Remuneration committee report
The remuneration committee was increased during the year with the appointment of a new independent non-executive director.
|RI Israel (Chairman)||
15 Jul 97
15 Jul 97
1 Aug 06
During the year, the committee met three times with all members in attendance and discussed all aspects of the remuneration of the group. For the year under review, and purely as payment for his services as chairman of the remuneration committee, Mr Israel was paid US$40 000. Mr Asher was paid a fee for his role as senior independent non-executive director and was not paid any additional fees for services to any board committee.
Mr Cole was paid US$12 500 for his service to the committee. Details of all directors' fees are contained here.
COMPENSATION DISCUSSION AND ANALYSIS
The principal function of the remuneration committee is to determine, on behalf of the board, the remuneration of the chairman and non-executive directors, the senior executive remuneration policy and the remuneration and terms and conditions of employment of the company's executive directors. Comparative industry surveys are provided to the committee by the company's human resources executive to assist in formulating remuneration.
The committee believes that it should be able to meet informally without management being in attendance and this has occurred on several occasions during 2006 in addition to the formal meetings. Furthermore, the committee is entitled to call for independent consultants' advice on pertinent issues. The committee continued to employ the services of Bachelder & Dowling to review executive remuneration, which was done in conjunction with reviews of various mining related industry surveys. Bachelder & Dowling were paid US$6 000 during the year. The consultant provided no other services to the company. At certain meetings, the members invited the chairman and chief executive officer to attend.
|Basic salary/fees||contract~||Other payments*||Total|
|31 Dec||31 Dec||31 Dec||31 Dec||31 Dec||31 Dec||31 Dec||31 Dec|
DM Bristow (CEO)
|600 000||600 000||1 212 584||975 136||693 700||693 700||2 506 284||2 268 836|
|RA Williams (Group finance director)||320 000||278 208||404 195||325 045||-||-||724 195||603 253|
|920 000||878 208||1 616 779||1 300 181||693 700||693 700||
3 230 479
2 872 089
|P Liétard (Chairman)||135 000||135 000||-||-||30 000||30 000||165 000||165 000|
|BH Asher||120 000||120 000||-||-||30 000||30 000||150 000||150 000|
|J-A Cramer||80 000||80 000||-||-||30 000||30 000||110 000||110 000|
|NP Cole||42 500||-||-||-||-||-||42 500||-|
|RI Israel||85 000||85 000||-||-||30 000||30 000||115 000||115 000|
|AL Paverd||80 000||80 000||-||-||30 000||30 000||110 000||110 000|
|K Voltaire||47 500||-||-||-||-||47 500||-|
|Sub-total||590 000||500 000||-||-||150 000||150 000||740 000||650 000|
|TOTAL||1 510 000||1 378 208||1 616 779||1 300 181||843 700||843 700||3 970 479||3 522 089|
|*||Other payments to Dr DM Bristow in 2005 and 2006 comprise the grant of shares. The award in 2006 of US$30 000 to each non-executive director translated into share grants which vest over a three year period from the date of the award.|
|~||In addition to the total amounts reflected in these columns, the company paid Mr RAR Kebble, who resigned from the board with effect from 3 November 2004, an amount of US$1 212 584 (2005: US$975 136). This amount reflected the final payment in settlement of Mr RAR Kebble's termination agreement.|
The bonus is calculated on the movement in the company's share price based on a calendar year to 31 March. The 2006 bonuses, as shown above, reflect the amounts paid in April 2006 in respect of the movement in the share price from 1 April 2005 to 31 March 2006, being US$12.36 to US$18.17. At 31 December 2006, the company accrued US$1.8 million for bonus payments in respect of 2006, based on a share price of US$23.46. Based on a share price of US$22.42 on 13 March 2007, the date of signing off the accounts, the aggregate amount of the bonuses payable for the period up to that date would be the higher amount of US$2.3 million. Bonuses in respect of the 2006 year are expected to be paid in April 2007 in terms of the provisions of the service contracts.
During the year, the new remuneration charter was approved by the board and this has been placed on the website.
The committee's objectives are to provide senior management, including directors, with a competitive package which will attract and retain executives of the highest calibre and encourage and reward superior performance. The committee is cognisant that the market demands that performance criteria be established which measure an individual's performance and that these should form a significant proportion of a directors' remuneration package. The committee agreed performance criteria with executive directors and used these in appraising their annual performance. The committee believes that the bonus payments, which are linked to the performance of the company's share price, together with participation in the company's share option scheme for the finance director and share grants for the CEO are sufficient motivation for these executives and that these align their interests with those of shareholders.
As in the past two years, the committee continues to believe that the correct method of incentivising the CEO and motivating his performance, but at the same time aligning him with the interests of shareholders, is to award him shares which are only granted upon the achievement of agreed performance criteria. The CEO no longer participates in the company's share option scheme. The company's finance director continues to participate in the share option scheme, although no new options have been awarded to him since August 2004. Other than the benefits listed above, the company has no other long term incentive scheme. The remuneration committee believes the existing schemes are sufficient to motivate executive directors and senior management. Should, however, it be deemed necessary to adopt any additional long term incentive scheme or a new share option scheme, in accordance with the UK Listing Rules, these would be submitted to shareholders for approval.
EXECUTIVE DIRECTORS' REMUNERATION
The remuneration of the executive directors comprises:
- A basic salary.
- An annual bonus.
- Participation in the share option scheme for the group finance director.
- A deferred compensation structure for the CEO.
The total executive directors' remuneration for the year ended 31 December 2006, excluding the additional and final termination payment to Mr RAR Kebble was US$3 230 479 (year ended 31 December 2005: US$2 872 089). Full details are provided in a table in this report.
Details of the various components comprising executive remuneration are as follows:
Executive directors receive a basic salary as determined by the committee in accordance with the remuneration policy and subject to agreed annual performance criteria. Individual service contracts (details of which are provided hereafter) do not provide for any pension or retirement payments nor does the company have any such retirement liability. The company does, however, provide a defined contribution fund into which employees, including directors, may contribute.
Share options are no longer awarded to non-executive directors or the CEO. In respect of the non-executive directors, the last options were awarded in 1998. Currently only two non-executive directors have not exercised their options.
Awards of share options are determined by the remuneration committee guided by industry and international standards. The existing share option scheme is not subject to performance criteria, which were not a standard at the time the present scheme was adopted. The board acknowledges that any future scheme would be performance related and its adoption would, in accordance with the terms of the UK Listing Rules, be subject to approval by shareholders. Any options awarded are subject to an upper limit of two per cent of the company's issued share capital. No share options can be awarded at a discount because the scheme rules provide that the exercise price is determined as the closing price of the shares on the trading day preceding that on which a person is granted the option. It is not the policy of the company to grant annual awards of share options to employees.
The scheme provides that all options may be exercised early in the event of an acquisition of the company that would require an offer to be made to all shareholders. Details of the options held by directors are contained in a table below.
The high and low ordinary share prices for the company for the year under review were: ordinary shares on the LSE (trading symbol RRS) and Nasdaq from 1 January 2006 to 31 December 2006:
|Pound sterling||ADRs on|
|(trading symbol RRS)||(trading symbol GOLD)|
The share price at the year end, being 29 December 2006, the last day of trading, was £11.95 for the ordinary shares trading on the LSE and US$23.46 for the ADRs trading on Nasdaq.
Executive directors' service contracts provide for the payment of an annual bonus. The bonus is determined on a notional shareholding and is measured according to the performance of the price of the company's ordinary shares over a 12 month period ending 31 March. The calculation of the annual bonus for Dr DM Bristow is based on a notional shareholding of 300 000 ordinary shares, for Mr RA Williams the figure is 100 000 ordinary shares. In terms of the termination agreement with the company's former chairman, Mr RAR Kebble, a bonus would be paid to him in the event of the company meeting criteria similar to the CEO. The last bonus payable to Mr RAR Kebble was for the year ended 31 December 2005 and was paid in April 2006.
Service contracts have been concluded with the two executive directors and Mr RA Williams's new agreement, concluded in April 2006, runs until 31 December 2008. Given the size of the company and its small management team, the board considers periods of employment in excess of one year to be appropriate. The board has agreed to a rolling three year contract for Dr DM Bristow which has been approved based on the importance attributed to his contribution to the company's overall strategic direction and performance. In the event of unilateral termination, the company would be required to compensate the director concerned for any outstanding amounts due in terms of the contract. The remuneration committee, in drafting and approving the service contracts, has taken cognisance of the costs that would accrue on early termination.
Under the terms of the service contract entered into with Dr DM Bristow, the board has awarded the CEO restricted stock. At the beginning of 2004, certain performance criteria were agreed by the board and the CEO. At the end of 2004, an appraisal was undertaken and it was agreed that the criteria had been met. Under the circumstances, an award of 150 000 shares was made to the CEO. The award entitled the CEO to 50 000 shares, at the end of each year of a three year period commencing 1 January 2005. The final third, being 50 000 shares accrued to the CEO on 1 January 2007. Such an award is not made annually, but the board reserves the right, on the recommendation of the remuneration committee, to reconsider this when it is deemed appropriate.
The company's performance has been measured against the HSBC Global Mining Index. The HSBC Global Mining Index is a capitalisation - weighted index calculated in dollars (US$). The series represents the mining industries of 21 countries for securities with a market capitalisation generally in excess of US$50 million. The series has a base of 100 on 31 December 1985, with the exception of two Latin American indices which are based at 100 at 31 December 1989. A copy of the graph is included here.
NON-EXECUTIVE DIRECTORS' REMUNERATION
In April 2005, following both the recommendations of the remuneration committee and the board, shareholders approved a revised policy on non-executive directors' remuneration. This remuneration policy was also approved at the 2006 annual general meeting. No additional changes are proposed for 2007 and non-executive directors' remuneration will continue to comprise:
- A general annual retainer to all non-executive directors of US$45 000.
- An annual committee assignment fee of US$25 000, with an additional premium for membership of the audit committee of US$10 000.
- The chairman of a board committee to receive a committee assignment fee of US$40 000.
- The senior independent director, in addition to the general annual retainer but in lieu of any committee assignment fee, to receive an additional US$75 000.
- The non-executive chairman, in addition to the general annual retainer, but in lieu of any committee assignment fee, to receive an additional US$90 000.
- An annual award to each director of US$30 000 to
be translated into a number of "restricted" shares. The shares are to
vest over a three year period from the date of the award. Vesting would
accelerate on the following conditions:
- Termination other than resignation or dismissal.
- Voluntary retirement after the age of 65, with a minimum of three years service as a director.
- Change in control of the company.
|28 Feb||31 Dec||31 Dec||non-|
|DM Bristow^*||782 584||732 584**||610 884||Beneficial|
|RA Williams||170 000||170 000||160 000||Beneficial|
|P Liétard||29 362||27 548||26 182||Beneficial|
|BH Asher||20 383||18 569||13 248||Beneficial|
|J-A Cramer*+||29 500||29 500||782||Beneficial|
|RI Israel||16 428||14 615||13 248||Beneficial|
|AL Paverd||41 828||40 015||38 649||Beneficial|
|^||This includes all shares issued to Dr DM Bristow in respect of his share award and restricted shares which have vested in the name of each non-executive director. Currently, in terms of the US$30 000 awarded to each non-executive director on 1 January 2005, the final 783 shares were issued on 1 January 2007. In terms of the US$30 000 awarded to each non-executive director on 1 January 2006, the second tranche of 584 shares were issued on 1 January 2007 and the remaining 585 shares will be issued on 1 January 2008. In terms of the US$30 000 awarded to each non-executive director on 1 January 2007, 447 shares were issued on 1 January 2007 and the remaining 894 will be issued in two tranches of 447 shares each on 1 January 2008 and 1 January 2009.|
|*||This is a rectification to Dr Bristow’s previous holdings to include an additional 4 184 shares registered in his name.|
|**||The final tranche of 50 000 shares for Dr Bristow vested on 31 December 2006. The shares were only transferred to Dr Bristow once the closed period ended upon publication of the company's preliminary results.|
|+||For Mr Cramer, the number of shares held when he retired on 27 October 2006 was 2 148.|
|Number of options during the period|
|1 Jan||31 Dec||price||exercise||which||Expiry|
|166 700||-||166 700||-||3.25||17.50||12/07/02||11/07/12|
|RA Williams||125 000||-||41 667||83 333||8.05||22.00||06/08/06||05/08/16|
|BH Asher||25 400||-||-||25 400||1.65||-||29/01/01||28/01/11|
|J-A Cramer||25 400||-||25 400||-||1.65||22.50||29/01/01||28/01/11|
|RI Israel||25 400||-||-||25 400||1.65||-||29/01/01||28/01/11|
NON-EXECUTIVE DIRECTORS' SHAREHOLDING
A non-executive director must hold shares at least equal in value (as at the beginning of the year) to the general annual retainer. New directors are granted three years in which to acquire the required shareholding and this period could be extended by the unanimous approval of the disinterested directors. If the number of shares were to fall below the threshold due to a fall in the share price, no additional purchase of shares would be required. Save for Mr Cole and Dr Voltaire, who were both appointed to the board in May 2006 and only obtained their first "restricted" shares with effect from 1 January 2007, all the remaining non-executive directors hold shares equal to the value of the general annual retainer. During the year, Mr Cramer retired and the vesting of his "restricted" stock was accelerated at the date of his retirement, being 27 October 2006, bringing his aggregate shareholding in the company on this date to 2 148 shares as detailed above. Directors' shareholdings in the company are detailed above.
NON-EXECUTIVE DIRECTORS' OPTIONS
Previously, non-executive directors were granted share options over the company's ordinary shares. These share options were awarded to non-executive directors at a time when such options were not considered as affecting a director's independence and with the intention of aligning directors' interests with those of shareholders. Currently only two non-executive directors have unexercised share options. Mr Cramer, who retired from the board on 27 October 2006 exercised his options and acquired the shares. Details of remaining options are shown at the top of this page.