Absa Group Limited
2018 Integrated Report

We believe that there are four pillars that support sustainable value creation.

Leadership

Strong leadership is critical to value creation. For leadership to be effective it must be ethical and therefore our Board and senior executives are committed to the highest standards of integrity and ethical behaviour, and set the tone at the top through exemplary leadership. They uphold the standards of conduct required by law, the Group's code of conduct and our Values and the expected behaviours. We strove to achieve the appropriate diversity and to ensure robust governance and keen commercial decision-making.

Board leadership

Our Board has 14 members, 10 of whom are independent and three of whom are executive directors. Nine are South African, of who six are black and four are women. Our Group Chairman is an independent director and we have a Lead Independent Director.

Board composition and refresh

The magnitude and complexity of the Group influences our Board's composition and we strive to have an appropriate balance of diversity to ensure robust governance, keen commercial decision-making and strong technical inputs.

Executive leadership

The Executive Committee has 12 members of whom five are Black and three are women. The Committee is fully empowered and fully accountable for the delivery of the strategy across the different businesses and support functions.


Governance

Our Board is collectively responsible for delivering sustainable value through oversight of the management of the Group’s business, challenging and approving strategic plans proposed by management, and monitoring implementation of these plans in the context of the approved risk appetite, the available opportunities, and the macro and regulatory environment.

The Board's primary responsibilities

The Board is the apex governing-forum of the Group and is responsible for decision-making (strategy, key policies, major policy decisions and certain significant actions) and oversight management's performance and effectiveness.

Embedding Corporate governance

Good corporate governance creates and sustains shareholder value; ensures that our behaviour is ethical; and promotes positive outcomes for all stakeholders. Our approach is assessed against the King IV Code of Corporate Governance and is embedded through our Group Governance Framework.

Board Committee reviews

The Board has mandated 10 committees, to assist in the execution of the Board's duties and responsibilities.The mandates, membership and the tenure of committee members, as well as the key activities of each committee during 2018 are oulined in this section.


Risk management

Our strategy focuses on opportunities for growth and takes into account matters which are deemed material for long-term sustainability. The Group strategy is the key driver of risk and return, and is to be achieved within the parameters of the agreed risk appetite. The risk and capital management strategy is developed alongside our strategy and forms an integral part of the integrated planning process. Risk appetite defines the nature and the amount of risk that the Group is willing to take to meet its objectives.


Reward

Our reward practices have been designed to inform how we reward – the behaviours we reward and the behaviours which we discourage. The practices are embedded through performance management, recognition programmes and consequence management. Our reward philosophy underpins our growth strategy, entrepreneurial culture and risk management approach. Its objective is to direct the efforts of our people in delivering our strategy of creating sustainable value for all our stakeholders in a fair and responsible way.

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What we do What we don't do How we embed these practices
  • Define, measure, review and reward performance supportive of the achievement of our strategy, within risk appetite.
  • Assess an individual's performance through objectives as well as the Values and expected behaviours.
  • Align remuneration outcomes to the value we create for shareholders and other stakeholders, in the short, medium and long term.
  • Link pay and performance using a primarily formulaic approach, with appropriate discretion to mitigate for unintended outcomes.
  • Ensure accountability in achieving the balance between risk and reward.
  • Support the efforts of our employees in delivering our strategy which in turn creates sustainable value to our stakeholders.
  • Deliver fair and responsible remuneration, with continued emphasis to address differentials in reward considering job grade, role, diversity and other objective factors, within the context of affordability and market relativity.
  • Reward excessive or inappropriate risk taking or other negative conduct, such as mis-selling.
  • Reward short-term performance at the expense of sustainable longer-term performance.
  • Award short-term incentives to individuals in instances of underperformance in terms of their personal performance rating.
  • Effective internal communication – improving the transparency of reward outcomes through effective communication of overall performance, as well as individual reward outcomes linked to this.
  • Performance management – individuals set their objectives aligned to their team and businesses objectives and Group ambitions. Employees and managers have regular performance and development conversations through both our structured performance assessment cycle as well as on an ongoing basis through informal and formal engagements.
  • Recognition programmes – we have a diverse range of recognition programmes, structured in accordance with the business' needs, to enhance employee engagement in the respective business/function.
  • Responsible business – we drive ethical behaviour and clearly communicate the impact of inappropriate conduct by emphasising Absa Values and through the use of malus and clawback mechanisms to underpin sustainability of performance outcomes.
  • Variable pay – takes into account i) performance and risk appetite; ii) appropriate allocation of profit between shareholders, capital and employees, based on performance to business plan; and iii) affordability and market relativity.
Feedback? Comments or queries regarding these documents can be sent to groupinvestorrelations@absa.africa or groupsec@absa.africa