Remuneration report (PDF - 42.9KB)

Remuneration report

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The Remuneration Committee determines and monitors executive remuneration for the company. This it does through adherence to the company's Executive Remuneration Policy, which is to:

• attract, reward and retain executives of the highest calibre;
• align the behaviour and performance of executives with the company's strategic goals, in the overall interests of shareholders;
• ensure the appropriate mix of short, medium and long-term rewards and incentives, with the latter being closely linked to structured company performance targets and strategic objectives; and
• ensure that regional management is competitively rewarded within a global remuneration policy, which recognises both local and global markets.

In particular the Remuneration Committee is responsible for:

• the remuneration packages for executive directors of the company including, but not limited to, basic salary, performance-based short and long-term incentives, pensions, and other benefits; and
• the design and operation of the company's executive share option and other incentive schemes.

Membership of the Remuneration Committee

At the commencement of 2004, the following non-executive directors were members of the committee:

• Russell Edey (chairman);
• Colin Brayshaw;
• Nicky Oppenheimer;
• Julian Ogilvie Thompson; and
• Tony Trahar.

Messrs Oppenheimer and Ogilvie Thompson retired from the board of AngloGold Ashanti on 29 April 2004 and from all board committees.

Five meetings of the Remuneration Committee were held in 2004. Noting the resignation of Messrs Oppenheimer and Ogilvie Thompson during the year, attendance by members at meetings was as follows:

All meetings of the committee are attended by the chief executive officer and executive officer: human resources, except when their own remuneration or benefits are being discussed. The services of Deloitte & Touche are retained to act as independent, expert advisers on executive remuneration.

The following principles are applied in determining executive remuneration:

1. Annual remuneration should be a combination of base pay and short, medium and long-term incentives, with salary comprising not more than 50% of annual remuneration.
2. Salary should be set at the median for the relevant markets.
3. All incentive plans should align performance targets with shareholder interests.

Executive director remuneration currently comprises the following elements:

1. Basic salary, which is subject to annual review by the Remuneration Committee and is set at the median of salaries in similar companies in the relevant markets both in South Africa and globally. The individual salaries of executive directors are reviewed annually in light of their own performance, experience, responsibility and company performance.
    
2. Annual bonus, which is determined by the achievement of a set of stretching company and individual performance targets. The company targets include earnings per share, cost control and global production. The weighting of the respective contribution of company and individual targets is 70% for company and 30% for individual. Failure to achieve safety improvement targets results in the reduction of bonuses for executive directors.
    
3. Share incentive scheme, which allows for an annual grant of AngloGold Ashanti share options based on the achievement of pre-determined performance targets similar to those used for the annual bonus. Options granted are subject to the achievement of a performance condition set by the Remuneration Committee and are subject to a maximum equivalent to one times' annual salary for any executive director.
    
4. Pensions: all executive directors are members of the AngloGold Ashanti Pension Fund, a defined benefit fund which guarantees a pension on retirement equivalent to 2% of final salary per year of service. Death and disability cover reflects best practice among comparable employers in South Africa.
    
5. Other benefits: Executive directors are members of Discovery Health, which covers the director and his immediate family.

All executive directors hold service contracts that are reviewed and renewed annually. None of the service contracts have conditions which, on termination, provide for salary or benefit payments, whether in cash or in kind, in excess of one year.

Following additional research conducted by Deloitte & Touche on behalf of AngloGold Ashanti, the committee has recommended the discontinuation of the current share incentive scheme and the introduction of a bonus share plan (BSP) with effect from 2005. The options which have been granted under the scheme will remain subject to the conditions under which they were granted. As noted in last year's report, an investigation was also conducted into the introduction of a long-term incentive plan (LTIP).

The Remuneration Committee has therefore recommended the introduction of a BSP and LTIP, subject to shareholder approval at the annual general meeting to be held in 2005. The main reason for these proposed changes to executive incentive plans is that the current option scheme does not provide sufficient linkage between the interests of shareholders and the efforts of executives or managers. There is also little correlation between the efforts of executives and the success of the option scheme.

Bonus share plan

Participants in the bonus share plan will receive an annual bonus, part of which is paid in cash and part in shares, subject to the performance targets of the plan being achieved. The share element vests after three years, providing the participant is still in the company's employment at that time.

This will provide senior employees with a real stake in the company, unlike share options, where vesting is dependent on factors outside of their control. The vesting period of three years should also act as an incentive for employees to stay with the company.

Long-term incentive plan

The Remuneration Committee proposes the introduction of an LTIP for the most senior executives and managers in the company. The scheme will reward participants through the granting of shares for the achievement of stretched performance targets over a three-year period. These targets will be based on the performance of earnings per share (EPS) and relative total shareholder return (TSR), whereby the company will need to outperform its gold company peers consistently. Additionally, strategic business objectives will also need to be met, such as the successful integration of Ashanti into AngloGold.

Executive directors' and executive officers' remuneration

Non-executive directors' remuneration

The following table details fees and allowances paid to non-executive directors

Share incentive scheme

Options to subscribe for ordinary shares in the company granted to, and exercised by, executive directors, executive officers and other managers during the year to 31 December 2004 and subsequent to year-end.

Executive directors, executive officers and other managers