CORPORATE GOVERNANCE
Remgro endorses and is fully committed to compliance with the principles of the King II Reports Code of Corporate Practices and Conduct. All the Companys listed subsidiaries and associated companies endorse the Code of Corporate Practices and Conduct where applicable.
The Company is an investment holding company. Reference to the Company may also denote the Company and its wholly owned subsidiaries. Each entity in which the Company is invested has its own governance structures. In giving effect to its risk management responsibilities, Remgro has also approved the maintenance of a broader continuous risk management review programme to ensure a coherent governance approach throughout the Group.
The Remgro Board advocates sound governance practices by all entities the Company is invested in. Effective corporate governance forms part of Remgros investment assessment criteria. It is monitored by Remgros non-executive representation on those boards.
In setting the parameters for this report, guidance was taken from the Global Reporting Initiative (GRI) Boundary Protocol. Disclosure is limited to those entities that could generate significant impact on the Companys sustainability performance and where it exercises control over the financial and operating policies of such entities, save where those entities disclose the relevant information in their own publicised annual reports.
The following are the notable aspects of the Companys corporate governance.
BOARD CHARTER
The Board has adopted a formal charter which has been implemented to:
- identify, define and record the responsibilities, functions and composition of the Board, and
- serve as a reference to new directors.
The charter has been endorsed by all directors of Remgro Limited and is available for inspection at the registered address.
The Board, having reflected on the following, is satisfied that, for the year under review, the required actions contained in the charter were executed satisfactorily.
COMPOSITION OF THE BOARD
Remgro has a fully functional Board that leads and controls the Group. On 31 March 2007, the Board consisted of five executive and ten non-executive directors of whom five are independent.
The roles of the chairman and the chief executive officer are separated. The chairman is a non-executive director but is not independent.
Board members are listed in this report.
ROLE AND RESPONSIBILITIES
The Board is ultimately responsible for the strategic direction, risk appetite, performance and affairs of the Company. In directing the Group, the Board exercises leadership, integrity and judgement based on fairness, accountability, responsibility and transparency so as to achieve continuing prosperity for the Group.
After approving operational and investment plans and strategies, the Board empowers executive management to implement these and to provide timely, accurate and relevant feedback on progress made.
The Board remains accountable for the overall success of the approved strategies, based on values, objectives and stakeholder requirements, and for the process and policy to ensure the effectiveness of risk management and internal controls. The Board is the focal point of the Groups corporate governance and is also responsible for ensuring that it complies with all relevant laws, regulations and codes of best business practices.
The Board is responsible for monitoring the operational and investment performance of the Group including financial and non-financial aspects. It is also responsible for ensuring that procedures and practices are in place which will protect the Companys assets and reputation.
The Board has established the following subcommittees to assist it in discharging its duties and responsibilities:
- The Remuneration and Nomination Committee, consisting of four non-executive directors, advises the Board on the remuneration and terms of employment of all directors and members of senior management and is responsible for succession planning. Additionally, it annually participates in evaluating directors. The committee is also responsible for nominating directors. Directors do not have long-term contracts or exceptional benefits associated with the termination of services. The chairman of the Board is chairman of this committee. The chief executive officer attends meetings by invitation.
The committee has a formal mandate and its effectiveness is evaluated by the Board in terms thereof.
- The Audit and Risk Committee, consisting of three non-executive directors and one executive director, reviews the adequacy and effectiveness of the financial reporting process; the system of internal control; the management of financial, investment, technological and operating risks; risk funding; the internal and external audit processes; the Companys process for monitoring compliance with laws and regulations; its own code of business conduct; and procedures implemented to safeguard the Companys assets. An independent non-executive director is chairman of the committee.
The committee has a formal mandate and its effectiveness is evaluated by the Board in terms thereof. The committee evaluates the effectiveness of the treasury committee.
- The Executive Committee, consisting of all five executive directors, meets regularly between Board meetings to deal with issues delegated by the Board.
The Board is responsible for the appointment and induction of new directors. Non-executive directors are selected for their broader knowledge and experience and are expected to contribute effectively to decision-making and the formulation of strategies and policy.
Executive directors contribute their insight of day-to-day operations enabling the Board to identify goals, provide direction and determine the feasibility of the strategies proposed. These directors are generally responsible for taking and implementing all operational decisions.
MEETINGS AND QUORUM
The articles of association requires three directors to form a quorum for Board meetings. A majority of members, preferably with significant representation of the non-executive directors, are required to attend all committee meetings.
The Board meets at least six times a year. The Audit and Risk Committee meets at least four times a year, and the Remuneration and Nomination Committee meets at least once a year.
MATERIALITY AND APPROVAL FRAMEWORK
Issues of a material or strategic nature, which can impact on the reputation of the Company, are referred to the Board. Other issues, as mandated by the Board, are dealt with at senior management level.
The minutes of all the committee meetings are circulated to the members of the Board. Issues that require the Boards attention or a Board resolution, are highlighted and included as agenda items for the next Board meeting.
REMUNERATION PRINCIPLES
The Companys policy that guides the remuneration of all directors and senior management is aimed at:
- Retaining the services of existing directors and senior management
- Attracting potential directors and senior managers
- Providing directors and senior management with remuneration that is fair and just
- Ensuring that no discrimination occurs
- Recognising and encouraging exceptional and value-added performance
- Ensuring that remuneration structures are consistent with the Companys long-term requirements
- Protecting the Companys rights by service contracts
In accordance with these objectives, the Remuneration and Nomination Committee annually reviews and evaluates the contribution of each director and member of senior management and determines their annual salary adjustments. For this purpose it also considers salary surveys compiled by independent organisations.
DUTIES OF DIRECTORS
The Companies Act places certain duties on directors and determines that they should apply the necessary care and skill in fulfilling their duties. To ensure that this is achieved, best practice principles, as contained in the King II Report on Corporate Governance for South Africa, are applied.
The Board is also responsible for formulating the Companys communication policy and ensuring that spokespersons of the Company adhere to it. This responsibility includes clear, transparent, balanced and truthful communication to shareholders and relevant stakeholders.
After evaluating in terms of their respective charters, the directors are of the opinion that the Board and the subcommittees have discharged all their responsibilities.
CONFLICTS
Mechanisms are in place to recognise, respond to and manage any potential conflicts of interest. Directors sign, at least once a year, a declaration stating that they are not aware of any undeclared conflicts of interest that may exist due to their interest in, or association with, any other company. In addition, directors disclose interests in contracts that are of significance to the Companys business and do not participate in the voting process of these matters.
All information acquired by directors in the performance of their duties, which is not disclosed publicly, is treated as confidential. Directors may not use, or appear to use, such information for personal advantage or for the advantage of third parties.
All directors of the Company are required to comply with the Remgro Code of Conduct and the requirements of the JSE Limited (JSE) regarding inside information, transactions and disclosure of transactions.
COMPANY SECRETARY AND PROFESSIONAL ADVICE
All directors are entitled to seek independent professional advice concerning the affairs of the Group, at the Companys expense.
All directors have unlimited access to the services of the company secretary, who is responsible to the Board for ensuring that proper corporate governance principles are adhered to. Board orientation or training is done when appropriate.
GOING CONCERN
At least once a year the Board considers the going concern status of the Group with reference to the following:
- Net available funds and the liquidity thereof
- The Groups residual risk profile
- World economic events
- The following years strategic business plan, budgets and cash flow models
- The Groups current financial position
SERVICE COMPANY
Since the establishment in 2000 of Remgro Limited and VenFin Limited, M&I Management Services (Pty) Limited has rendered management and support services to these two and their group companies. Neither Remgro, nor VenFin had a financial interest in M&I Management Services.
The service agreements with Remgro and VenFin stipulate that fees will not be more than 0.463% of market capitalisation. In the previous year to 31 March 2006, fees paid by Remgro amounted to R81 million, or 0.137% of market capitalisation.
During the past financial year a subsidiary of Remgro, M&I Group Services Limited (new M&I), has acquired the business of M&I Management Services and recovers some of its costs through fees for services rendered to group companies. An agreement has also been negotiated with VenFin to provide certain support and administrative services to the VenFin group of companies at fees determined annually.
The net cost of the new M&I will be part of the corporate costs of Remgro and is comparable with the fees paid in the past by Remgro to M&I Management Services. Refer also to note 19.
RISK MANAGEMENT AND INTERNAL CONTROL
In determining strategic goals, the Board of Directors has ensured its understanding of all the risks accepted in the Companys investment portfolio with a view to maximising sustainable profits and growth. These risks are continuously measured against the risk appetite determined by the Board.
The categories of risk identified can be broadly classified as follows:
- Performance risk, relates to those risks managed by the Board and includes strategic risk, opportunity risk, reputation risk, liquidity risk, and also risks relating to corporate governance, social responsibility and stakeholder relations.
- Investment risk, inherent to existing investments. The Board has delegated the responsibility for investment risk management to the boards of the various investment companies. The Remgro Board monitors that these delegated responsibilities are effectively executed by appointing its own members in non-executive capacities on those boards.
- Operational risk, includes operational effectiveness and efficiency, safeguarding of assets, compliance with relevant laws and regulations, reliability of reporting, effective operational risk management, human resource risk, technology risks, business continuity and risk funding.
The Board has documented and implemented a comprehensive risk management system, which incorporates continuous risk assessment, evaluation, and internal control embedment.
The Enterprise-wide Risk Management system applicable to the Company is as follows:
- Group risk analysis
The purpose of the Group risk analysis is to reconfirm and update the Groups consolidated risk profile. This ensures that the residual risk profiles by investment, and in total, remain within the risk tolerances set by the Board and that new emerging risks are identified and responded to in time.
- Activity risk analysis
The activity risk assessment further refines the Companys risk assessment at key activity level relevant to the achieving of detailed objectives and ensures that risk management initiatives are duly prioritised and resourced appropriately.
- Operational risk management
The Board influences the control environment by setting ethical values and organisational culture while ensuring that management styles, delegated authorities, business plans and management competency are appropriate, effective and efficient.
Operational risks are managed mainly by means of internal control. This is a process designed to provide reasonable assurance regarding the constant achievement of organisational objectives and to reduce the possibility of loss or misstatement to within accepted levels. The effectiveness of risk management is measured by the level of reduction of the Companys cost of risk.
Management structures have been established to focus on certain key risk activities, including treasury, safety, health, environment, asset protection, tax and risk funding.
- Treasury
Given the nature and its extent, control of treasury risk is regarded as very important. The responsibility of M&I Group Services Limiteds central treasury department is to manage the risks associated with rates of return, compliance, liquidity as well as investment, financing and foreign exchange transactions in accordance with a written mandate.
A treasury committee, constituted of nominated members of the Risk and Audit Committee and senior management, is responsible for determining policy and procedures as well as clearly defined levels of competency and gives regular feedback to the Board. The treasury policy also ensures that the return on cash reserves is optimised taking cognisance of investment and credit risk and the Groups liquidity requirements.
V&R Management Services, a company registered and managed in Switzerland, renders treasury services to R&R Holdings and Remgro Investments ( Jersey). These two companies have service contracts which record V&Rs obligations and responsibilities concerning their treasury policies as approved and monitored by their Boards. V&Rs activities and risk management practices are annually subject to independent audits. Remgro and VenFin each holds 50% of V&R.
- Risk funding
Risk funding is viewed as a cost of capital activity aimed at reducing the Companys residual exposures to potential risk with catastrophic impacts or risks which cannot be managed cost beneficially.
- Integrated assurance
The Board does not only rely on the adequacy of the control embedment process but regularly receives and considers reports on the effectiveness of risk management activities. The Audit and Risk Committee ensures that the assurance functions of management as well as internal and external audit are sufficiently integrated.
The various assurance providers to the Board comprise the following:
- The Executive Committee and senior management consider the Companys risk strategy and policy along with the effectiveness and efficiency thereof.
- The Audit and Risk Committee considers the adequacy of risk management strategies, systems of internal control, risk profiles, legal compliance, internal and external audit reports and also reviews the independence of the auditors, the extent and nature of their engagements, coverage and findings. This committee also reviews the level of disclosure in the annual reports and the appropriateness of policies adopted by management, the ethics register and other loss incidents reported. The Board reviews the functionality of the Audit and Risk Committee against its charter.
Internal audit
The Companys internal audit function is fulfilled by M&I Group Services Limiteds Risk Management and Internal Audit department. It is an effective independent appraisal function and employs a risk-based audit approach, formally defined in accordance with the Institute of Internal Auditors (IIA) definition of internal auditing and documented in a charter approved by the Board. The head of this department has direct access to the chairman of the Audit and Risk Committee as well as to the chairman of the Group.
External audit
The Companys external auditors attend all Audit and Risk Committee meetings and have direct access to the chairman of the Audit and Risk Committee. Their audit coverage is adequately integrated with the Internal Audit functions without their scope being restricted.
Other services provided by the auditing firm mainly relate to tax matters and are effected by a department independent to the audit partners. Independence is further assured by terms of appointment.
The directors are of the opinion that, based on inquiries made and the reports from the internal and external auditors, the risk management programmes and systems of internal control of the Company and its dependent subsidiaries were effective for the period under review. In this regard Tsb Sugar and Wispeco are considered to be independent.
The Audit and Risk Committee has also satisfied itself that there are effective audit committees functioning at the Companys independent subsidiaries and associated companies.
DEALINGS IN SECURITIES
In accordance with the Listings Requirements of the JSE, the Company has adopted a code of conduct for insider trading. During the closed period directors and designated employees are prohibited from dealing in the Companys securities. Directors and designated employees may only deal in the Companys securities outside the closed period, with the authorisation of the chairman or the managing director. The closed period lasts from the end of a financial reporting period until the publication of financial results for that period. Additional closed periods may be declared from time to time if circumstances warrant it.
ATTENDANCE AT MEETINGS
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Audit and |
Remuneration |
|
|
Executive |
Risk |
and Nomination |
|
Directorate |
Committee |
Committee |
Committee |
Number of meetings held |
6 |
7 |
4 |
2 |
|
|
|
|
|
Attendance by directors |
|
|
|
|
J P Rupert |
6 |
|
|
2 |
M H Visser |
6 |
7 |
|
2 |
P E Beyers |
6 |
|
|
|
W E Bührmann |
6 |
7 |
|
|
G D de Jager(1) |
5 |
|
2 |
1 |
J W Dreyer |
5 |
|
|
|
D M Falck |
6 |
7 |
4 |
|
P K Harris |
5 |
|
|
2 |
E de la H Hertzog |
5 |
|
|
|
J Malherbe(2) |
3 |
|
|
|
J F Mouton(3) |
2 |
|
2 |
1 |
J A Preller (Mrs) |
6 |
7 |
|
|
D Prins |
5 |
|
4 |
|
M Ramos (Miss)(4) |
1 |
|
|
|
F Robertson |
6 |
|
4 |
2 |
T van Wyk |
6 |
7 |
|
|
(1) |
Mr G D de Jager was a member of the Audit and Risk Committee as well as the Remuneration and
Nomination Committee for six months. |
(2) |
Mr J Malherbe was appointed to the Board of Directors of this Company on 11 October 2006 and has since attended all the meetings. |
(3) |
Mr J F Mouton retired as a director of this Company on 11 October 2006. |
(4) |
Miss Ramos was appointed to the Board of Directors of this Company on 26 March 2007. |