Introduction

This corporate governance report sets out the key governance principles and practices of the Group, one of which is fair, honest and understandable disclosure to both our internal and external stakeholders.

The Group is fully committed to the principles of effective corporate governance and application of the highest ethical standards in the conduct of its business. We support the view that good corporate governance is essentially about leadership and for this reason we conduct the enterprise with integrity and in compliance with South African best practice, whilst taking cognisance of the value systems of the countries in which we operate.

Endorsement of the King Code

The board of directors (the board) is committed to and subscribes to the values of good corporate governance and the conduct recommended in the King Report for Governance in South Africa and in its Code of Governance Principles (collectively King II). The board endorses the principles of integrity and accountability advocated by King II.

Statement of compliance

The Listings Requirements of the JSE Ltd require that listed companies report on the extent to which they comply with the principles incorporated in King II. Accordingly, the board can declare that it has applied the practices of King II throughout the accounting period under review and has conducted the enterprise in the spirit of the King II guidelines.

The role of chairman and chief executive officer (CEO) are not vested in a single person as recommended by the JSE. Whilst the Group’s chairman is not an independent non-executive director, appropriate steps have been taken in this regard which are discussed in more detail below.

The Group’s corporate governance structures and practices are reviewed on an ongoing basis in response to changes within and external to the Group. Furthermore, the board is in the fortunate position that a number of its non-executive directors operate on the forefront of international corporate governance best practice and as such the board regularly receives best advice on a timely basis that enables it to remain ahead of the evolution of corporate governance practices in the domestic and international business environments.

Chairman and chief executive officer

The role of the chairman is separate from that of the CEO. The roles are clearly delineated and set out in the Board Charter. Each has a very specific and defined set of duties in order to prevent overlap of obligations and responsibilities and to eliminate any possible conflict of function. While the CEO takes full responsibility for the operations of the Group, the board has delegated to the chairman the responsibility to lead the board, to ensure the effectiveness of governance practices, to represent the board to shareholders and to build and maintain shareholders’ trust and confidence in the Group. As a consequence, there exists no uncertainty between the two individuals as to their respective terrain of operations.

Executive chairman and a best practice board

In regard to the appointment of an executive chairman, rather than an independent non-executive chairman, as recommended by the King II, the board appointed David Sussman, founder of the Group, as its executive chairman.

Largely on the grounds of independence, risk mitigation and objectivity, codes on corporate governance, including in South Africa King II and the JSE, have recommended that the chairman of a public listed company should be an independent non-executive director.

Globally and locally, however, this recommendation has not found favour in a significant number of instances where chairmen have had many years of experience in successfully running their companies. The fact that almost one third of all JSE listed companies still have executive chairmen is evidence of this standpoint and even more so in America where more than 80% of the S&P500 US corporations still have executive chairmen¹.

In addition, the results of world wide research² are inconclusive as to the value of the independent chairman model. To this date, empirical proof is lacking that links higher earnings or higher share prices or enhanced corporate governance oversight or risk mitigation or financial disclosure transparency, as a direct consequence of the CEO/chairman split role and independent chairman model. This was recently confirmed by the failure of well known FTSE350 corporate institutions in Britain due mainly to poor risk management decisions by their boards – of whom 79%³ had split role models in place and were led by non-executive chairmen. This clearly disputes the assertion that the presence of an independent chairman per se adds a risk mitigating value to a board or promotes an independent view that encourages a greater level of interrogation in the decision making process. These qualities can equally well be brought to the board by an executive chairman who has an independent mindedness about him. Such attributes and traits, coupled to business acumen and experience, are valued by shareholders above perceived independence. This is the case in the JD Group where the board considers the business experience, and especially the retail expertise, of David Sussman to be of inestimable value.

Of more importance than an independent chairman, it seems, is to have a balanced and ethical board. Governance experts have found the presence of certain common elements in a best practice board. Amongst others, these include sensible leadership, a board that “does the right thing”, an optimal board composition with strong minded individuals, solicitation of external advice, introspection, as well as holding of non-executive meetings.

The Group’s board has been benchmarked against these characteristics and the results are shown in the table below.

Executive chairman and balanced board