The Implats Board of directors continues to be committed to the highest levels of corporate governance standards. A healthy and ethical environment is promoted wherein every employee of the Group is expected to behave with integrity, honesty and fairness. The Board is fully cognisant of the important role corporate governance plays in the delivery of sustainable growth to all our stakeholders, and it remains one of the key focus areas of the Board and of the Company’s executive management.
During the year under review, the Board materially complied with King III recommendations as outlined in the Code of Corporate Practices and Conduct. The Group’s practices were benchmarked against King III principles, using a detailed gap analysis that was undertaken during the year. All areas of improvement that have been identified in the analysis are being effectively dealt with. The Group has materially entrenched the majority of King III principles into its internal controls, policies, terms of reference and overall procedures and will continue to do so.
The following are explanations for areas where the Company does not fully apply the principles of King III:
|King III recommendation||Implats’ application|
|The evaluation of the Board, its Committees and the individual directors should be performed every year|
|Yearly evaluations should be performed by the Chairman or an independent provider||All retiring directors undergo an evaluation, conducted by an independent service provider. A review is conducted on all retiring directors before they are recommended for re-election at the AGM. The Company performs evaluations of the Board, its Committees and the Committee chairmen once every two years, as opposed to annually, as the extended period between evaluations allows for a more reasonable assessment of performance|
|An overview of the appraisal process, results and action plans should be disclosed in the Integrated Annual Report||The Nominations Committee reviews the appraisal process, makes recommendations for areas of improvement, as identified and implements action plans accordingly. The Company includes a statement in the Integrated Annual Report in respect of the appraisals conducted as recommended by King III but does not include an analysis of the results thereof, as it is considered sensitive information|
|Companies should remunerate directors and executives fairly and responsibly|
|Non-executive fees should comprise a base fee as well as an attendance fee per meeting||The Company does not link payment to attendance at Board or Committee meetings|
|Companies should disclose the remuneration of each individual director and certain senior executives|
|The salaries of the three most highly paid employees who are not directors must be disclosed||The Company does not deem it appropriate to disclose the names of the three most highly paid employees who are not directors, and only the salaries of these employees will be published|
|Share-based and other long-term incentive schemes|
|All share-based incentives, including options and restricted or conditional shares, whether settled in cash or in shares, should align the interests of executives with those of shareholders and should link reward to performance over the longer term||The Implats Share Appreciation Bonus Plan does not have performance conditions attached and will be reviewed by the Remuneration Committee during FY2012|
The Companies Act 71 of 2008, as amended by the Companies Amendment Act 3 of 2011,
(“new Companies Act”) and other legislation
The new Companies Act came into effect on 1 May 2011, and the Board confirms its commitment to the implementation of and compliance to the new Companies Act. The Company is in the process of conducting a gap analysis to determine the requirements of the new Companies Act and related regulations against current practices and expects to be able to verify behavioural compliance and a programme towards structural compliance in the Annual Integrated Report for 2012.
The Company continues to comply with all the Listing Requirements of both the Johannesburg Stock Exchange and the London Stock Exchange. The Company also continues to maintain a sponsored Level 1 American Depositary Receipt Programme through Deutsche Bank, Americas.
Board of directors
The Board has 13 directors, comprising eight independent non-executive directors, two non-executive and three executive directors. Dr Khotso Mokhele, an independent non-executive director, is chairman of the Board. Mr DH Brown is the chief executive officer (CEO) and an executive director. The roles of the Chairman and CEO are separate.
Mr TV Mokgatlha, Mr OM Pooe and the alternate director, Mr NJD Carroll, are not considered independent given their relationship with the Royal Bafokeng Nation, a substantial shareholder of the Company. During the period under review, Ms D Earp resigned as the Chief Financial Officer of the Company and as an executive director of the Board, while Mr LJ Paton retired from the Company and resigned as an executive director.
The Nominations Committee recommends the appointment of new directors for approval by the Board according to the strategy adopted by the Board in February 2010. There is a policy in place which details procedures for appointments to the Board. Such appointments are formal and transparent and a matter for the entire Board, assisted by the Nominations Committee. When appointing directors, the Board takes cognisance of its needs in terms of skills, experience, diversity, size and demographics. The Board comprised 62% HDSAs and 31% female members and details of all Board members can be found here.
During the year under review the following members were appointed to the Board:
|1.||Brenda Berlin (Executive director)|
|2.||Hugh Cameron (Independent non-executive director)|
|3.||Mandla Gantsho (Independent non-executive director)|
|4.||Terence Goodlace (Independent non-executive director)|
|5.||Babalwa Ngonyama (Independent non-executive director)|
|6.||Mpueleng Pooe (Non-executive director)|
In terms of the Company’s Memorandum of Incorporation, Board members are appointed for a three-year term of office. Re-election of Board members is staggered to ensure continuity and succession planning. An executive director retires at the annual general meeting (AGM) after his/her 63rd birthday, and a non-executive director after his/her 67th birthday, except that in the case of a non-executive director, his/her term of office may continue on an annual basis if the majority of their co-directors request them to continue. This was the situation with Ms MV Mennell, who was asked by the Board to retain her directorship until October 2011. Ms Mennell will retire from the Board at the Company’s annual general meeting in October 2011. The names of the retiring directors and curriculum vitae are stated under the heading of “Annual General Meeting”.
The role and purpose of the Board
The Board provides overall leadership to Management in respect of setting and implementing the business strategy of the Company. In addition, the Board takes full responsibility for the management, direction and performance of the Company by exercising independent judgement on all issues reserved for its review and approval. More importantly, the Board remains cognisant of its accountability to stakeholders and that the Company conducts all its business activities in a proper and transparent manner.
The role of the Board is documented in a formal Board Charter that defines matters reserved for Board approval. The Board Charter is reviewed and updated regularly, in accordance with any new guidelines and legislation that is enacted during the period under review. The Charter will be reviewed and updated to ensure compliance with the new Companies Act and related regulations. The Board Charter is available on the Company’s website www.implats.co.za. In addition to the Board Charter, a formal delegation of authority (“Approval Framework”) is in place that defines the powers and authority of the Board and Management.
Frequency of meetings
The Board meets at least seven times a year. In addition to the four quarterly Board meetings, three full-day sessions are held annually to discuss the following:
2. Budget and Business Plans
3. Board Education and Training
The Board meets on an ad hoc basis to consider specific issues as the need arises. The progress and status of identified strategic issues are reported and monitored at the quarterly Board meetings. Non-executive directors meet both officially and unofficially with Management on a regular basis.
Board committeesThe Board functions are supported by the following committees:
- Audit and Risk Committee
- Remuneration Committee
- Nominations Committee
- Health, Safety and Environmental Committee
- Transformation Committee.
Attendance at Board meetings and Committee meetings are set out below:
Attendance at Board and Committee meetings and Annual General Meeting
|NUMBER OF MEETINGS||7||4||4||4||5||4||1|
|1||Resigned during the year under review|
|2||Appointed during the year under review|
Declaration of interests
Directors’ interests in terms of Section 75 of the new Companies Act are disclosed at every meeting.
AUDIT AND RISK COMMITTEE
Members: Michael McMahon (Chairman), Hugh Cameron, Vivienne Mennell, Babalwa Ngonyama.
During the 2011 financial year Hugh Cameron and Babalwa Ngonyama were appointed as members of the Audit and Risk Committee. The Committee comprises independent non-executive directors only. The Chief Executive Officer, Chief Financial Officer, the Head of Group Internal Audit and the external auditor attend meetings of the Committee by invitation only.The statutory and Board delegated duties of the Committee include the following:
- Monitoring the integrity of the Integrated Annual Report and other relevant external financial reports of Implats and reviewing all significant inputs, judgements and outputs in order to present a balanced and understandable assessment of the position, performance and prospects of Implats, as appropriate
- Preparing a report to be included in the annual financial statements in terms of Section 94(7)(f) of the new Companies Act which is found here
- Reviewing the Company’s internal financial control and financial risk management systems in order to safeguard Implats’ assets
- Monitoring and reviewing the effectiveness of Implats’ internal audit function
- Recommending to the Board the appointment of the external auditors, approving the remuneration and terms of engagement of the external auditors and monitoring their independence, objectivity and effectiveness, taking into consideration relevant professional and regulatory requirements
- Regulating the use of the external auditors for non-audit duties in terms of a policy document prepared and enforced which governs the use of external auditors for non-audit services
- Receiving and dealing appropriately with any concerns or complaints, whether from within or outside the Company, in terms of Section 94(2)(g) of the new Companies Act.
The Committee has adopted formal written terms of reference approved by the Board of Directors. These terms of reference mandate the Committee to investigate any activity of the Company and permit seeking information or advice from any employee and to consult externally. The internal and external auditors have unlimited access to the chairman of the Committee and they meet at least once a year, individually, with the Committee in-camera.
The Audit and Risk Committee has, in the past financial year, satisfied its responsibilities in compliance with the new Companies Act and its predecessor, the Companies Act 71 of 1973, as amended, and its terms of reference, which are aligned with King III.
Members: Mandla Gantsho (Chairman), Michael McMahon, Thandi Orleyn, Thabo Mokgatlha, Mpueleng Pooe.
The Remuneration Committee comprises three independent non-executive directors and two non-executive directors. This is in accordance with the King III recommendation that the majority of members should be independent non-executive directors. Mandla Gantsho was appointed as a member and his appointment as the Chairman of the Committee was effective on 01 February 2011. Mpueleng Pooe was also appointed to the Committee during the year under review. The Chairman of the Board, Chief Executive Officer and the human resources executive are invited to attend all Remuneration Committee meetings except when their own remuneration is under consideration.
The Company’s remuneration policy as determined by the Remuneration Committee will be presented to the shareholders for consideration at the Annual General Meeting convened in terms of the notice can be found here. The policy strives for competitive and fair remuneration to recognise and reward individual and team achievements. The Remuneration Committee has adopted formal written terms of reference which have been approved by the Board.The main functions of the Remuneration Committee are to:
- Determine fixed and variable remuneration for executive directors and senior executives
- Ensure that the right calibre of executive and senior management is attracted, retained, motivated and rewarded for individual performance and contribution to the performance of the Group
- Ensure the provision of fair, equitable and competitive conditions of employment across the Group
- Ensure the effectiveness of a comprehensive talent management process, encompassing employee development and executive succession planning
- Benchmark remuneration practices against both local and international best practice
- Monitor retirement benefits for management
- Discharge the obligations of the Board to ensure objectivity regarding the remuneration of directors
- Recommend the Company’s remuneration policy to the Board for presentation to shareholders at the Annual General Meeting, as a non-binding advisory vote
- Make recommendations on the remuneration packages of the non-executive directors, the Chairman of the Board, members (including chairmen) of sub-committees to the shareholders for approval.
Members: Khotso Mokhele (Chairman), Thandi Orleyn, Vivienne Mennell.In line with the recommendation of King III, the Committee comprises three independent non-executive directors and the Chairman of the Board is a member of the Committee. The CEO is also a permanent invitee of the Committee. The Committee assists the Board in ensuring that the balance in structure, size and effectiveness of the Board is maintained. This objective is reached by giving due consideration to the number of executive, non-executive and independent non-executive directors appointed to the Board and ensuring that the Board and its sub-committees:
- Are reviewed regularly
- Comprise the requisite mix of skills, experience, diversity and other qualities
- Align with the strategic direction and requirements of Implats
- Meet the requirements of sound corporate governance.
The Nominations Committee is responsible for ensuring that the Board, its directors and its committees are assessed regularly; proposing adjustments to the Board and its committees, as appropriate; planning for the succession of directors; recommending appointments and re-elections of directors; establishing a formal induction process and ensuring that a training and development programme is in place for Board members.
Members: Thandi Orleyn (Chairman), David Brown, Khotso Mokhele, Thabo Mokgatlha, Hugh Cameron.
The Committee comprises three independent non-executive directors, a non-executive director, and the CEO. The Committee is responsible for facilitating and monitoring socio-economic transformation with the aim of achieving a transformed workforce, across the Group.The Committee is therefore responsible for:
- Advising and guiding the Board on any decision-making process relating to transformation
- Guiding the organisation on issues of transformation
- Consulting all roleplayers to ensure commitment and adopting an inclusive approach in addressing transformation issues
- Providing quality assurance regarding the implementation of the transformation processes
- Ensuring transparency in communication.
HEALTH, SAFETY AND ENVIRONMENTAL COMMITTEE
Members: Terence Goodlace (Chairman), Khotso Mokhele, Michael McMahon, David Brown.
The Health, Safety and Environmental (HSE) Committee is responsible for the governance of health, safety and environmental matters in the Group and as a sub-committee of the Board it has been in place since 1988. Its role in respect of its terms of reference is to monitor and review safety, health and environmental performance and standards. The HSE Committee supplements and provides support, advice and guidance on the effectiveness of Management’s efforts in the areas of safety, health and the environment.As such the Committee:
- Reviews the adequacy and appropriateness of the health, safety and environmental, policies, standards, codes of practice and procedures of the Group
- Monitors HSE performance in accordance with stated goals and objectives, including measurement against South African and international norms and benchmarks
- Monitors the HSE management function and recommends improvements where considered necessary
- Reviews the HSE element of the Company’s business plan and approves the HSE section of the Integrated Annual Report
- Has the right to institute investigations into matters where inadequacies have been identified or as directed by the Board.
The HSE Committee comprises three non-executive directors and the Chief Executive Officer. The Committee saw changes in membership during the reporting period with Terence Goodlace, an independent non-executive director, being appointed a member. Terence Goodlace was appointed Chairman of the Committee on 16 November 2010.
Education and induction
Ongoing Board education remains a key focus and upon appointment, new directors are offered an induction programme tailored to meet their specific requirements. In the year under review, these included meetings with operational executives at specific points of interest to assist the new directors to gain a good understanding of the business.
At the quarterly Board meetings the directors are kept abreast of all applicable legislation and regulations, changes to rules, standards and codes, as well as relevant sector developments, which could potentially impact the Group and its operations. All education and training programmes are, where necessary, supplemented by external courses.
Board committees operate in terms of mandates reviewed and approved by the Board. A mandate sets out the role, responsibilities, scope of authority, composition and procedures the Board committee will follow when reporting to the Board. These mandates were amended during the year to comply with the requirements of King III and the new Companies Act, where applicable. All Committees report to the Board at quarterly Board meetings and reports from the chairmen of the Committees are tabled at these Board meetings.
The role of the Company Secretary is to ensure the Board remains mindful of its duties and responsibilities. In addition to guiding the Board on discharging its responsibilities, the Company Secretary keeps the Board abreast of relevant changes in legislation and governance best practices. The Company Secretary oversees the induction of new directors, as well as the ongoing education of directors. The principal responsibilities of the Company Secretary are set out in Section 88 of the new Companies Act. The Company Secretary is also secretary to the Board committees. All directors have access to the services of the Company Secretary.
Board and retiring director evaluations
During the year under review, the Board underwent its biennial evaluation. The process was led by the Nominations Committee, and carried out by PwC, as an external service provider, with assistance from the Company Secretary. The results of the evaluation will be tabled at a future Board meeting and all areas of concern arising from the report will be acted upon with a view to improvement. An annual evaluation of the Chairman of the Board was also carried out, under the direction of the Nominations Committee, and Ms Thandi Orleyn. This evaluation formed the basis for the Board’s annual appointment of Dr Khotso Mokhele as Chairman.
Finally, all directors standing for re-election are evaluated through a process overseen by the Nominations Committee and conducted by PwC for the year under review.
The re-election of the retiring directors was endorsed unanimously by their fellow directors.
Other corporate governance issues
The risk management philosophy of the Group is explained in a separate section of the report found here.
IMPLATS INTERNAL CONTROL/INTERNAL AUDIT CORPORATE GOVERNANCE STATEMENT FOR FY2011The Implats Board assumes overall responsibility for the system of internal control and ensures that controls are adequate in design and effective in implementation to provide reasonable assurance that governance, risk management and controls are in place and the set business objectives will be achieved. Implats management is responsible for ensuring that sufficient internal controls are in place to:
- Safeguard against fraud and inefficiency
- Ensure accuracy and reliability of accounting and operational data
- Secure compliance with legislation, organisational policies, procedures, standards and guidelines.
Key controls that include, inter alia, financial and operational controls, are implemented to mitigate against key risks identified by management to ensure Implats’ assets are safeguarded and that liabilities and working capital are effectively managed.
The introduction and application of the provisions of King III has led to numerous enhancements of the internal control environment over the past financial year. The combined assurance model has been one of the enhancements that have been instrumental in ensuring optimisation of the assurance provision to the Company. The process has been established and is functioning throughout the organisation.
Implats Group Internal Audit
The independence and objectivity of Implats Group Internal Audit (IGIA) is underpinned by a direct reporting line to the Audit and Risk Committee, allowing for free and unfettered access to Implats documentation. Furthermore, the Head of Group Internal Audit holds regular meetings with the Audit and Risk Committee Chairman, the Chief Financial Officer, Chief Executive Officer and Chairman of the Board of Implats. The Head of Group Internal Audit attends Executive Committee meetings. The department is adequately skilled, well supported and makes a meaningful contribution to effective governance within the Group.
IGIA continues to apply a risk-based approach to its strategy and in the conduct of its audits. The department conforms to the International Standards for the Professional Practice of Internal Auditing, as prescribed by the Institute of Internal Auditors (IIA). Overall compliance with the Standards was endorsed by a successful full external assessment of this function during May 2011.
To ensure a continued service that complies with the definition of Internal Auditing, the International Standards for the Professional Practice of Internal Auditing and the code of ethics, the quality assurance and improvement programme, which includes both internal and external evaluations, assesses the effectiveness and efficiency of the internal audit activity and identifies opportunities for improvement.
The role of IGIA has been increased through key contributions made towards enhancing the organisation’s combined assurance framework and the facilitation of the Control Self-Assessment (CSA) process. The outputs of the CSA process were used to support the written assessment of the effectiveness of internal financial controls by the Audit and Risk Committee, and internal controls by the Board.
CORRUPTION AND FRAUD
Implats adopted a zero tolerance stance on fraud and corruption throughout the Group. The expectation is that our employees, business partners, contractors and associates conduct themselves with the highest level of integrity and in line with the Implats code of ethics and fraud policy. This detailed code of ethics underpins the Group’s fraud policy, together with an organisational culture that promotes a strong and healthy ethical fibre. Both policies are fully compliant with the Prevention and Combating of Corrupt Activities Act of 2004.
Executives and line management are responsible and accountable for the implementation of the fraud policy, code of ethics and resultant actions.
A number of allegations were reported via the whistleblower line, some were reported directly to senior management and others to IGIA. In line with the fraud policy, IGIA investigates all reported allegations and, for tracking purposes, maintains a register.
A total of 36 allegations were reported Group-wide, 11 of these were regarding the South African operation and the remaining 25 were reported in Zimbabwe. In accordance with our zero tolerance policy statement, all the reported allegations were investigated.Twenty one of the allegations were founded and were dealt with in the following manner:
- In the South African operation three allegations were founded resulting in one disciplinary hearing leading to a dismissal. No disciplinary hearing could be conducted on two remaining cases due to the following:
– In the first matter, fraud was committed by an external party, the matter was therefore referred to the authorities; – In the second matter, fraud was uncovered after the staff member was retrenched.
- In the Zimplats operation 18 allegations were founded and in all these cases a reward of US$2 550 was paid to the whistleblowers. Thirteen cases were taken through a disciplinary process which did not lead to any dismissals and Management were unable to resolve the remaining five due to a lack of evidence.
CODE OF ETHICS
Implats has a code of ethics which underpins the business practice to which all employees and suppliers are expected to adhere. The policy outlines conflicts of interest, the prevention of dissemination of Company information, the acceptance of donations and gifts, and protection of the intellectual property and patent rights of the Company. The policy outlines the disciplinary action (including dismissal or prosecution) that will be taken in the event of any contravention. A “whistle-blowing” toll-free helpline is in place to facilitate the confidential reporting of alleged incidents that are reported to the Chairman of the Board.
DEALINGS IN SECURITIES
The Group observes a closed period from the end of the relevant accounting period to the announcement of the interim or year-end results, and any period when the Company is trading under a cautionary announcement, during which neither directors nor employees may deal, either directly or indirectly, in the shares of the Company or its listed subsidiaries. Certain employees, by virtue of their positions or access to information are also prohibited from trading during certain periods when they are in possession of unpublished price-sensitive information. The Morokotso Trust (ESOP) is allowed to trade during a closed period as no measure of discretion is applied during the routine trading of shares by participants and it is not a share incentive scheme in terms of the JSE Listings Requirements, and the provisions of Schedule 14.9(d) do not apply to the ESOP. All directors’ dealings require the prior approval of the Chairman and the Company Secretary retains a record of all such dealings and approvals.
The Company publishes an Integrated Annual Report that consolidates both financial and non-financial reporting and includes information on sustainable development. However, a separate Sustainable Development Report is also published and contains detailed analysis of non-financial performance. The non-financial performance indicators relating to sustainability is assured by an independent third party.
JSE SOCIALLY RESPONSIBLE INVESTMENT (SRI) INDEX
Implats has been a constituent on the JSE SRI index since the inception of the index. The index assesses the constituent’s performance in terms of triple bottom-line reporting on issues such as environment, society and economy as well as corporate governance.
Group policy prohibits political donations, either directly or indirectly.
LEGISLATIVE DEVELOPMENTSAlthough all legislative developments impact on the effective management of the Company, the following legislative developments were significant to both the Company and stakeholders:
|1.||Companies Act 2008 and related Companies Regulations, 2011|
|2.||Labour Law amendments relating to the Labour Relations Act, the Basic Conditions of Employment Act, the Employment Equity Act and the Employment Services Bill.|
|3.||Indigenisation Act (Zimbabwe).|
Sustainable development in South Africa and Zimbabwe is managed within the regulatory framework of the respective countries.
ACCESS TO INFORMATION
Implats has complied with the requirements of the Promotion of Access to Information Act of 2000. The corporate manuals are available on the website www.implats.co.za and from the Company Secretary who has been appointed the Information Officer for the Group.
Annual General Meeting
Effects and implications of the Annual General Meeting.
The notice of the Annual General Meeting includes the following items:
|1.||To adopt the annual financial statements for the Company and the Group for the year ended 30 June 2011.|
|2.||To approve the re-appointment of PricewaterhouseCoopers Inc. as independent auditor of the Company until the conclusion of the next Annual General Meeting.|
|3.||To individually re-elect the following independent non-executive directors as members of the Implats Audit and Risk Committee:
|4.||To endorse the Company’s Remuneration Policy for the 2011 financial year.|
|5.||To approve the re-appointment of Ms B Berlin, Mr DH Brown, Mr HC Cameron, Dr MSV Gantsho, Mr TV Mokgatlha and Ms B Ngonyama as directors of the Company, who retire from office at the meeting and who offer themselves for re-election. The Company’s Memorandum of Incorporation requires that at least one-third of the Board retire from office annually and stand for re-election by shareholders at the Annual General Meeting.|
|The brief biography of all the directors to be re-appointed at the Annual General Meeting are set out here.|
|6.||To authorise the directors to issue the unissued shares in the capital of the Company to such person or persons and on such terms and conditions as they deem fit, subject to a maximum of 5% of the Company’s issued share capital and to the Listings Requirements of the JSE Limited.|
|1.||To authorise the directors to buy back a maximum of 5% of the Company's issued share capital, subject to the provisions of the Companies Act 2008 and the Listings Requirements of the JSE Limited. The Company bought back approximately 2.6% of the issued share capital in previous years, utilising surplus cash to acquire shares at lower price levels.|
|2.||To approve the remuneration of the non-executive directors and of the Chairman of the Board for the financial year beginning on 1 July 2011. Details of the proposed remuneration are given in the Remuneration report.|
|3.||To authorise the directors to cause the Company to provide financial assistance to any entity which is related or inter-related to Implats, subject to the provisions of the Companies Act 2008.|
The three resolutions constituting special business require approval by a 75% majority of the votes cast by shareholders present in person or by proxy at the meeting.