Executive pay link to fatalities
Kumba to fine poor safety
KUMBA Iron Ore, South Africa’s biggest iron ore producer and a supplier to the global steel industry, plans to review its executive remuneration policy in a bid to reach a zero fatality rate. This follows the death of two employees in separate accidents last year.
Kumba’s remuneration committee chairperson Allen Morgan told the company’s general meeting yesterday the company was committed to revise the policy with shareholders and experts.
“Shareholders feel that the penalty for management’s poor safety performance is not severe enough, and we will look at that. We will start a consultation process after July,” Morgan said.
He added that Kumba was a caring company and, in an event of a fatality, employees received a policy payout amounting to three times their annual salary, while a life insurance policy was paid out to their children in addition to the pension payout.
A company spokesperson said the key performance area weighting for Safety, Health & Environment for the chief financial officer was 5 percent.
The spokesperson said this was linked to the chief financial officer’s visible felt leadership to instil safe behaviour in their main area of responsibility and was not specifically linked to fatalities.
The weighting for the chief executive was set at 12 percent, because they were responsible for leading the safety performance of the entire organisation, including the elimination of fatalities.
Shareholder activist Theo Botha told the meeting the company’s executives had “shot the lights out” in bonuses while there were fatalities not only in Kumba, but at parent company Anglo and its platinum subsidiary Anglo American Platinum.
“We want to have a situation where the remuneration and performance bonuses are clawed back until the company reaches zero fatalities,” he said.
Kumba said in its 2016 annual report that two employees had died, although it was fatality free in 2015.
The company said Grahame Skansi had died in a machine accident at the company’s Kolomela Mine and Gideon Dihaisi was electrocuted while working at the Sishen Mine in the Northern Cape.
Newly appointed chief executive Themba Mkhwanazi responded that safety was not something the company took lightly. SOUTH African packaging and paper group Mondi expects completed projects in Richards Bay and Syktyvkar in Russia to start making good contributions to group earnings.
However, the company admits it is facing some challenges with its operations in the other parts of the world, such as in the Czech Republic.
“We are making good progress on our capital investment projects. The recently completed projects in our Richards Bay and Syktyvkar mills are making good contributions. Ramp-up of the rebuilt paper and inline coating machine in Steti (Czech Republic) remains challenging,” the group said.
It said its investment at Swiecie in Poland was progressing well. The Polish investment is set to provide an additional 100 000 tons a year of softwood pulp and 80 000 tons a year of lightweight kraftliner.
“Obtaining approval for tax incentives and permission for the proposed new paper machines at our Steti and Ruzomberok (Slovakia) mills is ongoing and work has started on the modernisation of the Steti pulp mill,” the group said in a trading update.
Mondi also saw positive signs in some areas of the business units, which reported growth in sales volumes.
“Sales volumes grew across the group’s packaging paper, fibre packaging and consumer packaging business units compared to the first quarter of 2016. This was further enhanced by the acquisitions in our corrugated and consumer packaging businesses during 2016,” the group said.
The selling prices for the group’s main paper grades were on average below those of the comparable prior year as prices decreased last year.
“As… highlighted, during the first quarter of 2017, we implemented price increases across a number of our paper grades, although these had only limited impact in the quarter.”
The group said wood costs were higher than in the comparable prior year and benchmark paper for recycling prices rose 17percent compared with the first quarter of last year.
Benchmark polyethylene prices were higher on the back of higher crude oil prices while energy costs rose due to the weather conditions in Europe and higher energy input costs.
It said inflationary cost pressure resulted in higher fixed costs and depreciation charge because of the impact of its capital investment programme.
In the quarter to March, the group reported underlying operating profit fell 6 percent to €252million (R3.6billion) compared with €269m in the corresponding quarter last year.
It attributed the decline to inflationary cost pressures and lower selling prices.
Mondi shares fell 2.39 percent yesterday to R344.78.