Remuneration Policy

Our Remuneration Policy aims to align the interests of senior executives and employees with the interests of shareholders and the Group’s overall business strategy.

The Remuneration Policy and the LTI in particular have gone through a substantive review in the past two years to adjust to today’s business and economic realities. This includes considering the impact of both GBK and COVID-19. This was completed to ensure that it remains relevant and achieves its intended objectives of retaining and rewarding our management.

However, we acknowledge that the Remuneration Policy is a living document and is subject to regular review and change. In 2023, we revised our Remuneration Policy, to improve clarity and completeness.

The Remuneration Committee’s mandate (refer page 135) is to assist the Board in discharging its oversight responsibilities relating to all compensation matters.

Our policy design

Our remuneration policy, setting out the Group’s remuneration principles and practices, applies to all employees. It provides a high-level guideline for implementing the Group’s remuneration strategies and designing and managing remuneration processes.

The policy was designed around the following themes:

• Support for the business strategy, objectives and long-term interests of Famous Brands and its stakeholders, aligned with the Group’s beliefs and values.
• Maintain a competitive reward system to attract, motivate and retain high-performing individuals, including industry-competitive packages.
• Apply consistent and responsible business and remuneration practices, sound and effective risk management and governance.
• Develop performance metrics that are demanding and sustainable and cover all relevant aspects of the business.

The policy also considers King IV (principle 14), the Companies Act 2008, the Basic Conditions of Employment Act 1997, the Employment Equity Act 1998 and other applicable legislation.

Our approach to remuneration

Famous Brands’ remuneration objective is to attract, motivate and retain a skilled workforce through fair, responsible, transparent and competitive remuneration.

Key principles of this Remuneration Policy

The Remuneration Policy is in place to support our remuneration approach and is based on the following key principles:

• Reward, retain and, where necessary, attract talent through fair, transparent and competitive remuneration.
• Reward short-term and long-term performance by linking STIs to operational, financial and other targets; and LTIs to the achievement of Famous Brands’ strategic objectives.
• Key focus areas are reflected in the scorecard of executive management and the annual performance evaluations for employees. Scorecards reflect KPAs and the associated KPIs.
• We reward for value created contribution and performance to ensure alignment with shareholder interests, balancing this across economic, social and environmental aspects.
• Employee rewards are influenced by individual and Company performance, and employees’ contributions are recognised through a discretionary performance bonus.
• Bargaining unit employees are subject to the terms of wage agreements and are part of a “basic plus benefits” remuneration scheme

Fair and responsible remuneration

The remuneration principles are underpinned by a fair and responsible remuneration approach where:

• Remuneration must be free from any form of discrimination.
• Market benchmarking refers to the correct remuneration bands and levels with progression reflected for experience and accountability.
• Remuneration design and application must drive internal and external parity.
• All the applied remuneration components are designed and implemented within the applicable tax and regulatory requirements.
• Performance and value are defined and measured over the short, medium and long terms and protect our shareholders’ interests.
• An overarching drive for the correct moral and legally defensible remuneration practices.

We focus on developing an equitable workplace. We commit to equal pay and gender equality in line with the JSE Listings Requirements and King IV.

Famous Brands conducts an equal pay for equal work audit as part of the annual salary increase exercise in March each year. The following interventions were applied this year in response to findings from the audit:

• Three discrepancies were identified in Manufacturing and the gaps identified were closed in line with the peer group.
• Seven discrepancies were identified in Logistics and gaps were closed in line with peer group.
• In the rest of the Group, 51 discrepancies were identified, and the salaries were adjusted accordingly.

Benchmark methodology

Famous Brands undertakes a total remuneration benchmark at least every two years, using reputable remuneration consultants.

The one benchmark uses a database covering over 700 South African companies, extracting data from companies with a relevant job match. The second benchmark is from a specified comparator group of companies the Committee approves.

An overview of the remuneration components

The key components of remuneration at Famous Brands:

The remuneration structure for executives and employees in senior management positions comprises guaranteed (including benefits) and variable remuneration (together referred to as the pay mix). A different set of rules and guidelines are applicable to each remuneration component.

Pay mix

Famous Brands’ pay mix aims to achieve a balanced mix appropriate for the job, level and performance and in line with market practice. In 2023, Deloitte reviewed the pay mix and determined that the pay mix is appropriately aligned with the current market, and there is no need for adjustments at this time.

There is a balance between fixed and variable pay. For F-level positions (Executive committee, the CEO and his direct reports), fixed pay represents about 51% of total remuneration, which is deemed high enough to avoid employees becoming overly dependent on variable pay. This pay mix ratio is in line with the market remuneration mix.

Remuneration landscape and eligibility

Cost to company and bonus

Base salary

Salaries are reviewed annually in May after the audited financial results are available. The increase is effective 1 March of each year. Increases are informed by consumer price inflation (CPI) and adjusted upward or downward to recognise individual performance. Bargaining unit employee increases are based on two-year wage agreements.

The CEO makes recommendations regarding Exco’s increases to the Committee. The Committee reviews the CEO’s base salary.

The overall increase pool is expressed as and limited to a percentage agreed by the Committee.

Retirement fund

All Company-related funds are defined contribution funds. Retirement funds vary depending on jurisdiction and legislation. Famous Brands ensures contributions align with country-specific legislation and any Company contribution is part of TCC.

Medical insurance

Medical funds vary depending on jurisdiction and legislation (some countries have national insurance). Any Company contribution towards a medical aid fund form part of the total guaranteed package, in line with Company policy.

Benefits

Benefits are provided based on local market trends and ensure overall competitiveness in the respective markets. Benefits can include life insurance, dread disease insurance, temporary and permanent disability, accidental death insurance, assistance with tax filing, cash in lieu of leave not taken (above legislated minimum leave requirements) and provisions under the executive travel guidelines.

Allowances

Allowances are linked to specific tasks, for example, a subsistence allowance for specific types of travel. Separate policies cover these types of allowances, or it is covered in the bargaining unit’s recognition agreements. No discretion is applied.

13th cheque

The 13th cheque is part of guaranteed pay for bargaining unit employees and forms part of the wage agreement with the trade unions.

Discretionary bonus

A bonus is provided based on individual performance, subject to Company performance criteria. It can only be up to 120% of one month’s TCC, and a sliding scale adjustment is made to recognise individual performance.

Performance ratings of less than 3 do not qualify for the discretionary bonus. This applies to all the employees outside the bargaining unit parameters but below the executives.

Short-term incentives

The STI is designed to drive the short-term strategies of Famous Brands (aligned to annual business plans and budgets) and ensures that participants deliver on the key priorities for the year. Performance ratings of less than 3 do not qualify for the STI. These have been designed to align and deliver on the Company and shareholder interests. The STI incentivises and drives participants’ motivation, contributes to attracting and retaining scarce human resources, and rewards superior performance.

The STI is paid in total in June each year.

How it is calculated

In 2023, Deloitte reviewed the STI scheme and recommended that the scheme rules were simplified and redesigned to remove the correlation between the weighted performance score and the amount of target STI earned. The scheme was redesigned so that the weighted performance score between 100% and 116% determines the target STI payout between 100% and 200%. A threshold payment of 50% of the target was introduced for performance sufficiently above the business plan. The redesigned scheme still incorporates leverage, with a maximum payout of 200% of the target.

The target STI is a targeted amount (a percentage of TCC) applicable to a person’s Paterson grade. The actual STI earned depends on performance.

Target STI is determined by market benchmarked targets and is validated regularly. The performance score is determined by individual and Group/operational performance relevant to the individual’s role to create a line of sight between business performance and individual reward. These are weighted and collectively provide a weighted score for the individual. Before the start of each half-year, the Board approves KPAs and associated KPIs.

In this design, the following formula will apply:

To drive line of sight principles, STI earnings are linked to areas where the executive has accountability and the ability to influence. The percentages reflect the relative weighting of performance on the ultimate combined scorecard of the participant.

Relative weighting of performance (%)

Individual performance is reviewed on a scale of 1 to 5. Performance ratings of less than 3 disqualify a participant from the STI scheme.

The combined outcome of the individual performance, and performance against the KPAs and KPIs, result in the actual percentage of target STI earned (which has a maximum cap).

The table alongside indicates how line of sight is achieved between combined performance and the individual’s level of STI earned, supporting the principle of rewarding exceptional performance.

The 2023 Group scorecard is:

Key performance areas	KPIs and targets
Financial performance and operational plan performance (60%)
Market-share performance and consumer measures (20%)	Google ratings: Outcome: Achieved. Net store growth. AME net store growth: Outcome: Not Achieved. Leading Brands and Signature Brands: Not Achieved. UK: Outcome: Not Achieved.
People performance (10%)	The Voice your View survey results, reflecting employee satisfaction and engagement. Outcome: Achieved – 77%. Exco succession (Identified successors for Exco roles). Outcome: Achieved – 7 out of 9. Executive stability ratio. This ratio is the level of attrition by voluntary resignations among executives. Outcome: Achieved – 3.38%
Transformation and ESG (10%)	B-BBEE rating -Improve rating to Level 3: Achieved level 2. Management control (Employment equity): Outcome: Not achieved 14.74 against target of 17 points. Enterprise and supplier development: Outcome: Achieved 36.76 against target of 36 points. Injuries on duty. Outcome: Achieved – Zero fatalities, minor 29 vs 75 PY, LTI 76 vs 49 PY. Sustainability targets including GHG Emissions and water usage. Outcome: not met.

Long-term incentives

The LTI is designed to drive the longer-term strategic and sustainable focus of Famous Brands, ensuring alignment between the long-term interests of executives and shareholders. It serves as a wealth creation mechanism for executives and drives the creation of shareholder value when strategic performance drivers are met. In 2024, the Long-Term Share Plan will replace the existing LTI. The current granted awards will continue to vest as per the rules of the current scheme.

Current Scheme Vesting structure and methodology

The vesting structure in terms of the new share plan has been simplified. All share awards vest in year three, provided that the service condition and performance conditions which were set at award date are met (read more). Share appreciation rights no longer exist in the new Share Plan.

New Share Plan award methodology

HEPS was reintroduced in the new Share Plan (defined as growth in HEPS vs CPI). Targets CPI + 5% and a stretch target of CPI + 10%. (read more)

New Share Plan Performance Metrics and Conditions

Malus and clawback

Famous Brands has malus and clawback provisions that enable adjustments to variable pay.

The Board may act on the recommendation of the Committee to reduce/cancel/adjust unvested variable remuneration (malus) or to recover (clawback) vested/paid variable remuneration where there is reasonable evidence that an executive director of Famous Brands materially contributed to, or was materially responsible for, but not limited to:

• Personally acting fraudulently or dishonestly or in a manner that adversely affects the Company’s reputation or is characterised as gross misconduct.
• Directing an employee, contractor or adviser to act fraudulently, dishonestly, or to undertake other misconduct.
• Receiving an STI or LTI award because of fraud, dishonesty or a breach of obligation committed by another person.
• Receiving an STI or LTI award because of an intentional error in calculating a performance measure.

Recruitment, contracts and termination

Recruitment

When recruiting new executives, a comparative benchmarking exercise is done to determine the size, nature and complexity of the role and the skills availability before making a competitive offer.

For new appointments, the Committee may consider compensation for remuneration forfeited by the appointee (STI, LTI, or any other relevant and valid element). The intention is to not grant more than what the appointee would have received from the Company in a 12-month period.

The Committee does have the discretion to compensate higher values if it can be demonstrated through a fair-value valuation that the forfeited amounts exceed the grants. The Committee compensates the forfeitures through a combination of equity and cash.

Famous Brands has a formal Recruitment and Selection Policy.

Sign-on

Sign-on bonuses are paid at the discretion of executive management and the Committee.

Service contracts

All executive team members have permanent employment contracts that entitle them to standard Group benefits as defined by their specific region and participation in the Company’s STI and LTI.

In exceptional situations, an executive team member can be appointed on a fixed-term contract.

Employee contracts contain defined termination notice periods, and the executive management team has a three-month notice period.

Termination

The executive management team typically does not have fixed-term contracts, and contracts are, therefore, open-ended. Exceptions include where prescribed retirement ages apply or where specific circumstances justify the appointment on a fixed-term basis.

The incentive scheme rules are clear on the termination provisions by termination category. In the event of termination, the Company can allow the employee to either work out their notice period or pay the TCC for the stipulated notice period in lieu of notice.

Employment contracts do not oblige Famous Brands to pay special severance or compensation on termination of employment contracts arising from failure or incapacity to perform or underperformance against contracted objectives.

Minimum shareholding requirements

Executive directors are required to build and maintain a minimum holding of Famous Brands shares. They may sell only up to 50% of their shares that vest until they have reached their minimum shareholding requirement. The CEO must hold 200% of their base salary, and the Group Financial Director must hold 100% of their base salary.