Directorate

While the Board remains accountable and responsible for the performance and affairs of the company, it delegates to management and board committees certain functions to assist the board in properly discharging its duties.

Each board committee acts within agreed, written terms of reference that are reviewed and updated from time to time. The chairperson of each board committee reports back to the board on the deliberation of the committee meeting, and minutes of board committee meetings are provided to the board for comment and noting.

The chairperson of each board committee is required to attend annual general meetings to answer questions raised by shareholders.

Audit committee

Members:
Ms HH Hickey (chairperson – independent non-executive director)
Mr FD Butler (independent non-executive director)
Ms D Naidoo (independent non-executive director)

The audit committee comprises three independent non-executive directors.

The chairperson is an independent non-executive director. The Group managing director, finance director, head of internal audit and the external audit partner are invited to attend meetings. The audit committee met on four occasions during the year under review. Details of the attendance by members of the audit committee is provided in the 2010 annual report.

The Audit Committee operates according to written terms of reference approved by the Board, which were reviewed in the year in accordance with the King III Report and the Companies Act 2008.

The responsibilities of the audit committee include:

• Oversee integrated reporting, and in particular has regard to all factors and risks that may impact on the integrity of the integrated report.
• Review the interim and annual financial statements and consider whether they are complete, consistent with information known to the Committee members and reflect appropriate accounting principles.
• Review the adequacy of management’s efforts in maintaining effective internal control systems, including information technology security and control.
• Review the performance of the external auditors and exercise final approval on the appointment or discharge of the auditors.
• Review the performance of internal audit and ensure that there exists no unjustified restrictions or limitations.
• Review the company’s finance function in order to satisfy itself of its expertise, resources and experience, assess the expertise and experience of the finance director and disclose the results of the review in the Audit Committee’s report in the company’s annual financial statements.
• Exercise oversight of financial reporting risks, internal financial controls, fraud and non-compliance risks as it relates to financial reporting and IT risks as it relates to financial reporting.

Services rendered by the external auditors during the year under review, and approved by the audit committee, comprised mainly compliance and other assurance-based engagements, including opinion work not related to or associated with any prohibited services in terms of the adopted policy.

Both the internal and external auditors have unrestricted access to the audit committee. The external auditors may report findings to the committee in the absence of members of executive management. It is a duty of the audit committee to ensure that the independence of the external auditor is not impaired.

PricewaterhouseCoopers Inc. act as the external auditors of the company. The audit committee is satisfied that the external auditors observe the highest levels of business and professional ethics and that their independence is not impaired. The audit committee has also reviewed the external auditor’s registration requirements in terms of the JSE Listings Requirements and is satisfied that the external auditors are compliant.

The audit committee is responsible for recommending to the board and shareholders at the annual general meeting for consideration, the approval and appointment of the external auditors.

The audit committee has, in accordance with the JSE Listings Requirements as amended, evaluated the experience and expertise of the finance director and is satisfied that he has the requisite experience and skills to fulfil his responsibilities competently.

Members of the audit committee conducted a self-evaluation exercise in order to identify areas that require attention and appropriate action to be taken in this regard. Based on this self-evaluation exercise, the audit committee will focus on strengthening its oversight role in relation to legal compliance and ensuring appropriate continuous development for audit committee members. At the end of each financial year, the audit committee reviews compliance with its terms of reference and makes appropriate recommendations to address any areas which may require improvement. During the year under review, the audit committee has satisfied its obligations in accordance with its terms of reference. The audit committee has also evaluated its compliance with the Corporate Laws Amendment Act, 2007, the Companies Act 2008 and the amendments to the JSE Listings Requirements as and when applicable, and the members were satisfied that the committee met the requirements of all.

Internal controls

The Group maintains systems of internal control over financial reporting and the safeguarding of assets against unauthorised use, acquisition or disposal. The internal audit function monitors these systems of internal control and reports its findings and recommendations to management. Corrective action is taken as and when control deficiencies or opportunities for improvement in the systems are identified.

The purpose, authority and responsibility of the internal audit function are formally defined in an internal audit charter, which has been approved by the board and which is consistent with the recommendation of the Institute of Internal Auditors.

The adequacy and capability of the Group’s internal audit structure is subject to review by the audit committee to ensure that adequate, objective internal audit assurance standards and procedures exist within the Group. In this regard, appropriate recommendations are made by the audit committee from time to time to ensure the continued improvement of the internal audit department.

The audit committee tables audit plans for each business annually. Follow-up audits are conducted in areas where major weaknesses are identified.

The system of internal control is designed to manage rather than eliminate the risk of failure to achieve business objectives and can provide reasonable, but not absolute, assurance against material misstatement or loss.

The Group maintains a vigilant stance against corporate crimes and to that end a whistle blowing mechanism has been implemented with reports submitted directly to the audit committee through internal audit.

The whistle blowing line is intended to ensure that a proactive approach is applied to fraud with a focus on prevention, detection and investigation. This provides assurance to stakeholders that fraud risks within the company are being managed and mitigated.

Social, ethics and risk committee

Members:
Mr FD Butler (chairman - independent non-executive director)
Mr RB Humphris
Mr N Crosse
Mr R Harvenstein

The risk management committee has established itself as an important management tool with inputs from all levels of management, operating in accordance with the framework and guidelines of a written risk policy.

It comprises members of the board and executive management, and is chaired by the managing director. It is the board’s view that management has the requisite experience and knowledge to identify and appropriately manage the business risks of the Group.

The committee considers as many potential sources of risk as possible. The Group’s SHEQ officer and other specialist employees attend meetings by invitation.

The risk management philosophy of the Group is summarised as follows:

• Risk is an inherent part of operating a business, in that taking no risk implies no reward.
• Ensure a culture of open and frank debate on risk.
• Know, understand and manage the risks affecting the business, consistent with achieving business objectives and enhancing shareholder value.
• Reduce the cost of risk over the long term.
• Minimise the possibility of catastrophic loss.
• Carry the costs of the risks within the business as far as possible, depending on the assessment of the Group’s current cash flow strength.
• Ensure flexible and appropriate responses to changes in the business and legislative environment affecting risks.
• Continuously develop and implement an ongoing risk management process throughout the Group.
• Purchase adequate level of indemnity and cover, where economical and appropriate.

While operational risk can never be fully eliminated, the Group endeavours to minimise it by ensuring that the appropriate infrastructure, controls, systems and human resources are in place throughout the business units. At the operational level, senior management identifies major risks, promotes awareness, introduces an applicable control environment and procedures and applies risk monitoring.

The philosophy of the Group’s short-term insurance programme is to self-insure inevitable and smaller losses which are not administratively cost effective to submit to insurers, and to develop self-insurance and aggregate deductibles over the longer term. The Group transfers only potential catastrophic losses to insurers. Apart from motor vehicles, assets are traditionally insured for full replacement values.

Remuneration committee

Members:
Prof SS Loubser (Chairman – independent non-executive director)
Mr NJ Crosse (non-executive director)
Ms D Naidoo (independent non-executive director)

To ensure sufficient impartiality, the remuneration committee comprises three non-executive directors. The Group managing director and the Group human resources director attend meetings by invitation. The chairman of the board chairs the remuneration committee. As stated above, the structure and composition of the Remuneration Committee, particularly that of chairman, is currently being reviewed in order to comply with corporate governance best practice.

Other directors who do not serve on the committee may be invited to attend meetings for any special expertise they may have, or to explain the performance of an incumbent under review.

The Remuneration Committee operates under written terms of reference which are reviewed from time to time. The main responsibilities of the Remuneration Committee are to:

• Obtain research and decide on the compensation packages and other terms of employment of the directors, the Group managing director and the managers reporting to him.
• Establish guidelines relating to the compensation and benefit arrangements for all employees of the Group.
• Prepare suggestions for the payment of directors’ fees for consideration by the board (and subsequent approval by the shareholders at the annual general meeting).

The Remuneration Committee’s overall strategy is to ensure that employees are rewarded for their contribution to the Group’s operating and financial performance, by taking into account industry, market and country benchmarks. In order to promote an identity of interests with shareholders, share incentives are considered to be critical elements of executive incentive pay. Schedules setting out directors’ remuneration and equity interests appear in the directors’ report. Bonuses for senior executives are based on an economic value added (EVA) formula, which has been in place for many years. It is practice within the Group to spread payment of a portion of the bonus amount over a number of years. This rollover principle contributes to stable executive teams at Group and divisional levels.

The Group chairman’s compensation does not form part of the mandate of the remuneration committee and is negotiated with non-executive members of the board as and when required.

Succession planning for the Group managing director is not dealt with by the Remuneration Committee, but by the Board as a whole.