Introduction

As a new-era company, Exxaro understands that diversity, empowerment and development at every level can only
be achieved through effective, transparent and accountable leadership.

Exxaro’s leadership, in turn, recognises that good corporate governance practices are vital in maintaining high standards of integrity, professionalism and ethical behaviour. Exxaro’s directors are fully committed to embedding the principles of transparency and accountability in the group’s various business operations, ensuring the creation of value for all stakeholders.

In making good governance a hallmark of Exxaro, the directors are guided by established tenets in creating longterm value for all:

• Adhere to sound principles of direction and management
• Implement best practices on corporate management
• Keenly understand conceptual issues in corporate governance, including a review of recent developments in better understanding corporate governance systems and mechanisms
  
• Clarify the issues pertaining to the board of directors and management
• Recognise shareholder/stakeholder rights and responsibilities.
  

Best-practice corporate governance structures ensure a dynamic cycle of improvement where every individual is guided by a common set of values as we expand our quality portfolio of assets. At Exxaro, our values guide the way the organisation is managed and controlled. These values appear here.

Compliance with King II

The Exxaro board, its committees and management believe compliance is key in maintaining the group’s values. The group supports the provisions and principles of corporate governance as defined by the King II report and the Listing Requirements of the JSE. In the review period, the group complied in all material respects with the Code of Corporate Practices and Conduct published in King II and the Listing Requirements of the JSE.

To ensure that excellent corporate governance practices are entrenched in the Exxaro group, all entities are obliged to subscribe to the spirit and principles of King II. While the Exxaro board takes overall responsibility for compliance with King II, the directors of subsidiaries are required to continuously monitor compliance with these principles within their legal entities.

Ethics

In line with Exxaro’s value of honest responsibility, compliance with the group’s code of ethics is monitored by an executive general manager, the group risk manager and the company secretary, and awareness of ethical behaviour is encouraged throughout the group by communicating regularly with employees.

During the year, all business units were assessed for risks related to corruption. Training in anti-corruption policies and procedures is integrated into the Exxaro induction programme for new employees and during annual competence update training for existing staff.

Formal disciplinary measures are in place to deal with any identified incidents of corruption. In addition to Exxaro’s other compliance and enforcement activities, a reporting hotline (“whistle-blowing”) has been established through which all stakeholders can report suspected corruption, other reportable irregularities, or contraventions of group values with guaranteed anonymity.

Numerous alleged irregularities were reported on the hotline with one case of corruption resulting in crimina prosecution.

Exxaro regularly participates in industry initiatives focused on developing equitable public policies for the mining sector. However, the group does not directly or indirectly support political parties, individual politicians and relate dinstitutions through financial or in-kind contributions.

We have exceeded all key South African legislative requirements for transformation. Best practice corporate governance structures are in place and we will continue to set the standard in developing and training people — within and beyond the company — to address the critical skills shortage in South Africa.

Board of directors

Functions

The board is the focal point of Exxaro’s corporate governance system and remains ultimately accountable and responsible for the company’s performance and affairs. The board charter clearly sets out the purpose and composition of the board, responsibilities of board members, requirements for board meetings and remuneration of directors. The charter was reviewed during the year to assess compliance with the current regulatory framework and changes made where necessary.

The primary responsibility of the board is to determine the company’s purpose and values and provide strategic direction. It is also responsible for identifying key risk areas and performance indicators, monitoring performance against agreed objectives, advising on financial matters and reviewing the performance of executive managemen tagainst defined objectives and industry standards.

Exxaro’s policy on non-audit services, which is annually reviewed by the committee, details which services may or may not be provided by Exxaro’s external auditors and covers:

• basic accounting assistance
• payroll services
• tax services
• human resources services
• information technology services
• appraisal or valuation services
• legislative and administrative decision-making and corporate governance
• internal audit and risk management.
  
  

The above policy was complied with in the year under review.

ATTENDANCE
		Appointed
Director		to committee	Feb	May	Aug	Nov
Dr D Konar (chairman)		11 Feb 02	•	•	•	•
RP Mohring		30 May 07	n/a	•	•	•
NL Sowazi		30 May 07	n/a	•	•	•

The committee consists of five members with an independent chairman. The CEO and chief operating officer (COO) attend meetings as ex officio members.

General managers of commodity businesses, safety/health/environment, human resources and technology management attend meetings by invitation. Suitably qualified people may be co-opted onto the committee when necessary to render specialist services.

The committee meets at least three times a year.

Role, purpose and principal functions

The purpose of the committee is to develop the framework, policies and guidelines for health, environmental and safety management group-wide.

• oversee the development of policies and guidelines for safety, health, environmental management
• review the policies and performance of the company as a whole on the progressive implementation of SHE policies
  
• encourage independently managed subsidiaries, associates and significant investments to develop their own SHE policies that are consistent with those of the group
  
• receive reports on substantive SHE risks and liabilities
• monitor key indicators on accidents and incidents and, where appropriate, ensure this information is communicated to other companies managed by or associated with the company
  
• consider for adoption substantive national and international regulatory and technical developments
• facilitate participation, co-operation and consultation on SHE matters with government, national and international organisations, supernational authorities, other companies and other SHE associations.
  

TREMCO

During the year, the human resources, remuneration and nomination committee was merged with the transformation committee to form TREMCO. This was done to minimise duplicated responsibilities as transformation has a strong human element.

Composition and meeting procedures

The committee consists of four members, with the chairman being an independent director. The CEO, chief financial officer (CFO), executive general manager: human resources, and compensation and benefits advisers maybe invited to attend any meeting.

Suitably qualified people may be co-opted onto the committee to render the specialist services required to assist the committee in its deliberations on any particular matter.

The committee meets at least five times a year.

Role, purpose and principal functions

• make recommendations on the composition of the board and board committees and to ensure that the board consists of individuals equipped to fulfil the role of director of the company
  
• guide, monitor, review and evaluate the company’s progress on transformation, specifically the three primary pillars of employment equity, community involvement and preferential procurement
  
• ensure the company’s remuneration strategies, packages and schemes are related to achieving business objectives and delivering shareholder value
  

• ensure compliance with statutory and best-practice requirements on labour and industrial relations management, and that appropriate human resources strategies, policies and practices are in place.
  

Management committees

Executive committee

The executive committee (Exco) is chaired by the CEO and consists of 13 members. It meets formally each month and ad hoc when necessary.

Exco is mandated, empowered and held accountable for implementing the strategies, business plans and policies determined by the Exxaro board. It is also responsible for managing and monitoring the business affairs of the company in line with approved plans and budgets, prioritising the allocation of capital and other resources as approved by the board and establishing best management and operating practices.

Exxaro follows a structured process to ensure it invests in projects aligned with group strategy and which yield the required returns. In this process two forums are engaged: an initial assessment is completed by the strategic co-ordination forum and a comprehensive review is then undertaken by the investment review committee. The offshore review committee assists the board in financially co-ordinating Exxaro’s portfolio of offshore investments and interests.

• The strategic co-ordination forum

  The forum, chaired by the COO, meets every six weeks and its primary purpose is to ensure that all new initiatives are aligned with the Exxaro group strategy.
  
  

• ensure alignment of strategy execution and new developments
• determine strategic priorities and co-ordinate, support and monitor strategic initiatives throughout the group
• allocate resources and accountabilities for investigations or studies.
  
  

• Investment review committee

  The committee, chaired by the CFO, meets monthly and its primary responsibility is to undertake comprehensive investment reviews and assess the technical feasibility and financial viability of proposed capital projects or investments prior to these requests being presented to the executive committee and Exxaro board for approval.
  
  

• each project meets the strategic, technical and investment requirements defined by the board
• critical decisions, project parameters and potential risks are adequately addressed and researched prior to recommending the commitment of funds
  
• each project enhances the portfolio value of Exxaro.

Offshore review committee

• financial control and governance of Exxaro’s offshore investments and multi-disciplinary interests
• efficient financial structuring
• providing for offshore investment funding and expenditure
• ensuring that financial reporting, auditing and tax-related issues are properly managed
• ensuring that the company’s overseas offices are effectively staffed, managed and used.

Exxaro acknowledges the importance of intellectual property and its proper management. Chaired by the executive general manager: corporate services, an intellectual property committee has been established to ensure that possible innovations are exploited and, if appropriate, patented and properly maintained. Copyright, trademark and possible infringement issues are also addressed by this committee. The committee also comprises the company
secretary, representatives of the finance and technology departments, and Exxaro’s legal representatives.

Sustainability

Sustainability is a cornerstone of the Exxaro group and our approach is embedded in the first of our corporate values which states “empowered to grow and contribute”. Our aim is to encourage entrepreneurship as far as possible to transform this value into reality for as many stakeholders as possible (read more).

Black economic empowerment codes of good practice

While we understand that companies need to verify the BEE status of suppliers in terms of the Codes of Good Practice, Exxaro confines its reporting to the requirements set out in the Mineral and Petroleum Resources Development Act and its associated mining charter scorecard.

• the majority of voting rights are exercised by black people
• the majority of profits accrue to black people
• the majority of the board comprises black people.
  
  

Disclosure policy

The board has adopted a formal continual disclosure of interests policy to ensure full and timely disclosure by directors.

External communications

Exxaro believes that briefing analysts, investors and fund managers is an important element of maintaining investor relations. However, it will only provide “price-sensitive” information after disclosing that information to the market.

Broader stakeholder communication plans have been developed and are currently being implemented. The group believes in clear, transparent, concise and timely dissemination of relevant information to all stakeholders. This is achieved through a multitude of channels and media, including written, electronic and verbal presentations.