Governance framework

The king report on governance for South AFRICA 2009 (king III)

Remgro is committed to the highest level of corporate governance, integrity and ethics. The Board of Directors (the Board) is ultimately responsible for ensuring that governance standards are set and met and it is therein assisted by senior management who aim to instil a culture of compliance and good governance throughout the Remgro Group. This is underscored by sound and visible leadership characterised by the ethical values of responsibility, accountability, fairness and transparency. Sound corporate governance structures and processes are being applied and are considered by the Board to be pivotal to delivering sustainable growth in the interest of all stakeholders.

As a responsible investor, the Board advocates adherence to sound governance principles by all entities Remgro is invested in by using its significant influence to ensure that all Remgro’s listed subsidiaries, joint ventures and associates endorse the principles contained in King III. Effective corporate governance forms part of Remgro’s investment assessment criteria which are further monitored on a continuous basis by non-executive board representation on those investee companies’ boards. To this end the Remgro policy may be used as a benchmark.

Remgro is an investment holding company and accordingly all references to “the Group” in this context denote the Company and its wholly owned subsidiaries. Remgro’s main wholly owned operating subsidiary is Wispeco. Wispeco is operated and managed as an independent entity with an autonomous board of directors, however, the composition of its board does not comply with the independence requirements of King III due to the size of the business. Remgro’s representatives on the board of that company, however, ensure that sound corporate governance and sustainability practices are followed by Wispeco through the adoption and implementation of Remgro’s policies, processes and procedures.

Remgro’s other wholly owned subsidiaries, excluding Wispeco referred to above, are not operating companies and are administered by Remgro Management Services Limited (RMS). The members of Remgro’s Management Board are also the directors of RMS. RMS renders management and support services to Remgro and certain of its subsidiaries, joint ventures and associates and partially recovers its costs through fees for services rendered. The net costs of RMS are part of the corporate costs of Remgro.

The Board is satisfied that Remgro has met the majority of the principles contained in King III throughout the year under review. Where a principle of King III has not been adhered to as specified, this is explained where relevant. For ease of reference, however, a summary of all the principles of King III that were not applied is presented below.

• The Chairman of the Board, Mr Johann Rupert, is not an independent non-executive director but, given his knowledge of the business and his commercial ex­perience, the Board deems this arrangement not only as appropriate but also essential for achieving the business objectives of Remgro.
• The Chairman of the Board acts as ex officio chairman of the Remuneration and Nomination Committee. Although he is not independent the Board is supportive of his chairmanship of the Remuneration and Nomination Committee given the necessity to align the Company’s remuneration approach with corporate strategy. The Chairman receives no remuneration or fees from Remgro.
• The Board and subcommittees are evaluated annually, but have decided not to disclose the overview of the appraisal process, results and action plans in the Integrated Annual Report due to the potential sensitive nature thereof.
• In terms of the Board’s annual evaluation process, directors are not evaluated individually. Independent non-executive directors are, however, evaluated indivi­dually with regard to their independence and specifically the independence of the directors serving on the Board for more than nine years.
• In terms of King III, the Integrated Annual Report should disclose the terms of reference of the Board committees; however, only a summary of the terms is disclosed in the Integrated Annual Report. The complete terms of reference of Board committees are available here.
• The Board does not believe that directors should earn attendance fees in addition to a base fee. Many directors add significant value to the Group outside of the formal Board and Committee meetings, sometimes greater than they might do within the confines of a formal meeting.
• The Board does not intend to institute a formal dispute resolution process as it believes that the existing processes within the Group operate satisfactorily and do not require a more formal and separate mechanism. Shareholders have remedies in terms of the Companies Act.
• The King III Report recommends that the Company’s Sustainable Development Report be audited by an independent external professional party. Remgro’s Sustainable Development Report has not been audited but verification of the key sustainability indicators has been obtained through agreed upon procedures performed by internal audit and independent service providers.

The king report on corporate governance™ for south AFRICA 2016 (king IV)

King IV was published on 1 November 2016 and it is effective for financial years of organisations commencing on or after 1 April 2017. The Company will implement and report on the King IV requirements in its 2018 Integrated Annual Report. However, the JSE Limited (JSE) made amendments to section 3.84 of the Listings Requirements relating to certain governance practices extracted from King IV, which are mandatory for listed companies to comply with. The JSE requires listed companies to comply with these mandatory governance practices in all documents (circulars and annual reports) submitted to the JSE on or after 1 October 2017, having the effect that these mandatory governance practices apply to this Integrated Annual Report. A summary of these amendments to the Listings Requirements and page references to the application thereof in this Integrated Annual Report are as follows:

• Listed companies are required to have a separate audit committee, a committee responsible for remuneration and a social and ethics committee. The Company complies with these requirements. The relevant details in respect of the committees of the Company are set out here.
• The aforementioned committees must comprise at least three members and the composition thereof must comply with the requirements of the Companies Act and should be considered in accordance with the recommended practices in King IV on an apply and explain basis. Note that the composition of the Company’s Audit and Risk Committee and the Social and Ethics Committee complies with the Companies Act requirements. In addition, the composition of the Company’s Audit and Risk Committee, Remuneration and Nomination Committee and Social and Ethics Committee complies with the recommended practices in King IV. The composition of the relevant committees and attendance at the relevant committee meetings are set out here.
• There is a clarification that independent directors need to be determined holistically, and on a substance over form basis in accordance with the indicators provided in Sections 94(4(a) and (b) of the Companies Act and King IV. Independence of directors was determined holistically and on a substance over form basis as required by the Listings Requirements, and is set out here.
• Notwithstanding its duties pursuant to Section 94 of the Companies Act, the audit committee must also ensure that the issuer has established appropriate financial reporting procedures, and that these procedures are operating. Remgro’s Audit and Risk Committee has various aspects included in its mandate to ensure that the proper reporting processes are adequately documented, implemented, complied with, overseen by appropriate management and independently assessed. The committee’s mandate is available for inspection on here.
• The Board is still required to evaluate the Company Secretary’s competence, qualifications and experience, but no evaluation is required on the Company Secretary’s independence. The evaluation of the Company Secretary is set out here.
• A requirement to insert a race diversity policy at Board level, which is only effective in respect of annual reports issued on or after 1 June 2018. On 20 September 2017, the Board approved a Policy on the Promotion of Race Diversity, more details of which are set out on here.
• A non-binding vote is required on the Remuneration Policy and Remuneration Implementation Report of the Company and the measures that the Board commits to take in the event that either the Remuneration Policy or the Remuneration Implementation Report, or both, are voted against by 25% or more of the votes exercised on the relevant resolutions. The non-binding votes in respect of the Remuneration Policy and Remuneration Implementation Report are provided for in the Notice to Shareholders here and the engagement with shareholders in the event of a 25% of more vote against the reports is set out here.

OTHER REQUIREMENTS

The Board is further satisfied that the Company has met the requirements of the Companies Act and the Listings Requirements of the JSE Limited. Compliance with all relevant laws, regulations, accepted standards or codes is integral to the Group’s risk management process and is monitored on a continuous basis. As in previous years there has been no major non-compliance by, or fines or prosecutions against the Group during the year under review.

Since the launch of the JSE’s Socially Responsible Investment (SRI) Index, Remgro measured the effectiveness of its governance processes by means of continuous successful participation in the SRI Index. During June 2015 the JSE partnered with FTSE Russell and launched the FTSE/JSE Responsible Investment Index (RII)on 12 October 2015. Remgro has been included in this Index and the governance practices of RCL Foods Limited, being Remgro’s largest and only listed subsidiary, as well as those of Wispeco, are incorporated.