Corporate governance report


Political party support

While it is Sanlam’s policy to support the development of democratic institutions and social initiatives across party lines, it does not provide support to any individual political party, financially or otherwise. 

Corporate Code of Ethical Conduct

Business ethics and organisational integrity

The Sanlam Group remains committed to the highest standards of integrity and ethical conduct in dealing with all stakeholders. This commitment is confirmed at Board and general management level by their endorsement of the code for the Group.

A Group Ethics committee functions under the chairmanship of the Chief Actuary and is representative of the business clusters. The Group Ethics committee monitors compliance with the principles underlying the code of ethical conduct and investigates all matters brought to its attention, if necessary. A facility for the reporting of unethical conduct, the Sanlam fraud and ethics hotline, is available to all staff members in the Group. This hotline allows staff members to make anonymous reports and guarantees the protection of their identity, in accordance with the provisions of the Protected Disclosures Act, 2000.

In 2010, the Committee reviewed the Code of Ethical Conduct, a process which occurs every second year, to ensure relevance to the structure of the Group and the regulatory landscape in the jurisdictions in which we operate.

In terms of Sanlam’s code of ethical conduct, no employee within the Group may offer or receive any gift, favour or benefit that may be regarded as an attempt to exert influence in unduly favouring any party. Sanlam therefore has a formal Group gift/gratification policy to provide for the official declaration and recording of corporate gifts received or given.

The Board is satisfied that adequate grievance and disciplinary procedures are in place to ensure enforcement of the code of ethical conduct and to address any breaches of the code. The results of an independent ethical assessment conducted by KPMG during 2009 were very positive. The risk assessment study concluded that the integrity profile of the company was strong and that this provides an excellent base for further improvements in future. The assessment will be repeated during 2011.

Any transgressions of Sanlam’s code of ethical conduct during 2010 were dealt with appropriately in terms of the code. 


The Sanlam Group recognises that financial crime and unlawful conduct are in conflict with the principles of ethical behaviour, as set out in the Code of Ethical Conduct, and undermine the organisational integrity of the Group.

The financial crime combating policy for the Sanlam Group is designed to counter the threat of financial crime and unlawful conduct. A zero-tolerance approach is applied in combating financial crime and all offenders will be prosecuted.

A forensic services function at Group level oversees the prevention, detection and investigation of incidents of unlawful conduct that are of such a nature that they may have an impact on the Group or the executives of a business cluster. Group Forensic Services is also responsible for the formulation of Group standards in respect of the combating of unlawful conduct and the implementation of measures to monitor compliance with these standards.

The chief executive of each business division is responsible for the implementation of the policy in his or her respective business division and is accountable to the Group Chief Executive and the Sanlam Board.

Quarterly reports are submitted by Group Forensic Services to the Sanlam Risk and Compliance committee on the incidence of financial crime and unlawful conduct in the Group and on measures taken to prevent, detect, investigate and deal with such conduct. 


Sanlam considers compliance with applicable laws, industry regulations, codes and its own ethical standards and internal policies to be an integral part of doing business. The Group compliance function, together with the compliance functions of the business divisions and units, facilitates the management of compliance through the analysing of statutory and regulatory requirements, and monitoring the implementation and execution thereof. Material deviations (if any) are reported to the Sanlam Risk and Compliance committee. 
Remuneration report


Sanlam’s remuneration philosophy and strategy supports the Group strategy in that it governs processes that align predetermined strategic goals with the organisational behaviour required to meet and exceed these goals. In setting up the reward structures, cognisance is taken of prevailing economic conditions, national and international governance principles and the management of risk in the context of both short- and long-term incentive allocations. During 2010, a great deal of attention was given to correctly positioning both the nature and the scale of remuneration relative to national comparator groups and international best practice. Steps were also taken to ensure alignment with the regulatory and governance requirements and specifically those of King III. 

The Human Resources committee and its role 

The Human Resources committee of the Board (GHRC) is responsible for developing the remuneration strategy of the Group and presenting it to the Sanlam Board for approval. Its activities include approving mandates for bonus and all long-term incentive schemes and taking decisions about the Sanlam Group Executive committee remuneration packages relative to local and international industry benchmarks. The GHRC has the prerogative to make all remuneration decisions it deems appropriate within an approved framework and may propose amendments to any part of the Group’s remuneration policy as necessitated by changing circumstances. It also makes recommendations to the Board regarding the remuneration of Sanlam directors, other than the GHRC’s committee fees. To fulfil the role described above, the GHRC undertakes the following:
> Develops and recommends to the Sanlam Board for approval the Group’s remuneration strategy as far as the remuneration of executive directors and members of the Sanlam Group Executive committee is concerned. 
> Develops and recommends to the Sanlam Board for approval short-term incentive schemes for the Group. Its activities include the setting of annual targets, monitoring those targets and reviewing the incentive schemes on a regular basis to ensure that there is a clear link between the schemes and performance. 
> Develops and recommends to the Sanlam Board for approval long-term share incentive schemes for the Group. Its activities include the setting of guidelines for annual allocations and a regular review of the structure of the schemes. 
> Sets appropriate performance drivers for both short- and long-term incentives, as well as monitoring and testing those drivers. 
> Manages the contracts of employment of executive directors and Executive committee members so that their terms are compliant with good practice principles. 
> Determines specific remuneration packages for executive directors and Executive committee members, including basic salary, retirement benefits, short-term incentives, long-term incentives and conditions of employment. 
> Makes recommendations to the Board regarding the remuneration of non-executive directors. 
A copy of the GHRC’s terms of reference can be found on the company’s website (

During 2010, the GHRC considered the following issues:
> Benchmarking of remuneration levels and practices with international and local comparator groups; 
> Alignment of Sanlam remuneration practices with King III governance principles; 
> Recruitment and appointment of executive staff members; and 
> Monitoring and approval of short-term bonuses and the allocation of long-term incentives. 

Sanlam’s remuneration philosophy and strategy 


The Board is convinced that appropriate remuneration for executive directors and members of the Executive committee is inextricably linked to the development and retention of top-level talent and intellectual capital within the Group. Given the current economic climate, changes in the regulatory requirements and the ongoing skills shortage, it is essential that adequate measures be implemented to attract and retain the required skills. In order to meet the strategic objective of a high-performance organisation, the remuneration philosophy is positioned to reward exceptional performance and to maintain that performance over time. Sanlam’s remuneration philosophy aims to:
> inform stakeholders of Sanlam’s approach to rewarding its employees; 
> identify those aspects of the reward philosophy that are prescribed and to which all businesses should adhere; 
> provide a general framework for all the other elements of the reward philosophy; 
> offer guidelines for short- and long-term incentive and retention processes; and 
> offer general guidelines about how the businesses should apply discretion in their own internal remuneration allocation and distribution. 
Sanlam is the sole or part owner of a number of businesses and joint ventures. The organisation recognises the difference between these entities and where appropriate allows the businesses relative autonomy in positioning themselves to attract, retain and reward their employees appropriately within an overarching framework. In this regard, there are some areas where the dictates of good corporate governance, the protection of shareholder interests and those of the Sanlam brand or corporate identity require full disclosure, motivation and approval by the Human Resources committees either at Group or business level. The principle of management discretion, with regard to individual employees, is central to the remuneration philosophy on the basis that all rewards are based on merit. However, the overarching principles and design of the remuneration structure are consistent, to support a common philosophy and to ensure good corporate governance, with differentiation where appropriate. In other instances, the Sanlam remuneration philosophy implies that the businesses are mandated to apply their own discretion, given the role that their own Remuneration/Human Resources committees will play in ensuring good governance. To this end, the company has adopted a Total Reward Strategy for its staff members. This offering comprises remuneration (which includes cash remuneration and short- and long-term incentives), benefits (retirement funds, group life, etc.), learning and development, an attractive working environment and a range of lifestyle benefits. 


In applying the remuneration philosophy and implementing the Total Reward Strategy, a number of principles are followed:
> Pay for performance: Performance is the cornerstone of the remuneration philosophy. On this basis, all remuneration practices are structured in such a way as to provide for clear differentiation between individuals with regard to performance. It is also positioned so that a clear link between the performance hurdle that is being rewarded and the company strategy is maintained. 
> Competitiveness: A key objective of the remuneration philosophy is that remuneration packages should enable the company and its businesses to attract and retain employees of the highest quality in order to ensure the continued success of the organisation. 
> Leverage and alignment: The reward consequences for individual employees are, as far as possible, aligned with, linked to and influenced by: 
  > the interests of the shareholders;
  > the performance of the company as a whole;
  > the performance of any region, business unit or support function; and 
  > the employee’s own contribution.
> Consistency: The reward philosophy strives to be both consistent and transparent. Differentiation in terms of market comparison for specific skills groups or roles and performance is, however, imperative. Unfair discrimination is unacceptable and equal opportunities in respect of service practices and benefits must be guaranteed. 
> Attraction and retention: Remuneration practices should be recognised as a key instrument in attracting and retaining the required talent to meet the company’s objectives. 
> Shared participation: Employee identification with the success of the Group is important owing to the fact that it is directly linked to both company and individual performance. All employees should have the chance to be recognised and rewarded for their contribution and the value they add to the Group, and, in particular, for achieving excellent performance and results in relation to the Group’s stated strategic objectives. The performance management process contributes significantly towards obtaining this level of participation and towards lending structure to the process. 
> Best practice: Reward packages and practices must reflect local and international best practice. 
> Communication: The remuneration philosophy and practices, as well as the processes to determine individual pay levels, must be transparent and communicated effectively to all employees. In this process the link between remuneration and company strategic objectives must be understood by all employees. 
> Market information: Accurate and up-to-date market information and information on trends is a crucial factor in determining the quantum of the remuneration packages. 
For the Sanlam Group to remain competitive, remuneration policies and practices are evaluated against both national and international remuneration trends and governance frameworks. In response to developments on the international front and the implementation of King III, a number of amendments to Sanlam’s remuneration policy were implemented during 2010. These amendments will focus on the relationship of risk to incentives and issues related to claw-back mechanisms
(last-mentioned includes the discretion to reduce or reclaim payments where performance achievement is subsequently found to have been significantly misstated). Other actions relate to explicitly describing certain processes that are already in place but need further elaboration. 

An overview of the executive remuneration structure

The different components of the remuneration paid to executive directors and members of the Executive committee are summarised in the table below. A detailed description of each component follows in the next section.

In general terms, the quantum of the different components of the package is determined as follows:
> The guaranteed component is based on market-relatedness in conjunction with the individual’s performance, competence and potential. 
> The short-term variable component of remuneration is based on a combination of individual and annual business performance. 
> The long-term variable component is based on the individual’s performance, potential and the overall value to the business. 
Element Purpose Performance period and measures  Operation and delivery
Basic salary (guaranteed)*  Core element that reflects market value of role and individual performance  Reviewed annually based on performance against contracted output and market surveys  Benchmarked against comparator group and positioned on average on the 50th percentile 
Benefits (guaranteed)*  Retirement and lifestyle benefits which assist employees in carrying out their duties  Reviewed annually Included in comparator benchmarking 
Annual bonus (short-term variable)  Create a high-performance culture through a cash bonus in relation to performance against predetermined outputs  Annual Based on different levels and predetermined performance hurdles of business and personal targets. Cash settlement capped at a maximum of 250% of TGP 
Long-term incentives (long-term variable)  Alignment with shareholder interests  Annual grants and 3- to 5-year vesting period  Upon satisfaction of return target/hurdles 
*Total Guaranteed Package (TGP).
The above arrangements are reviewed on an ongoing basis to allow for significant changes in operating conditions or governance frameworks. 

Remuneration details for executive directors and members of the Executive committee 

In addition to the requirements of the disclosure of the executive directors in compliance with King III guidelines, Sanlam has decided to also disclose information on its Executive committee. The following section provides a detailed description of each component of the remuneration paid to executive directors and members of the Executive committee – including the purpose of the component and its implementation – as far as these individuals are concerned. 

Total Guaranteed Package (TGP)


TGP is a guaranteed component of the remuneration offering. It forms the basis of the organisation’s ability to attract and retain the required skills. In order to create a high-performance culture, the emphasis is placed on the variable/performance component of remuneration rather than the guaranteed component. For this reason this component of remuneration is normally positioned on the 50th percentile of the market. Included in TGP, Sanlam provides its employees with a flexible structure of benefits that can be tailored, within certain limits, to individual requirements. These include:
> Retirement fund
> Group life cover
> Medical aid
> Travelling allowance / Motor-car scheme

Process and benchmarking

TGP is set by reference to the median to upper quartile level paid by a group of comparator companies which Sanlam considers to be appropriate. The comparator group is made up of 20 to 22 companies and these companies have similar characteristics to Sanlam in terms of being in the financial services sector (but not limited only to this sector), market capitalisation and international footprint. In terms of the process followed in benchmarking TGP against these comparator companies, Sanlam obtains data from a number of global salary surveys and the data is then analysed using the Watson Wyatt grading system. In addition to this benchmarking process, when setting TGP levels Sanlam also takes into account the skills, potential and performance of the individual concerned. 

GHRC’s role

Upon conclusion of the benchmarking process, proposals regarding basic salary level increases for the following year are considered and approved by the GHRC. The GHRC also reviews and approves the adjustments to basic salary of each of the executive directors and members of the Executive committee. 


TGP levels are mostly positioned around the 50th percentile of the comparator market. In certain instances, however, there may be a salary sacrifice in favour of the variable component. Where specific skills dictate, TGP levels may be set in excess of the 50th percentile. 


The table below shows the TGP (rand) to each of the executive directors and members of the Executive committee:
Individual TGP as at
1 January 2010
TGP as at
1 January 2011
as % of TGP
Johan van Zyl* 4 975 300 5 300 000 6,5
Kobus Möller* 3 313 700 3 399 538 2,6
Yvonne Muthien* 2 200 000 2 354 000 7,0
Temba Mvusi*, ** 2 158 920 2 288 455 6,2
Lizé Lambrechts 3 102 000 3 205 937 3,4
Johan van der Merwe 3 890 100 4 045 918 4,0
Heinie Werth 2 651 400 2 907 689 9,7
André Zeeman 2 343 840 2 570 642 9,7
Executive director.
**  Receives an additional amount equal to 10% of TGP from Santam for services rendered.
***  Ian Kirk is also a member of the Sanlam Executive Committee. Details of his remuneration can be found in the 2010 Santam Annual Report.
The average salary increase paid to executive directors for 2010 was 5,6% and that of members of the Executive committee for 2010 was 6,6% compared with an average salary increase paid to all employees of 7%. 
Annual bonus plan


The purpose of the annual bonus plan is to align the performance of staff with the goals of the organisation and to motivate and reward staff who surpass the agreed performance hurdles. Over recent years, the focus has shifted from alignment and operational issues to growing the business and ensuring that it is managed in a sustainable way. 

GHRC’s role

The GHRC’s role with regard to the annual bonus is to:
> determine the structure of the annual bonus plan and ensure that it provides a clear link to performance and is aligned with the Group’s business strategy; 
> agree on the performance drivers for the annual bonus plan;
> agree on the split between business, Group and personal performance criteria; and
> set the threshold, target and stretch targets for the annual bonus plan and the percentage of basic salary which can be earned at each level by each group of employees. 

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