Our discussion on corporate governance in this annual integrated report is limited to notable aspects of the corporate governance of this company, RMH.
FirstRand discloses relevant information on corporate governance in its own annual integrated reports, which can be accessed at www.firstrand.co.za.
In South Africa, principles and guidelines for corporate governance are set by:
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, the board applies best practice principles, as contained in King III, where appropriate. We and all our investees endorse King III. As a JSElisted entity, we also comply with the JSE Listings Requirements.
We have an "owner-manager" culture, which has been inculcated at every business in which we are invested. So, whilst our board is responsible for the maintenance of sound corporate governance, we believe that implementation is best managed at an investee company level. Therefore FirstRand has its own governance structures, including board of directors, executive teams and board committees that monitor operations and deal with governance and transformation-related issues.
ROLE AND RESPONSIBILITIES
The board's paramount responsibility is to ensure that we create value for our shareholders. In so doing, it takes into account the legitimate interests and expectations of stakeholders, which include the present and potential future investors in RMH.
In terms of its formal charter, the board's responsibilities include the appointment of the chief executive and the approval of corporate strategy, risk management and corporate governance. The board reviews and approves the business plans and monitors the financial performance of the group and implementation of the strategies. The board is the guardian of the values and ethics of the group and ensures that we are seen as a responsible corporate citizen. The board is also responsible for formulating our 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.
The board has a fiduciary duty to act in good faith, with due care and diligence and in the best interests of the group and its stakeholders. It is the primary body responsible for the corporate governance values of the group. While control is delegated to management in the day-to-day management of the group, the board retains full and effective control over the group. A formal board charter, as recommended by King III, has been adopted. All directors subscribe to a code of ethics. The code deals with duties of care and skill, as well as those of good faith, including honesty, integrity and the need to always act in the best interest of the company. Procedures exist in terms of which unethical business practices can be brought to the attention of the board by directors or employees.
Board members have full and unrestricted access to management and all group information and property. They are entitled, at the cost of the group, to seek independent professional advice in the fulfilment of their duties. Directors may meet separately with management, without the attendance of executive directors.
After evaluating their performance in terms of their respective charters, the directors are of the opinion that the board and the sub-committees have discharged all their responsibilities.
DEFINITION OF INDEPENDENCE
An independent, non-executive director is a non-executive director who:
COMPOSITION OF THE BOARD
We have a unitary board with a non-executive director as chairman. The chairman is not independent in terms of the definition above. However, the board believes that GT Ferreira's specialist knowledge of the financial services industry makes it appropriate for him to hold this position.
The roles of chairman and chief executive are separate and the composition of the board ensures a balance of authority, precluding any one director from exercising unfettered powers of decision-making. The directors are individuals of a high calibre with diverse backgrounds and expertise, facilitating independent judgment and broad deliberations in the decision-making process. The board each year evaluates its composition to ensure an appropriate mix of skills and experience.
As at 11 September 2015, the board comprised 14 members, 13 of whom are non-executive directors. Six of the non-executive directors are also independent directors. Pat Goss is the lead independent non-executive director. The independence of the directors classified as "independent" was evaluated by weighing all relevant factors, including length of service, which may impair independence.
New directors are subject to a "fit and proper" test. An informal orientation programme is available to incoming directors. No director has an automatic right to a position on the board. All directors are required to be elected by shareholders at an annual general meeting. In a general meeting, the company may appoint any person to be a director, subject to the provisions of the memorandum of incorporation.
Details of directors' full names, their dates of appointment and other listed directorships as well as brief career and sphere of influence synopsis of each of the directors, appear here.
The boards of our major investments and operating divisions are similarly constituted with the necessary mix of skills, experience and diversity. There is also an appropriate mix between executive and non-executive appointments.
TERM OF OFFICE
Non-executive directors retire by rotation every three years and are eligible for re-election. Re-appointment of non-executive directors is not automatic. The retirement age of the nonexecutive directors is set at 70. RMH believes that FirstRand has a strong pipeline of executives whose natural career progression would be to serve on the RMH board.
The chief executive has an employment contract that can, subject to fair labour practices, be terminated upon one month's notice. In terms of our memorandum of incorporation, the retirement age of an executive director is 60, but the board has the discretion to extend it to 65.
It is not a requirement of our memorandum of incorporation or the board charter that directors own shares in the company. Directors’ interests in the ordinary shares are disclosed here.
The board meets once every quarter. Should an important matter arise between scheduled meetings, additional meetings may be convened.
Before each board meeting, an information pack, which provides background information on the performance of the group for the year to date and any other matters for discussion at the meeting, is distributed to each board member. At their meetings, the board considers both financial – and non-financial, or qualitative-, information that might have an impact on stakeholders.
Details of the board meetings held during the year ended 30 June 2015, as well as the attendance at the board meetings and annual general meeting by individual directors, are disclosed here..
Our board-appointed company secretary is Ellen Marais, BCom (Hons), CA(SA). All directors have unlimited access to her services and she is responsible to the board for ensuring that proper corporate governance principles are adhered to. She maintains an arm's length relationship with the board of directors and is not a director of RMH.
The board confirmed that the company secretary had adequately and effectively performed and carried out her roles and duties as the gatekeeper of good governance in RMH.
The board established five sub-committees to assist the directors in fulfilling their duties and responsibilities. The committees and their members are as follows:
Each committee has a formal charter and reports to the board at regular intervals. The charters, which set out the objectives, authority, composition and responsibilities of each committee, have been approved by the board. All the committees are free to take independent outside professional advice, as and when required, at the expense of the company.
The board met four times during the year, attended as follows:
|GT Ferreira (chairman)||✔||✔||✔||✔|
|Sonja De Bruyn-Sebotsa||✔||A||✔||✔|
|Jannie Durand (alternate)||✔||✔||✔||✔|
|Murphy Morobe (appointed 1 August 2014)||✔||✔||✔||✔|
|Obakeng Phetwe (Alternate)||✔||✔||✔||✔|
A – Apology received
All the directors, except for Sonja De Bruyn-Sebotsa, Paul Harris and Albertina Kekana, attended the annual general meeting of shareholders, which was held on 21 November 2014.
The JSE Listings Requirements require all JSE-listed companies to provide a narrative on how it has applied the recommendations contained in King III. Below is the King III gap analysis. RMH has complied with the King III principles for the full financial year ended 30 June 2015, unless otherwise indicated.