Using a phantom share scheme arrangement, Impala Platinum (Implats) converted a cash payment due to outgoing CEO Terence Goodlace into "share equivalents" vesting over three years, so the amount he gets will depend on the performance of the platinum company’s share price over the period.
Goodlace and the board resolved to do it this way, rather than him being given a "cash retention award". It is a method that exposes executives to the share price of the company, so is perhaps a better way to align the incentives of CEOs with those of shareholders than making a cash payment. It also ties in well with Goodlace’s particularly socially conscious way of running the company.
Almost uniquely among its peers, Implats published how Goodlace’s salary compared with the wages of the average mine worker, for example.
Goodlace, who joined the company in 2012, once again declined an increase or bonus earlier this year, which narrowed the ratio of his remuneration to that of the lowest-level underground worker to 37 times last year, from 41 times in the previous year.
Other directors of the company, including CFO Brenda Berlin, also had some of their "share equivalents" vested last week. Berlin received R1.6m for 23,618 notional shares.
As Implats spokesman Johan Theron explains: "they all qualified for their normal annual short-term incentive payments (bonus) a year ago, in line with their individual performance contracts — 50% of this was paid out in cash.
"The other 50% was converted into share equivalents that would vest after 12 months."
Theron says it was done to conserve cash at the time and also to further align management interests with those of shareholders while metal prices remained low.
Elsewhere in the mining sector, Gold Fields CEO Nick Holland was awarded 272,735 conditional performance shares based on a share price of R62.96. It translates to a transaction value of just over R17m.
Just last week the company granted share incentives to a host of its directors. Gold Fields pays its executives the best wages in the industry.
Holland took home a total package of US$2.6m last year.
Moving away from the miners, PPC’s top management scored a sizeable number of shares at a discount following the cement maker’s rights offer.
PPC sold 1bn shares at R4 each, which was a discount of 55.5% to the company’s closing price of R8.99 on August 19.
CEO Darryll Castle bought 625,000 shares for R2.5m, while CFO Mmakeaya (Tryphosa) Ramano bought 415,884 shares for R1.7m.
The purchases could be taken as a sign of commitment from the executives, as well as a hint at good future prospects, but shareholders have continued to dump the stock. One analyst said : "PPC’s management does not fully appreciate the seriousness of its position."
The rights issue was necessary to reduce debt levels and fund existing expansion capital expenditure and investment projects.
Questions have been raised by the investment community as to how Ramano will juggle her crucial role in the company with that of being a board member on the beleaguered SA Airways (SAA) board. Ramano will also serve as the SAA board’s deputy chair.
PPC’s corporate credit rating has already been downgraded by Standard & Poor’s.
The end of 2016 could mark the fourth consecutive year that the share price ends in the red. In the year to date, PPC is already down 58%.