16 July 2018 - NW21
Mazzone, Ms NW to ask the Ms N W A Mazzone (DA) to ask the Minister of Public Enterprises
(1) Whether any of the bonuses listed on page 108 of Eskom’s 2016-17 annual report have been paid out; (2)(a) what are the full relevant details of how Eskom’s Long-term Incentive Scheme works and (b) who were the beneficiaries of the specified scheme in the 2016-17 financial year? NW25E
Response is according to the information received from Eskom
Yes. Emoluments reflected on p108 of the Integrated Report are payments that have been audited by the Company’s External Auditors for the financial year under review and paid by the Company. The disclosure of remuneration of Prescribed Officers is prescribed by the Public Finance Management Act, the Companies Act, 2008 and the Company’s Memorandum of Incorporation (MOI).
2. Eskom’s LTI Scheme is designed to attract, retain and reward F Band employees for meeting the organisational objectives set by the Company in conjunction with the shareholder, and based on the Company’s remuneration strategy.
3. Eskom’s LTI scheme forms part of the F Band conditions of service which includes a guaranteed package, short and long term incentives, and other standard benefits such as Medical Aid, pension benefits and life cover.
While the conditions of service for E Bands do not include participation in the LTI scheme, some selected E band employees participate in the scheme.
4. The board of Eskom determines the LTI for the Group Chief Executive (GCE) and all senior executives, i.e. F bands in the whole group.
5. Exco determines and ratifies the LTI scheme for all eligible senior managers i.e. E bands.
6. The list of eligible E bands is reviewed by the GCE, on a regular basis and he may at his election consult the Exco members.
7. Upon appointment of F Bands or offer of LTIs to eligible E Bands, all eligible executives for the LTI scheme are issued with a letter stating the conditions of the scheme which states date of offer. This is subsequently supplemented by grant certificates issued annually stating awards for the eligible executives.
8. The board, at its election may take a decision to revise upwards or backdate the offer of the shares to the executives, after the original grant has been made.
9. The Eskom LTI scheme is intentionally designed as a phantom share scheme in that:-
a) the allocation of shares is purely monetary value, and does not translate into actual subscription of shares.
b) the equity of the shareholder, notably the government represented by the Department of Public Enterprises, is never diluted. That is, the executives do not take ownership of the shares.
c) the said shares allocated to the executives are also not transferable.
d) The value of the shares is set at R1 at grant date, and escalates at the money market rate over the set period of allocation, namely 3 years. These are the) refore not based on shareholder value.
e) The holders of the shares do not carry any personal risk in terms of the performance of the company. At worst, if the “gate keepers” performance requirements are not met, there is no cash disbursed to the scheme participants.
10. The shares vest on 1 April of the new year, for the previous years’ performance.
11. The LT Incentives are determined according to long term incentive percentage value model detailed below:
Table 1: Annualised LTI Values as a % of pensionable earnings
LTI as % of pensionable earnings
GCE and all F Bands
Table 2: Annualised LTI Values in line with KPI scores
LTI in line with KPI Scores
E Bands score
12. The following factors are considered in determining the incentives:-
a) Performance conditions and targets are determined by the board over the 3 year period in line with the Corporate Plan and Shareholder Compact with an agreed weighting in each category.
b) Conditions include financial and non-financial targets in areas such as ensuring business sustainability and reliability of electricity supply, providing for future power needs and supporting the developmental objectives of South Africa.
c) Awards vest if and to the extent that the targets are met of the company and of the individual. Furthermore, the vesting is dependent on the scheme participant remaining in Eskom’s employment throughout the vesting period.
d) The award lapses if employment ceases during the vesting period, other than for permitted reasons. The permission is granted by the board (for F Bands) or the GCE (for E bands) at their discretion.
e) Upon retirement, if a participant ceases to be an employee due to normal retirement (in accordance with the Company's employment policies from time to time) or early retirement (retirement before normal retirement age which is approved of by the People and Governance Committee at its discretion), the rules will continue to apply to the participants of the LTI scheme.
f) It must be noted that those acting in F Band positions are not eligible for LTI scheme.
g) Key performance indicators are related to the key performance areas and criteria set out in the shareholder compact.
h) The amount paid in relation to the level of achievement is stated
i) Situations where no long term incentive will be paid /penalties applicable are defined
j) A formula is established for calculating the incentives, and this is based on meeting the targets of each KPI reflected in the performance conditions.
k) Following payment of long term incentives, an analysis is set out in the Remuneration Report of the extent to which the relevant targets were actually met.
l) Contract employees are not eligible for the long term incentive scheme.
m) Eskom’s long term incentive scheme stands independent of the short term incentive scheme, although the participants of the long term incentive are also participants of the short term incentive scheme. All permanent employees of Eskom are eligible for the short term incentive scheme.
n) In line with principles of good corporate governance which include transparency as set out in King IV, details of remuneration of directors and prescribed officers (i.e Exco members), are disclosed in the annual financial statements. Exco member beneficiaries for the specific year can be found on page 108 of the 2016/17 Annual Financial Statements (AFS) (under the column ‘’LTI payments’’).
The full list of beneficiaries (includes E and F bands) is provided as Annexure A.
The Board of Directors has been requested to review the reward and remuneration system in Eskom.
Annexure A: The list of Beneficiaries (F and E Bands) for submission to Parliament
ID Du Plessis
FC Van Niekerk
CR Le Roux
J L Kilani
PG Le Roux
WJJ Du Plessis
J L de V Pfister
AA De Clercq
M Van der Riel
RW Van der Wal
A van Geuns
DJ du Plessis
M van Rensburg