • gold production.

    A safety multiplier was also applied so that the safety record could be taken into account when determining the extent to which performance targets are achieved.

    The weighting of the respective contribution of company and individual targets at the executive management level is 60% company and 40% individual.

    The bonus paid comprises two separate parts:

    • a cash bonus which is payable at the end of the relevant financial year (50%); and
    • an equity bonus which is settled by way of a BSP award of equal value to the cash bonus.

    The BSP awards vest over a two-year period and vesting is subject to the individual being in the employ of the group at the date of vesting. In respect of the BSP awards granted after 1 January 2008, 40% of the awards vest on the first anniversary from the date of grant and the remaining 60% of awards vest on the second anniversary from the date of grant. Provided that the individual has not exercised any BSP awards during the vesting period, he or she will be eligible to receive an additional 20% in BSP awards on the third anniversary from the date of grant.

    The maximum bonus achievable under the BSP (expressed as a percentage of basic salary) is shown in the table below. For these purposes, basic salary includes offshore payments:

    PositionMaximum bonusOn target bonusOn target cash bonusOn target BSP award face value at date of grant
    Chief Executive Officer160%80%40%40%
    Executive directors140%70%35%35%
    Executive management120%60%30%30%
    Other management100%50%25%25%

    In respect of 2009, the performance targets imposed on BSP awards (cash bonus and share awards) were achieved at a level of 79.66%. The payments made under the BSP in respect of the 2009 financial year to executive management are disclosed in this Remuneration Report.

    In respect of the 2010 BSP awards, the performance targets to be satisfied will be based on the targets summarised above and no changes to the maximum bonuses or on-target bonuses are proposed.

    Cash payments, equal in value to the dividends which would have been paid had actual shares been issued during the vesting period, were made when the BSP awards granted in 2006 vested during 2009.

  • Long-Term Incentive Plan (LTIP): The objective of the LTIP is to align the interests of the executive management with those of the company and the shareholders over the medium to long term.

    Under the LTIP, executive management are granted a right to receive shares in the company, subject to performance conditions being achieved, over the specified performance period and continued employment with the group.

    The performance targets used for the vesting of the LTIP awards are determined annually by the Remuneration Committee and link directly to the company’s strategy. The LTIP awards are granted with a three-year vesting period. For awards granted in 2009, the company targets were based on measures including:

    • EPS;
    • total shareholder return (TSR) against a comparator group of gold mining companies;
    • safety; and
    • resource generation.

    • LTIP awards will vest on the following basis for the 2009 and 2010 awards:

    1. Earnings per share (30% weighting)
      EPS growth of at least 2%, net of US inflation per year over the three-year vesting period. Partial vesting occurs at 2% growth per year and full vesting at 5% growth per year.
    2. Total shareholder return (30% weighting)
      TSR relative to four global gold companies, Barrick, Gold Fields, Harmony and Newmont. For vesting of the 2009 and 2010 LTIP awards to occur, the company’s TSR has to be at least equal to the third place performer from the comparator group for partial vesting, and second or better for full vesting.
    3. Strategic target (40% weighting)
      The strategic target is divided into two parts:
      1. Safety performance (20% weighting)
        The company’s safety performance has become the primary strategic target from an operating perspective and it is essential that the company’s performance shows significant improvement. The target is a 20% year-on-year improvement in the fatal injury frequency rate (FIFR) and in the lost-time injury frequency rate (LTIFR) during the period. For partial vesting, a minimum improvement of 10% per year must be achieved.
      2. Reserve and resource ounce generation (20% weighting)
        The target per annum is at least 9Moz at the measured and indicated resource level, and 5Moz at the published reserve level for full vesting, and 7Moz and 3Moz respectively for partial vesting.

    In this context, partial vesting means that 50% of the weighted target is achieved (except in the case of TSR where partial vesting means a 40% achievement of target) while full vesting results in a 100% achievement.

    The value of awards which may be granted under the LTIP by reference to the face value of the awards as at the date of grant and expressed as a percentage of basic salary, is shown in the table below. In this context, “face value” means the value of the award at the current share price (i.e. share price x number of shares under award) and “expected value” means the future value of the award taking into account the probability of the performance targets being achieved – an estimated probability of 60% has been applied for this purpose. In this context, basic salary includes offshore payments:

    PositionMaximum face valueMaximum expected value
    Chief Executive Officer120%72%
    Executive directors100%60%
    Executive management80%48%
    Other management80%48%

The LTIP awards granted in respect of the 2010 financial year to executive management are disclosed in this Remuneration Report under the Share Incentive Scheme section.

In respect of the LTIP awards granted in 2007 which vested during 2010, 56% of the award vested following the testing of the performance conditions. Further details are disclosed herein.

In respect of the LTIP awards granted in 2010, the performance targets to be satisfied will be based on the targets summarised above and no changes to the maximum face value or maximum expected value of awards are proposed.

At the discretion of the Remuneration Committee, a cash payment, equal in value to the dividends which would have been paid had actual shares been issued during the vesting period, will be made to employees to whom LTIP awards were granted, to the extent that these LTIP awards vest after the performance conditions have been tested.

Directors’ service contracts

Service contracts of executive directors are reviewed annually. Mark Cutifani, as Chief Executive Officer, has a 12-month notice period while the notice period for the Chief Financial Officer, Srinivasan Venkatakrishnan, is nine months. Executive Vice Presidents have a six-month notice period while Senior Vice Presidents and Vice Presidents have three-month notice periods. The contracts also provide for a payment of 24 months’ salary in the case of the Chief Executive Officer; 18 months in the case of the Chief Financial Officer and 12 months in the case of other executive management in the event of a material change in role, responsibilities or remuneration, including loss of employment, following a new shareholder assuming control of the company.

Non-executive directors’ remuneration

At the annual general meeting of shareholders to be held on 7 May 2010, shareholders will be asked to consider an increase to the fees payable to non-executive directors. The resolutions for consideration will be included in the notice of meeting which will be sent to shareholders together with the abridged annual report.

The reason for proposing an increase in non-executive directors’ remuneration is to ensure that the fees paid remain competitive in order to enable the company to attract and retain persons of the calibre required to make meaningful contributions to the company, given its global spread and growth aspirations and having regard to the appropriate capability, skills and experience required. A recent benchmarking exercise undertaken by PricewaterhouseCoopers has indicated that the current levels of nonexecutive fees remain well below the lower quartile of the comparator group, particularly when considering market practice outside South Africa and taking into account the fact that several non-executive directors are based internationally. The requirement of competing in the global market, and compliance with increasing onerous and complex international governance and regulatory requirements, requires flexibility to attract non-executives of international standing. The above proposal falls short of recognising the global responsibility that the directors share for the governance of the group with business in diverse jurisdictions, but it seeks to better reflect market practice in the director’s region of residence.

In arriving at the proposal to increase non-executive directors’ remuneration, the Chief Executive Officer, in consultation with the Chairman and Executive Vice President – Human Resources of the company, directed PricewaterhouseCoopers to review nonexecutive directors’ fees for comparable international South African companies and international companies. The results of the review indicated that the remuneration paid to the non-executive directors of the company was, with respect to the South African comparator group, at the upper quartile and with respect to the international comparator group, below the lower quartile. The proposals are based on adjusting the fee levels for non-executive directors to the median of the applicable market – using South African market data for the resident non-executive directors, and market data from North America, the UK and Australia for nonresident directors outside Africa. The fees for non-resident non-executive directors residing in Africa have been set to a similar level to those non-executive directors resident in South Africa.

The Remuneration Committee, having taken due consideration of the review, recommend for approval by the shareholders, the remuneration for the Chairman, while the Chairman, together with the Chief Executive Officer and the Chief Financial Officer, recommend for approval by the shareholders, the remuneration for the non-executive directors. Prior to these proposed changes, the remuneration of the non-executive directors has been unchanged since the annual general meeting held in May 2009.

In light of all of these factors, the proposed revised remuneration structure is considered to be fair and reasonable and in the best interests of the company.

The proposals to be made regarding non-executive directors’ remuneration are detailed below:

1 Non-executive directors’ fees

 BoardCurrent fee per annumIncreased fee per annum
1.1Chairman$180,000R1,520,300
1.2Deputy chairmanR600,000R650,000
1.3South African resident directorsR250,000R270,000
1.4Non-South African resident directors who are resident in Africa$25,000$33,750
1.5Non-South African resident directors who are resident in jurisdictions other than Africa$40,000$60,000

The remuneration payable will be in proportion to the period during which office is held.

2 Allowance for attendance by non-executive directors at additional board meetings

Each non-executive director will be entitled to an allowance for each board meeting attended by such director in addition to the six scheduled board meetings per annum, as follows:

 BoardCurrent fee per annumIncreased fee per annum
2.1Chairman$9,000R78,000
2.2Deputy chairmanR30,000R32,400
2.3South African resident directorsR12,500R16,000
2.4Non-South African resident directors who are resident in Africa$1,250$2,000
2.5Non-South African resident directors who are resident in jurisdictions other than Africa$2,000$3,000

3 Board committee fees payable to non-executive directors

The fee paid to each non-executive director in respect of membership of a committee of the board is to be increased with effect from 1 June 2010 on the basis set out below. The fees payable in respect of “other committees” pertain to the following committees which meet on a quarterly basis:

  • Investment;
  • Remuneration;
  • Safety, Health and Sustainable Development; and
  • Transformation and Human Resource Development.
 Board committeeCurrent fee per annumIncreased fee per annum
 Audit and Corporate Governance Committee  
3.1Chairman – South African residentR150,000R160,000
3.2Member – South African residentR125,000R135,000
3.3Member – Non-South African resident who is resident in Africa (1)R125,000$16,875
3.4Member – Non-South African resident who is resident in jurisdictions other than AfricaR125,000$25,315
 Other committees  
3.5Chairman – South African residentR120,000R130,000
3.6Chairman – Non-South African resident who is resident in Africa (1)R120,000$16,250
3.7Chairman – Non-South African resident who is resident in jurisdictions other than AfricaR120,000$25,000
3.8Member – South African residentR100,000R110,000
3.9Member – Non-South African resident who is resident in Africa (1)R100,000$13,750
3.10Member – Non-South African resident who is resident in jurisdictions other than AfricaR100,000$20,000

(1) Non-South Africans who are resident in Africa will receive the $ equivalent of the South African resident fees, converted at a rate of R8/$.

4 Ad hoc committee fees payable to non-executive directors

Each non-executive director will be entitled to an allowance for each ad hoc committee meeting attended. Ad hoc committees are those committees which meet on an as needs basis, namely the Party Political Donations Committee, the Nominations Committee and any special purpose committee established by the board.

 BoardCurrent fee per annumIncreased fee per annum
2.3South African residentR15,000R16,200
2.4Non-South African resident who are resident in Africa (1)R15,000$2,025
2.5Non-South African resident who are resident in jurisdictions other than AfricaR15,000$3,000

(1) Non-South Africans who are resident in Africa will receive the $ equivalent of the South African resident fees, converted at a rate of R8/$.

5 Travel allowance to attend board meetings

The travel allowance, as detailed below, remains unchanged from that approved by shareholders at the annual general meeting held on 15 May 2009.

5.1 $10,000 per board meeting for the chairman, when based internationally;
5.2 $6,000 per board meeting for non-South African resident directors who are resident in Africa; and
5.3 $8,000 per board meeting for non-South African resident directors who are resident in jurisdictions other than Africa.

Below are the schedules detailing the remuneration paid or payable to non-executive and executive management for services rendered during the 2009 financial year.

Non-executive directors’ remuneration

The following table details fees and allowances paid to non-executive directors:

All figures stated to the nearest R000 (1)Appointed with effect from(2)Resigned/
retired with effect from (2)		Directors’ fees (3)Com-mittee feesTravel  (4)TotalDirectors’ fees (3)Com-mittee feesTravel (4)Total
 2009200920092008
RP Edey (Chairman)  1,6263183142,2581,2742662191,759
Dr TJ Motlatsi (Deputy chair)  560273–833360160–520
FB Arisman  315303208826212275170657
RE Bannerman 15 May 091216888277212100219531
Mrs E le R Bradley 6 May 08––––4542–87
JH Mensah 15 May 0912110038259212175170557
WA Nairn  227288–515135160–295
Prof LW Nkuhlu (5) See note(5)240260–500135225–360
SM Pityana  227393–620135279–414
SR Thompson 28 July 08––––11713340290
Total – non-executive directors  3,4372,0036486,0882,8371,8158185,470

Rounding may result in computational differences.

(1) Where directors' compensation is in dollars, the amounts reflected are the actual South African rand values paid, calculated using the R:$ rate of exchange at the time of payment.

(2) Fees are disclosed only for the period from or to which, office is held.

(3) At the annual general meeting of shareholders held on 15 May 2009, shareholders approved an increase in directors fees with effect from 1 June 2009

 For six meetingsAdditional per meetingTravel (4)
 – Chairman$180,000$9,000$10,000
 – Deputy chairmanR600,000R30,000-
 – South African resident directorsR250,000R12,500-
 – Non-South African directors   
    – Living in Africa$25,000$1,250$6,000
    – Living other than in Africa$40,000$2,000$8,000

The fees payable in respect of committees were approved by the board.

(4) A travel allowance per board meeting is paid to non-executive directors who travel internationally to attend board meetings. In addition, AngloGold Ashanti is liable for the payment of all travel costs and accommodation.

(5) Prof. Nkuhlu resigned from the board with effect from 5 May 2009 and rejoined the board on 1 June 2009.

Executive directors do not receive payment of directors' fees or committee fees.

Non-executive directors are not eligible to participate in the Share Incentive Scheme.

Executive directors’ and executive management remuneration

Executive director and executive management remuneration is made up as follows:

All figures in R000Appointed with effect from (1)Resigned/
retired with effect from (1)		SalaryPerfor-mance related payments (2)Pension scheme contri-butionsOther benefits (3)En-cashed leave (4)Sub totalPre-tax gains on share options exercised (5)Total
2009          
Executive directors’ remuneration          
M CutifaniFull year 10,8077,6271,913634–20,981–20,981
S VenkatakrishnanFull year 6,5524,2971,1991,948–13,9962,62116,617
   17,35911,9243,1122,582–34,9772,62137,598
Executive management remuneration          
Representing 10 executive managersFull year 37,63517,0024,51010,13539469,67620,37090,046
Total executive directors, and executive management remuneration 2009  54,99428,9267,62212,717394104,65322,991127,644
           
2008          
Executive directors’ remuneration          
M CutifaniFull year 9,5135,8771,47724–16,891–16,891
S VenkatakrishnanFull year 5,5853,6131,004––10,2021,83712,039
   15,0989,4902,48124–27,0931,83728,930
Executive management’s remuneration 2008          
Representing 11 executive managers  31,77114,5415,1351,19449653,1371,58454,721
Total executive directors, and executive management remuneration 2008  46,86924,0317,6161,21849680,2303,42183,651

Rounding of figures may result in computational discrepancies.

(1) Salaries are disclosed only for the period from or to which office was held.

(2) In order to more accurately disclose remuneration received/receivable by executive directors and executive management, the tables above include the performance related payments calculated on the year's financial results.

(3) Includes health care, retention payments and personal travel.

(4) In 2005, AngloGold Ashanti altered its policy regarding the number of leave days that may be accrued. As a result, surplus leave days accrued are compulsorily encashed.

(5) Mr Venkatakrishnan applied all of the proceeds after tax from the sale of his share options to acquire 5,130 ordinary shares (2008: 4,569) in AngloGold Ashanti. Of the 92,452 share options exercised by the executive management, the proceeds from the sale of 48,595 options were used to acquire 16,911 ordinary shares in AngloGold Ashanti (2008: of the 15,563 options exercised, proceeds from the sale of 12,963 shares were used to acquire 2,304 ordinary shares in AngloGold Ashanti).

Share incentive schemes

Details of the options and rights to subscribe for ordinary shares in the company granted to, and exercised by, executive directors, as well as executive management and other managers on an aggregate basis during the year to 31 December 2009 and subsequent to year-end are set out in the table below.

 M CutifaniVenkat (1)Executive management (2)Other managementTotal scheme
Granted and outstanding at 1 January 2009     
    Number(3)39,44062,027433,4882,906,8413,441,796
Granted during the year     
    Number60,68736,029172,020932,3791,201,115
Exercise during the year     
    Number–8,56492,4521,030,9001,131,916
    Pre-tax gain at date of exercise (value) - R–2,620,85820,369,930169,444,948192,435,736
Lapsed during the year     
    Number–7,30827,123248,880283,311
Held at 31 December 2009     
    Number100,12782,184485,9332,559,4403,227,684(4)
Subsequent to year-end - to 31 January 2010     
Granted     
   Number–––––
Exercised     
   Number–––33,28233,282
    Pre-tax gain at date of exercise (value) - R–––8,502,5468,502,546
Lapsed     
    Number–––6,6626,662
Held at  31 January 2010     
    Number100,12782,184485,9332,519,4963,187,740
Latest expiry date16 Feb 201916 Feb 201916 Feb 201916 Feb 201916 Feb 2019

(1) Mr Venkatakrishnan (Venkat) applied all of the proceeds after tax from the sale of his share options to acquire 5,130 ordinary shares (2008: 4,569) in AngloGold Ashanti.

(2) Of the 92,452 options exercised by the executive management, the proceeds from the sale of 48,595 options were used to acquire 16,911 ordinary shares in the company.

(3) As a result of the change in status, the following movements to opening balances were made:
– From executive management status to other managers – 17,099 options/awards.

(4) Of the 3,227,684 options/awards granted and outstanding at 31 December 2009, 983,094 options/awards are fully vested.

(5) Awards granted to executive directors and executive management in February 2010 are as follows:


 BSPLTIP
M Cutifani27,14650,548
Venkat15,07425,543
Total executive management102,164167,609

For full details of the AngloGold Share Incentive Scheme, including the number of shares used in the scheme and dilution to shareholders in this regard, refer to the Directors’ Report.

ANGLOGOLD ASHANTI Annual Financial Statements 2009