Remuneration report

Annual report on remuneration

2013 remuneration of directors

This table reports executive and non-executive directors’ remuneration in accordance with UK reporting regulations applicable to financial reporting periods ending on or after 1 October 2013.

    Base salary/ NED fees1 Benefits Pension contribution Annual bonus including grant value of BSP award Value of LTIP vesting in the performance year4 Value of LTIP vesting at date of grant5 Share price gain on vesting LTIP award between grant and vest dates6 Other7 Total
David Hathorn 2013 €994,017 €46,796 €298,205 €1,089,662 €3,160,051 €1,656,206 €1,503,845 €74,504 €5,663,235
  2012 €1,013,129 €49,826 €303,939 €1,224,780 €3,648,107 €1,540,027 €2,108,080 €66,013 €6,305,794
Andrew King 2013 €587,480 €37,952 €146,870 €515,207 €1,202,090 €630,310 €571,780 €30,577 €2,520,176
  2012 €570,656 €40,212 €142,664 €545,038 €1,387,972 €585,924 €802,048 €27,257 €2,713,799
Peter Oswald 2013 €872,000 €36,956 €218,003 €773,290 €1,860,218 €989,190 €871,028 €57,371 €3,817,838
  2012 €847,000 €40,219 €211,753 €807,632 €2,283,692 €960,003 €1,323,689 €49,557 €4,239,853
Fred Phaswana2 2013 €184,896 €184,896
  2012
David Williams 2013 €310,425 €310,425
  2012 €316,497 €316,497
Cyril Ramaphosa3 2013 €101,855 €101,855
  2012 €316,497 €316,497
Stephen Harris 2013 €98,093 €98,093
  2012 €95,618 €95,618
Imogen Mkhize 2013 €101,375 €101,375
  2012 €84,601 €84,601
John Nicholas 2013 €100,577 €100,577
  2012 €98,150 €98,150
Anne Quinn 2013 €106,785 €106,785
  2012 €104,698 €104,698
  1. 1 David Hathorn’s and Andrew King’s salaries are denominated in pounds sterling and their 2013 salaries were £846,000 and £500,000 respectively. The non-executive directors’ fees are also denominated in pounds sterling. Euro amounts are reported based on exchange rates on the dates actual payments were made. Non-executive director fees were increased by 2.9% with effect from 3 May 2013 following the passing of a resolution at the annual general meetings of Mondi Limited and Mondi plc. See the table below for current fee levels.
  2. 2 For 2013, the fee paid to Fred Phaswana covers the period from his appointment on 1 June 2013.
  3. 3 Cyril Ramaphosa stepped down from the Boards on 3 May 2013.
  4. 4 For 2013, the three year performance cycle of the 2011 LTIP award ended on 31 December 2013. The award value shown has been based on the average share price over the last three months of the performance cycle.
  5. 5 For 2013, the value is shown of the 2011 LTIP award made at the start of the three year performance cycle, and for 2012, the value of the 2010 LTIP award made at the start of the three year performance cycle.
  6. 6 For 2013, the enhanced value is shown of the 2011 LTIP based on the share price gain between grant and the average share price over the last three months of the performance cycle. The value of Mondi plc’s shares increased from £5.43 to £10.16, and the value of Mondi Limited shares from R62.06 to R167.85 during this time. For 2012, the enhanced value is shown of the 2010 LTIP that vested based on share price appreciation during the holding period. The value of Mondi plc’s shares increased from £3.74 to £8.84, and the value of Mondi Limited shares from R45.96 to R121.68.
  7. 7 Includes cash amounts of equivalent value to dividends on vested BSP shares during the year. See table of share awards granted to executive directors.

Performance measures used for variable pay, and performance against these measures

For the annual bonus in respect of 2013 performance the performance measures and achievement levels were:

  BSP performance measures
  EBITDA ROCE Safety Personal Total
Weight 30 30 10 30 100
Outcomes:          
David Hathorn 22.3 25.6 0 25 72.9
Andrew King 22.3 25.6 0 25 72.9
Peter Oswald 22.3 25.6 0 26 73.9

Financial performance for 2013 was strong. Both EBITDA and ROCE were between target and stretch performance and also exceeded prior year performance. Executives’ personal performance was assessed against objectives agreed by the Committee at the start of the year including: development of strategy; operational performance; financial efficiency; stakeholder relationships; credit ratings and financing; streamlining of organisational structures; integration of acquisitions and achievement of synergies. Safety was measured on total recordable incidents and fatalities. While total recordable incident targets were achieved there were regrettably and unacceptably four fatalities of contractors engaged in maintenance work for Mondi. No safety element was therefore paid and an even greater focus is being placed on key aspects of safety in 2014.

Detail of annual bonus awarded in the year

Name Awarded in cash Awarded in shares Total
David Hathorn €544,831 €544,831 €1,089,662
Andrew King €257,604 €257,603 €515,207
Peter Oswald €386,645 €386,645 €773,290

Long-Term Incentive Plan (LTIP)

Vesting of the 2011 award

The LTIP awards that were made in 2011, with a three-year performance period that ended on 31 December 2013, were reviewed by the Committee in February 2014 against the (equally weighted) relative Total Shareholder Return (TSR) and Return on Capital Employed (ROCE) performance conditions. Maximum performance was achieved against the TSR targets and ROCE targets. 100% of the shares under award therefore vested in March 2014.

Awards granted in 2013

The maximum award that can be made to any LTIP participant in any year is equal to two times salary. For 2013, the award made to David Hathorn was 185% of salary and the awards made to Andrew King and Peter Oswald were 130% of salary.

For the LTIP awards made in 2013, the performance conditions are based on two performance measures of equal weight – relative TSR and ROCE, measured over a three-year performance period ending on 31 December 2015. The Committee believes that this combination of metrics provides an appropriate means of aligning the operation of the LTIP with shareholders’ interests and the Group’s business strategy.

The TSR performance condition is based on the Group’s TSR relative to a group of competitor companies. For the 2010, 2011, 2012 and 2013 LTIP awards, the following group of companies was selected:

Amcor (2013)1 Metsä Board
Bemis (2013)1 Norske Skog (2010, 2011, 2012)2
Billerud Portucel
DS Smith Sappi
Domtar SCA (2010, 2011)3
Holmen Smurfit Kappa
International Paper Stora Enso
Mayr-Melnhof UPM
MeadWestvaco  
  1. 1 As previously reported, Amcor and Bemis were added to the peer group for 2013 and subsequent awards.
  2. 2 As previously reported, Norske Skog was excluded from the peer group for 2013 and subsequent awards.
  3. 3 SCA was removed from the peer group for 2012 and subsequent awards following the acquisition of SCA Packaging by DS Smith.

For the 50% of awards attributable to TSR: If the Group’s TSR is below the median when ranked against the comparator group, this part of the award will lapse in full. For TSR at the median, 25% of this part of the award (i.e. 12.5% of the total award) will vest, with a straight-line progression to the upper quartile, at which point 100% of this part of the award (i.e. 50% of the total award) will vest.

For the 50% of awards attributable to ROCE: This part will lapse in full if ROCE is below 10%. 25% of this part of the award (i.e. 12.5% of the total award) will vest for achievement of ROCE of 10%, with a straight-line progression to full vesting of this part of the award for achievement of ROCE of 16% (i.e. 50% of the total award).

Mondi’s TSR performance over the last five years

The following graphs set out the comparative TSR of Mondi Limited relative to the JSE All-Share Index, and Mondi plc relative to the FTSE All-Share Index, for the period between 31 December 2008 and 31 December 2013. Those indices were chosen because they are broad equity market indices of which Mondi Limited and Mondi plc, respectively, are members.

JSE All-Share Index

JSE All-Share Index [graph]

FTSE All-Share Index

FTSE All-Share Index [graph]

CEO remuneration from 2009

Year Total remuneration % of maximum bonus earned % of LTI vested
2013 €5,663,235 73 100
2012 €6,305,794 80 100
2011 €12,824,11211 78 92
2010 €3,160,318 89 33
2009 €2,627,196 83 12
  1. 1 David Hathorn’s remuneration in 2011 included €3.9 million from the proceeds of a one-off, shareholder approved, share award under a Co-Investment Plan he participated in at the time of the Group’s demerger from Anglo American plc in 2007. Under this plan, he invested £1 million from his own funds in Mondi plc shares in August 2007. He was eligible to receive a match of up to 250% of the number of investment shares based on a relative TSR performance measure over a four-year period. As the TSR achieved by Mondi plc was better than the upper quintile – Mondi was the top-performing company in the comparator group – the Committee approved the maximum vesting in accordance with the Plan rules.

Comparison of 2013 and 2012 remuneration of CEO versus other employees

  Percentage change in remuneration elements from 2012 to 2013
  Salary Benefits Bonus
CEO1 2.9% 1.7% -6.8%
Mondi Group2 7.0% N/A3 -14.8%
  1. 1 CEO remuneration is reported in euros, but denominated in pounds sterling. See the table above, 2013 remuneration of directors. Change percentages shown are for pounds sterling values.
  2. 2 Includes salaries and bonuses for all employees of Mondi Group excluding the CEO with year on year movements reported in per capita terms. Based on aggregate values across 30 countries. Reported at constant (2013) exchange rates. Percentage movements reported are influenced by changes in the workforce composition over time (such as the acquisition of Nordenia in October 2012) and different inflation rates across countries.
  3. 3 In most of the Group the majority of benefits are provided through social security. Additional benefits represent only circa 2.6% of the salary bill. This does therefore not provide an appropriate or stable comparator with the CEO’s benefits.

Relative importance of spend on pay

€million 2013 2012 % change
Dividends 145 128 13
Overall remuneration expenditure1 940 834 13
  1. 1 Remuneration expenditure for all Mondi Group employees.

Non-executive directors’ remuneration

Current fee levels are as follows:

Role Annual Fee2
Joint chairman fee1 £265,000
Non-executive base fee £42,400
  Additional fees:
Senior independent director and DLC remuneration committee chairman fee £15,900
DLC audit committee chairman fee £10,600
DLC sustainable development committee chairman fee £8,480
Mondi Limited social and ethics committee chairman fee £8,480
Attendance fee per meeting (outside country of residence) £5,300
Attendance fee per day (inside country of residence) £1,590
  1. 1 No supplement is payable for additional commitments in relation to this role.
  2. 2 Fees are determined in pounds sterling. In the remuneration table above, euro amounts are reported based on exchange rates on the dates actual payments were made.

The joint chairmen and the other non-executive directors are appointed by Mondi Limited and Mondi plc. The terms of their appointment provide for the appointment to be terminable on six months’ notice.

Statement of directors’ shareholdings and share interests

The chief executive officer is required to build a shareholding equivalent to 150% of base salary, and other executive directors a shareholding equivalent to at least 100% of base salary. As at 31 December 2013, all executive directors had met the shareholding requirements.

The beneficial and non-beneficial share interests of the directors and their connected persons as at 1 January 2013 or, if later, on appointment, and as at 31 December 2013, or as at their date of resignation if earlier, were as follows:

Executive directors

    Shareholding at 1 Jan 2013 Shareholding at 31 Dec 2013 Total shareholding as multiple of salary (%) Deferred BSP shares outstanding at 31 Dec 20131 Deferred LTIP shares outstanding at 31 Dec 20132
David Hathorn Mondi plc 218,922 193,922 224 163,646 481,642
  Mondi Limited 25,000 0   71,560 210,337
Andrew King Mondi plc 208,330 108,330 212 73,344 189,677
  Mondi Limited 208 208 0.41 32,063 81,420
Peter Oswald Mondi plc 252,756 130,000 171 163,607 416,814
  1. 1 BSP shares subject to service condition.
  2. 2 LTIP shares subject to service and performance conditions.

Non-executive directors

Mondi Limited

  Shareholding at 1 Jan 2013 Shareholding at 31 Dec 2013
Imogen Mkhize 3,222 3,222

Mondi plc

  Shareholding at 1 Jan 2013 Shareholding at 31 Dec 2013
Fred Phaswana1 0 5,000
David Williams 5,000 5,000
Stephen Harris 1,000 1,000
Imogen Mkhize 2,000 2,000
John Nicholas 6,000 6,000
Anne Quinn 11,882 11,882
Cyril Ramaphosa 7,050 7,0502
  1. 1 Joined the Boards on 1 June 2013.
  2. 2 Shareholding shown is for 3 May 2013, when he stepped down from the Boards.

There has been no change in the interests of the directors and their connected persons between 31 December 2013 and the date of this report.

Remuneration committee governance

The DLC remuneration committee

The DLC remuneration committee (the ‘Committee’) is a formal committee of the Boards. Its remit is set out in terms of reference adopted by the Boards. A copy of the terms of reference is available on the Group’s website. The primary purposes of the Committee, as set out in its terms of reference, are:

  • to make recommendations to the Boards on the Group’s framework of executive remuneration;
  • to determine individual remuneration packages within that framework for the executive directors and certain senior executives;
  • to determine the remuneration of the joint chairmen; and
  • to oversee the operation of the Group’s share schemes.

The members of the Committee are Anne Quinn (chairman of the Committee), Stephen Harris, Imogen Mkhize and David Williams, all of whom are independent non-executive directors. David Williams is joint chairman of Mondi Limited and Mondi plc and Anne Quinn is senior independent director. Philip Laubscher and Carol Hunt act as secretary to the Committee.

The Group head of reward, Paul Wessels, provides advice on remuneration policies and practices and is usually invited to attend meetings of the Committee, along with David Hathorn, the chief executive officer and Fred Phaswana, joint chairman.

The Committee is authorised to seek information from any director and employee of the Group and to obtain external advice. The Committee is solely responsible for the appointment of external remuneration advisers and for the approval of their fees and other terms.

No director or other attendee takes part in any discussion regarding his or her personal remuneration.

In the year to 31 December 2013, New Bridge Street (‘NBS’) provided remuneration advice and benchmarking data to the Committee. NBS do not undertake any other work for the Group. Total fees paid to NBS in respect of the year under review were £48,411.

Sums paid to third parties in respect of a director’s services

No consideration was paid or became receivable by third parties for making available the services of any person as a director of Mondi Limited or Mondi plc (‘the Companies’), or while a director of the Companies, as a director of any of the Companies’ subsidiary undertakings, or as a director of any other undertaking of which he/she was (while a director of the Companies) a director by virtue of the Companies’ nomination, or otherwise in connection with the management of the Companies or any undertaking during the year to 31 December 2013.

Share awards granted to executive directors

The following tables set out the share awards granted to the executive directors.

Mondi Limited

   Type of award 1 Awards held at beginning of year or on appointment to the Boards  Awards granted during year  Shares lapsed  Awards exercised during year  Award price basis (ZAc)  Date of award  Awards held as at 31 December 2013  Release date
David Hathorn BSP 37,347 37,347 4596 Mar 10 Mar 13
  BSP 29,838 6206 Mar 11 29,838 Mar 14
  BSP 24,216 6979 Mar 12 24,216 Mar 15
  BSP 17,506 11464 Mar 13 17,506 Mar 16
  LTIP 105,628 105,628 4596 Mar 10 Mar 13
  LTIP 80,749 6206 Mar 11 80,749 Mar 14
  LTIP 74,355 6979 Mar 12 74,355 Mar 15
  LTIP 55,233 11464 Mar 13 55,233 Mar 16
Andrew King BSP 15,328 15,328 4596 Mar 10 Mar 13
  BSP 13,096 6206 Mar 11 13,096 Mar 14
  BSP 11,177 6979 Mar 12 11,177 Mar 15
  BSP 7,790 11464 Mar 13 7,790 Mar 16
  LTIP 40,188 40,188 4596 Mar 10 Mar 13
  LTIP 29,762 6206 Mar 11 29,762 Mar 14
  LTIP 28,719 6979 Mar 12 28,719 Mar 15
  LTIP 22,939 11464 Mar 13 22,939 Mar 16
  1. 1 For note 1 please refer to the table below.

Mondi plc

  Type of award1 Awards held at beginning of year or on appointment to the Boards Awards granted during year Shares lapsed Awards exercised during year Award price basis (GBp) Date of award Awards held as at 31 December 2013 Release date
David Hathorn BSP 89,752 89,752 374 Mar 10 Mar 13
  BSP 66,689 543 Mar 11 66,689 Mar 14
  BSP 56,154 584 Mar 12 56,154 Mar 15
  BSP 40,803 851 Mar 13 40,803 Mar 16
  LTIP 253,844 253,844 374 Mar 10 Mar 13
  LTIP 180,479 543 Mar 11 180,479 Mar 14
  LTIP 172,423 584 Mar 12 172,423 Mar 15
  LTIP 128,740 851 Mar 13 128,740 Mar 16
Andrew King BSP 36,835 36,835 374 Mar 10 Mar 13
  BSP 29,269 543 Mar 11 29,269 Mar 14
  BSP 25,917 584 Mar 12 25,917 Mar 15
  BSP 18,158 851 Mar 13 18,158 Mar 16
  LTIP 96,578 96,578 374 Mar 10 Mar 13
  LTIP 69,614 543 Mar 11 69,614 Mar 14
  LTIP 66,596 584 Mar 12 66,596 Mar 15
  LTIP 53,467 851 Mar 13 53,467 Mar 16
Peter Oswald BSP 92,683 92,683 374 Mar 10 Mar 13
  BSP 66,504 543 Mar 11 66,504 Mar 14
  BSP 56,039 584 Mar 12 56,039 Mar 15
  BSP 41,064 851 Mar 13 41,064 Mar 16
  LTIP 226,055 226,055 374 Mar 10 Mar 13
  LTIP 153,991 543 Mar 11 153,991 Mar 14
  LTIP 147,547 584 Mar 12 147,547 Mar 15
  LTIP 115,276 851 Mar 13 115,276 Mar 16
  1. 1 The value on award of the BSP awards set out in this table is included in the table of executive directors’ remuneration
  2. 2 In addition to the number of shares that vested as shown in the table above in respect of the BSP, the executive directors also received the following cash amounts of equivalent value to dividends on vested shares over the vesting period, in accordance with the plan rules:
Name Amount
David Hathorn €74,504 (£63,446)
Andrew King €30,577 (£26,039)
Peter Oswald €57,371

All-employee share plans

The Group currently operates two HM Revenue & Customs approved all-employee share plans in the UK:

Share Incentive Plan (SIP)

Employees resident in the UK are eligible to participate in the SIP. Contributions of up to £125 are taken from participants’ gross salary and used to purchase ordinary shares in Mondi plc each month. Participants receive one matching Mondi plc ordinary share free of charge for each share purchased. The shares are placed in trust and the matching shares are forfeited if participants resign from the Group’s employment within three years. If the shares are left in trust for at least five years, they can be removed free of UK income tax and National Insurance contributions.

Sharesave

Employees resident in the UK are also eligible to participate in a Sharesave scheme when offered. Participants enter into a savings contract under which they choose to save a fixed amount of between £5 and £250 per month by deduction from their salary. They are granted an option to acquire Mondi plc shares to the value of their savings at a specified price. In normal circumstances the option can only be exercised during the six months following the end of the savings contract. The last Sharesave invitation was made in 2009.

SIP

Details of shares purchased and awarded to executive directors in accordance with the terms of the SIP.

  Shares held at beginning of year or on appointment to the Boards Partnership shares acquired during the year Matching shares awarded during the year Shares released during year Total shares held as at 31 December 2013
David Hathorn 3,764 169 169 4,102
Andrew King 4,208 169 169 4,546
  1. 1 Since 1 January 2014 up to the date of this report, David Hathorn has acquired 25 partnership shares and was awarded 25 matching shares. Andrew King acquired 25 partnership shares and was awarded 25 matching shares.

Sharesave

Executive directors held the following options over Mondi plc ordinary shares under the Mondi Sharesave Option Plan.

  Awards held at beginning of year or on appointment to the Boards Awards granted during year Awards lapsed during year Exercise price per share (GBp) Date of award Awards held as at 31 December 2013 Exercise period
David Hathorn 15,808 99 Mar 09 15,808 1 May 14 to 31 Oct 14
Andrew King 15,808 99 Mar 09 15,808 1 May 14 to 31 Oct 14

Mondi Limited and Mondi plc share prices

The closing price of a Mondi Limited ordinary share on the JSE Limited on 31 December 2013 was R179.70 and the range during the period between 1 January 2013 and 31 December 2013 was R92.16 (low) and R182.50 (high).

The closing price of a Mondi plc ordinary share on the London Stock Exchange on 31 December 2013 was £10.46 and the range during the period between 1 January 2013 and 31 December 2013 was £6.67 (low) to £11.22 (high).

Statement of voting at annual general meetings

The annual general meetings of Mondi Limited and Mondi plc were both held on 3 May 2013. As required by the dual listed company structure, all resolutions were treated as joint electorate actions and were decided on a poll. All resolutions at both meetings were passed. The voting results of the joint electorate actions are identical and are given below. Overall in excess of 83% of the total Group shares were voted.

Resolution Votes for % Votes against % Votes total Votes withheld
Mondi Limited Business
13. To endorse the remuneration policy 405,411,149 99.51 1,981,114 0.49 407,392,263 585,234
14. To authorise the payment of a fee to the chairman of the social and ethics committee * 407,153,379 99.98 95,257 0.02 407,248,636 728,861
15. To authorise a 2.9% increase in non-executive director fees* 407,314,582 99.98 92,539 0.02 407,407,121 567,376
Mondi plc Business
28. To approve the remuneration report 405,500,992 99.51 1,984,814 0.49 407,485,806 491,691
  1. * Special resolutions

Statement of implementation of directors’ remuneration policy in 2014

Current salary levels, and increases awarded in January 2014, are as follows:

Name Base salary effective 1 Jan 2014 Previous base salary % change
David Hathorn £868,000 £846,000 2.60%
Andrew King £513,000 £500,000 2.60%
Peter Oswald €895,000 €872,000 2.64%

David Hathorn remains eligible for a bonus of up to 150% of salary in respect of 2014 and the other executive directors for a bonus of up to 120% of salary. Half of any bonus earned will be paid out in cash and the other half will be deferred for three years in conditional Mondi shares. The bonus structure for 2014 will remain as it was for 2013, viz. a maximum of 60 points on financial objectives (30 on EBITDA and 30 on ROCE), 10 points on safety and 30 on personal objectives.

For 2014, the Committee intends to make an LTIP award of 185% of salary to David Hathorn and of 130% of salary to Andrew King and Peter Oswald. There will continue to be two performance conditions of equal weight – TSR and ROCE, measured over a three year performance period commencing on 1 January 2014.

For the 50% of awards attributable to TSR: If the Group’s TSR is below the median when ranked against the comparator group above under Long-Term Incentive Plan (LTIP), this part of the award will lapse in full. For TSR at the median, 25% of this part of the award (i.e. 12.5% of the total award) will vest, with a straight-line progression to the upper quartile, at which point 100% of this part of the award (i.e. 50% of the total award) will vest.

For the 50% of awards attributable to ROCE: This part will lapse in full if ROCE is below 10%. 25% of this part of the award (i.e. 12.5% of the total award) will vest for achievement of ROCE of 10%, with a straight-line progression to full vesting of this part of the award for achievement of ROCE of 16% (i.e. 50% of the total award).

The Group will continue to operate pensions and benefits in accordance with its approved policy in 2014.

Current non-executive directors’ fees, and increases proposed for implementation with effect from the date of the annual general meetings of Mondi Limited and Mondi plc to be held on 14 May 2014, are:

Role Annual fee Proposed with effect from 14 May 2014 Percentage increase proposed
Joint chairman fee 1 £265,000 £272,000 2.64
Non-executive base fee £42,400 £43,500 2.59
Additional fees:      
Senior independent director and DLC remuneration committee chairman fee £15,900 £16,350 2.83
DLC audit committee chairman fee £10,600 £10,900 2.83
DLC sustainable development committee chairman fee £8,480 £8,700 2.59
Mondi Limited social and ethics committee chairman fee £8,480 £8,700 2.59
Attendance fee per meeting (outside country of residence) £5,300 £5,450 2.83
Attendance fee per day (inside country of residence) £1,590 £1,630 2.52
  1. 1 No supplement is payable for additional commitments in relation to this role.

This report was approved by the Boards on 27 February 2014 and is signed on their behalf.

Anne C Quinn
Senior independent director and chairman of the DLC remuneration committee