Ethical leadership and corporate citizenship

Governance of ethics

The board provides effective leadership based on a principled foundation and the group subscribes to high ethical standards. Responsible leadership, characterised by the values of responsibility, accountability, fairness and transparency, has been a defining ethos of the group since its establishment in 1902.

The fundamental objective has been to do business ethically while building a sustainable company that recognises the short and long-term impact of its activities on the economy, society and the environment.

In its deliberations, decisions and actions, the board is sensitive to the legitimate interests and expectations of the company’s stakeholders. The board as a whole acts as a steward of the company and each director acts with intellectual honesty and independence of mind in the best interests of the group and its stakeholders.

Management of ethics

Barloworld’s commitment to building and sustaining an ethical organisational culture is entrenched in our vision, mission, strategies and operations. While the board has ultimate responsibility for the company’s ethics performance, executive management is responsible for setting up a well-designed and properly implemented ethics management process.

The ethics and compliance programme is designed to further entrench and integrate good corporate governance throughout the group. In line with the maturity model contained in this programme, the group continues to perform assessments of ethical risks and opportunities and integrate these into the risk management process and, thereafter, continually monitor, report and disclose the group’s ethics performance.

The business of the group is governed by a Worldwide Code of Conduct and a Code of Ethics, both approved by the board. The group, including the board, management and employees, is bound by these codes.

The Worldwide Code of Conduct articulates Barloworld’s commitment to doing business the right way, according to best practices, guided by the values of integrity, excellence, teamwork and commitment. The Worldwide Code of Conduct reminds us of the standards to which we hold ourselves accountable and to respect the needs of all our stakeholders.
The Code of Ethics enjoins Barloworld directors, management and employees to:
Obey the law
Respect others
Be fair and honest
Protect the environment.

The company maintains an ethics hotline. This independent and confidential system allows stakeholders to report unethical, dishonest or improper behaviour, including non-compliance with company policies as well as corruption and fraud. All reported incidents are investigated by management and, where appropriate, action is taken. The service is outsourced to an independent service provider. In line with legislation, our well-communicated commitment not to victimise whistle-blowers ensures transparency and promotes ethical conduct. The identity of whistle-blowers is protected by the service provider.

The group’s comprehensive risk management approach covers operations and risks associated with corrupt and dishonest behaviour. These are analysed and assessed as part of the risk management process. Induction and other staff training programmes address expected behaviour in terms of the company’s ethics, codes, policies and procedures.

Ongoing communication through various media – including employee handbooks, letters of appointment, management briefings and structured team meetings – reinforces the company’s commitment to its values and expected behaviour by its employees. Structured sessions involving group and divisional executives and facilitated by legal and human resource practitioners review business conduct and compliance with legislation, company ethics, codes and policies.

Corporate citizenship

The board and management recognise that Barloworld is a corporate citizen and, as such, has a social and moral standing in society with all the attendant responsibilities. Under the auspices of the board, the group is involved in a number of corporate social investment projects, which are covered on pages 98 to 99 of the integrated report.

Compliance with laws, rules, codes and standards

The board is responsible for ensuring that the group complies with applicable laws and considers adhering to non-binding rules, codes and standards. The board recognises that the group’s operations are located in many jurisdictions where the rule of law exists in varying degrees.

Through its audit, risk and sustainability, and social, ethics and transformation committees, the board ensures that structures and systems, with appropriate checks and balances, are established to help it discharge its legal responsibilities and oversee legal compliance. Processes are also in place to ensure the board is conversant with significant developments in applicable laws, rules, codes and standards. Compliance risk is thus an integral part of the company’s risk management process and the board delegates the task of implementing an effective compliance framework and processes to management. The board regularly considers compliance with laws, rules, codes and standards as a part of its meetings.

Regulatory and statutory compliance

Barloworld is listed on the Johannesburg Stock Exchange (JSE) and maintains secondary listings on the London Stock Exchange (LSE) and Namibia Stock Exchange. The board annually confirms that the company complies with the Listings Requirements of the JSE. Barloworld is not registered with the Securities and Exchange Commission in the United States and has unsponsored American depository receipts. Accordingly, the Sarbanes-Oxley Act of 2002 does not apply to the company.

The board places strong emphasis on the highest standards of financial management, accounting and reporting. The financial statements are prepared in accordance with International Financial Reporting Standards (IFRS). For nonfinancial aspects, the company is guided by the Sustainability Reporting Guidelines (GRI G3.1).

Barloworld is a signatory to the United Nations Global Compact which addresses human rights, labour standards, the environment and anti-corruption. The means to deal with these issues are entrenched in the group and all related initiatives are reported to the board via the appropriate board committees.

The board keeps abreast of significant legislative developments in jurisdictions in which it operates.

King III application

The board regularly reviews the extent to which Barloworld applies the principles and recommended practices in the King Report on Governance for South Africa (King III). This review identifies the governance principles already being applied and those which the company needs to address or further entrench. The review also identifies areas of improvement or ways in which our governance practices can be enhanced.

We confirm that the company applies the governance principles contained in King III and continues to further entrench and strengthen recommended practices in our governance structures, systems, processes and procedures.

The table below summarises the results of the board review regarding the extent to which the company applies King III.

Applied
Partially applied

CHAPTER 1 – ETHICAL LEADERSHIP AND CORPORATE CITIZENSHIP
NO   PRINCIPLE   APPLIED   HOW PRINCIPLE IS APPLIED OR OTHER RELEVANT EXPLANATION
1.1   The board should provide effective leadership based on an ethical foundation.   tick   The group subscribes to high ethical standards, and responsible leadership, characterised by the values of responsibility, accountability, fairness and transparency, has been a defining characteristic of the group since the company’s establishment in 1902.
1.2   The board should ensure that the company is and is seen to be a responsible corporate citizen.   tick   The board is responsible for ensuring that the group protects, enhances and invests in the well-being of the economy, society and natural environment, and the group is involved in a number of corporate social investment projects.
1.3   The board should ensure that the company’s ethics are managed effectively.   tick   The business of the group is governed by the Barloworld Worldwide Code of Conduct and a code of ethics, both approved by the board. In May 2011 the board approved an ethics and compliance framework for the group, which is designed to further support and integrate the requirements of good corporate governance throughout the group.
CHAPTER 2 – BOARD AND DIRECTORS
NO   PRINCIPLE   APPLIED   HOW PRINCIPLE IS APPLIED OR OTHER RELEVANT EXPLANATION
2.1   The board should act as the focal point for and custodian of corporate governance.   tick   The board ensures that the group applies the governance principles contained in King III and continues to further entrench and strengthen recommended practices, the group’s governance structures, systems, processes and procedures
2.2   The board should appreciate that strategy, risk, performance and sustainability are inseparable.   tick   The board approves and monitors the implementation of the strategy and business plan of the group, sets objectives, reviews key risks, evaluates performance against the background of economic, environmental and social issues relevant to the company and international political and economic conditions.
2.3   The board should provide effective leadership based on an ethical foundation.   tick   Responsible leadership characterised by the values of responsibility, accountability, fairness and transparency, has been a defining characteristic of the group since the company’s establishment in 1902.
2.4   The board should ensure that the company is and is seen to be a responsible corporate citizen.   tick   The board and management recognise that Barloworld is a corporate citizen and, as such, has a social and moral standing in society with all the attendant responsibilities. Under the auspices of the board, the group is involved in a number of corporate social investment projects.
2.5   The board should ensure that the company’s ethics are managed effectively.   tick   In May 2011 the board approved an ethics and compliance programme for the group. In line with the maturity model contained in the programme, the group continues to perform assessments of ethical risks and opportunities and integrate these into the risk management process and, thereafter, continually monitor, report and disclose the group’s ethics performance.
2.6   The board should ensure that the company has an effective and independent audit committee.   tick   In line with the Companies Act, the board annually appoints an independent and effective audit committee that is approved by shareholders at the next annual general meeting.
2.7   The board should be responsible for the governance of risk.   tick   The board is responsible for the governance of risk and ensures that the company has an effective risk management system. The company has a written risk management philosophy statement issued by the chief executive and endorsed by the directors. This statement is supported by an ongoing systematic, enterprise-wide risk assessment process that ensures risks and opportunities are adequately identified, evaluated and managed at the appropriate level in each division, and that their individual and joint impact on the group is considered.
2.8   The board should be responsible to information technology (IT) governance.   tick   The board bears ultimate responsibility for information technology (IT) governance and has approved the IT governance charter which defines the structures, processes and responsibilities for IT governance. The responsibility for developing an IT governance framework has been delegated to the risk and sustainability committee.
2.9   The board should ensure that the company complies with applicable laws and considers adherence to non-binding rules, codes and standards.   tick   The board is responsible for ensuring that the group complies with applicable laws and considers adhering to non-binding rules, codes and standards and recognises the challenges associated with the fact that the group’s operations are located in many jurisdictions which are at different levels of maturity and in which the rule of law exists in varying degrees.
2.10   The board should ensure that there is an effective risk-based internal audit.   tick   The board has established a group-wide risk-based internal audit function whose purpose, authority and responsibilities of the internal audit function are defined in a board-approved charter that is consistent with the requirements of the Institute of Internal Auditors and the principles of King III.
2.11   The board should appreciate that stakeholders’ perceptions affect the company’s reputation.   tick   The board appreciates the importance of stakeholders and has approved a stakeholder management policy that is regularly reviewed. The board ensures that the group operates on the basis of transparency, best practice disclosure, consistent communication and equal and timely dissemination of information to all stakeholders.
2.12   The board should ensure the integrity of the company’s integrated report.   tick   On the recommendation of the audit committee, the board considers and approves the company’s integrated report.
2.13   The board should report on the effectiveness of the company’s system of internal controls.   tick   Based on the report of the audit committee and the written assessment of the company’s internal auditor, the board reports on the effectiveness of the company’s system of internal controls.
2.14   The board and its directors should act in the best interests of the company.   tick   In its deliberations, decisions and actions, the board is sensitive to the legitimate interests and expectations of the company’s stakeholders. The board as a whole acts as a steward of the company and each director acts with intellectual honesty and independence of mind in the best interests of the group and its stakeholders.
2.15   The board should consider business rescue proceedings or other turnaround mechanisms as soon as the company is financially distressed as defined in the Act.   tick   The board is aware of the requirements of the Companies Act regarding business rescue. The board has established a risk management process that helps the group to continuously evaluate both internal and external risks, threats and opportunities to ensure that the company is operating optimally and is not in distress.
2.16   The board should elect a chairman of the board who is an independent non-executive director. The CEO of the company should also not fulfil the role of chairman of the board.   tick   Advocate Dumisa Ntsebeza SC, an independent non-executive director, is chairman of the board and Clive Thomson, an executive director, is chief executive. The roles of the chairman and chief executive are thus separate and clearly defined.
2.17   The board should appoint the chief executive officer and establish a framework for the delegation of authority.   tick   While retaining overall accountability and subject to matters reserved to itself, the board has delegated to the chief executive and other executive directors authority to run the day-to-day affairs of the company subject to an approval framework established by the board.
2.18   The board should comprise a balance of power, with a majority of non-executive directors. The majority of non-executive directors should be independent.   tick   Considerable thought is given to board balance and composition. The board has 16 directors, comprising 10 non-executive directors, and six executive directors. Of the 10 non-executive directors nine are independent.
2.19   Directors should be appointed through a formal process.   tick   To ensure a rigorous and transparent procedure, any new appointment of a director is considered by the board as a whole, on the recommendation of the nomination committee. The selection process involves considering the existing balance of skills and experience, and a continual process of assessing the needs of the company.
2.20   The induction of and ongoing training and development of directors should be conducted through formal processes.   tick   The company secretary is responsible for the induction of new directors in accordance with an established programme and based on the needs of each new director. The board has also approved a written policy on the continuing professional development of directors that is implemented under the auspices of the nomination committee.
2.21   The board should be assisted by a competent, suitably qualified and experienced company secretary.   tick   Ms Lerato Manaka is the group company secretary, duly appointed by the board in accordance with the Companies Act and the JSE Listings Requirements. The board is satisfied that the company secretary is properly qualified and experienced to competently carry out the duties and responsibilities of company secretary.
2.22   The evaluation of the board, its committees and the individual directors should be performed every year.   tick   The performance of the board as a whole and the board committees individually is evaluated annually and independently evaluated by an external service provider from time to time.
2.23   The board should delegate certain functions to well-structured committees but without abdicating its own responsibilities.   tick   The board has seven committees that assist it in discharging its duties and responsibilities. These committees operate in accordance with written terms of reference approved by the board and reviewed annually.
2.24   A governance framework should be agreed between the group and its subsidiary boards.   tick   The group operates according to an approval framework approved by the board and each subsidiary board has approved such approval framework.
2.25   Companies should remunerate directors and executives fairly and responsibly.   tick   The board determines the remuneration of directors and executives based on recommendations made by the remuneration committee, taking into account market conditions, expert advice from remuneration specialists and in accordance with a remuneration structure and policy approved by the board.
2.26   Companies should disclose the remuneration of each individual director and certain senior executives.   tick   The board approves the remuneration report prepared by the remuneration committee. The report discloses the remuneration of each individual director and prescribed officers in line with the Companies Act.
2.27   Shareholders should approve the company’s remuneration policy.   tick   The company’s remuneration policy approved by the board on recommendation by the remuneration committee is tabled for a non-binding advisory vote at each annual general meeting of shareholders.
CHAPTER 3 – AUDIT COMMITTEE
NO   PRINCIPLE   APPLIED   HOW PRINCIPLE IS APPLIED OR OTHER RELEVANT EXPLANATION
3.1   The board should ensure that the company has an effective and independent audit committee.   tick   All members of the audit committee are regarded as independent directors. The audit committee is appointed by the shareholders at the AGM.
3.2   Audit committee members should be suitably skilled and experienced independent non-executive directors.   tick   All audit committee members are evaluated by the nomination committee as being independent with experience in finance, law, IT and commerce.
3.3   The audit committee should be chaired by an independent non-executive director.   tick   The chairman of the audit committee is regarded as an independent non-executive director by the nomination committee.
3.4   The audit committee should oversee integrated reporting.   tick   The audit committee considers the integrated report including sustainability information, the annual financial statements and recommends the approval of the integrated report to the board.
3.5   The audit committee should ensure that a combined assurance model is applied to provide a coordinated approach to all assurance activities.   tick   The combined assurance model is reviewed annually and approved by the audit committee. A combined assurance report is tabled bi-annually to the audit committee.
3.6   The audit committee should satisfy itself of the expertise, resources and experience of the company’s finance function.   tick   Annually, the audit committee evaluates the expertise and experience of the group financial director as well as the level of financial experience and qualifications of all the financial staff members in the divisions of the company. The audit committee also discusses the succession plan for senior financial resources.
3.7   The audit committee should be responsible for overseeing internal audit.   tick   The head of internal audit reports directly to the chairman of the audit committee. The audit committee approves the annual internal audit work plan and monitors the performance of internal audit.
3.8   The audit committee should be an integral component of the risk management process.   tick   The audit committee annually reviews the effectiveness of the risk management process in the company. Two members of the audit committee are also members of the risk and sustainability committee.
3.9   The audit committee is responsible for recommending the appointment of the external auditor and overseeing the external audit process.   tick   Annually, the audit committee reviews the independence and ratings of the external auditors including the professional suitability of the lead auditor and recommends his appointment to the board and shareholders for the forthcoming financial year.
3.10   The audit committee should report to the board and shareholders on how it has discharged its duties.   tick   The audit committee chairman reports back to the board subsequent to each committee meeting. At the interim and year-end meetings such reports are in writing. Annually the chairman prepares an audit committee report to shareholders.
CHAPTER 4 – THE GOVERNANCE OF RISK
NO   PRINCIPLE   APPLIED   HOW PRINCIPLE IS APPLIED OR OTHER RELEVANT EXPLANATION
4.1   The board should be responsible for the governance of risk.   tick   Formal processes are in place reflecting the board’s leadership with regard to the governance of risk.
4.2   The board should determine the levels of risk tolerance.   tick   Specific limits are set annually at the risk and sustainability committee meeting and approved by the board. These limits take account of both external and internal risk factors.
4.3   The risk committee or audit committee should assist the board in carrying out its risk responsibilities.   tick   The risk and sustainability committee reviews all aspects of the risk function for which the board is responsible.
4.4   The board should delegate to management the responsibility to design, implement and monitor the risk management plan.   tick   Management is accountable to the board, through the risk and sustainability committee, for embedding the risk management process in the business. Day-to-day responsibility for the management of the plan rests with the head of risk management.
4.5   The board should ensure that risk assessments are performed on a continual basis.   tick   The risk assessment process identifies risks and opportunities and the process is formalised and regular.
4.6   The board should ensure that frameworks and methodologies are implemented to increase the probability of anticipating unpredictable risks.   tick   The workshop methodology, which is used as the basis upon which the risk assessments are conducted, ensures that unpredictable risks are considered.
4.7   The board should ensure that management considers and implements appropriate risk responses.   tick   The implementation of controls, existing and new, is monitored on an ongoing basis.
4.8   The board should ensure continual risk monitoring by management.   tick   Continual risk monitoring is required in terms of the risk management plan and the process is monitored by management.
4.9   The board should receive assurance regarding the effectiveness of the risk management process.   tick   Barloworld group internal audit services provides assurance to the board in respect of divisional and group risk management processes.
4.10   The board should ensure that there are processes in place enabling complete, timely, relevant, accurate and accessible risk disclosure to stakeholders.   tick   The board discloses the top risks facing the group and confirms its satisfaction with the executive management of the risk management processes.
CHAPTER 5 – THE GOVERNANCE OF INFORMATION TECHNOLOGY
NO   PRINCIPLE   APPLIED   HOW PRINCIPLE IS APPLIED OR OTHER RELEVANT EXPLANATION
5.1   The board should be responsible for information technology (IT) governance.   tick   The IT steering committee is empowered by the risk and sustainability committee (a committee of the board) to guide IT governance in the group.
5.2   IT should be aligned with the performance and sustainability objectives of the company.   tick   IT is fully integrated into the strategic planning process ensuring strategic, tactical and operational alignment in the achievement of business objectives.
5.3   The board should delegate to management the responsibility for the implementation of an IT governance framework.   tick   The IT steering committee is empowered by the risk and sustainability committee (a committee of the board) to guide IT governance in the group.
5.4   The board should monitor and evaluate significant IT investments and expenditure.   tick   The IT steering committee monitors the performance of all major IT projects in the group.
5.5   IT should form an integral part of the company’s risk management.   tick   IT risk management is integrated into the enterprise risk management framework. The IT steering committee monitors disaster recovery and other IT practices.
5.6   The board should ensure that information assets are managed effectively.   #   The company has approved a revised and new set of group information security policies to deal with effective management of information assets. Implementation of these policies at divisional level will be completed over the next 15 months and will result in the required improvements to information management, information security and privacy.
5.7   A risk committee and audit committee should assist the board in carrying out its IT responsibilities.   tick   IT is represented at the risk and audit committees and these committees review key elements of IT practice including IT internal controls and risk management.
CHAPTER 6 – COMPLIANCE WITH LAWS, CODES, RULES AND STANDARDS
NO   PRINCIPLE   APPLIED   HOW PRINCIPLE IS APPLIED OR OTHER RELEVANT EXPLANATION
6.1   The board should ensure that the company complies with applicable laws and considers adherence to non-binding rules, codes and standards.   tick   The board recognises that the group’s operations are located in many jurisdictions which are at different levels of maturity and in which the rule of law exists in varying degrees and hybrid systems of governance are developing.
6.2   The board and each individual director should have a working understanding of the effect of the applicable laws, rules, codes and standards on the company and its business.   tick   Barloworld has a formalised continuing professional development policy for its directors. Developments in laws, rules, codes and standards which affect the group form part of this programme.
6.3   Compliance risk should form an integral part of the company’s risk management process.   tick   The group’s risk management process encompasses all classes of risk, including compliance.
6.4   The board should delegate to management the implementation of an effective compliance framework and processes.   tick   Barloworld has developed an ethics and compliance framework which has been approved by the board. The Worldwide Code of Conduct articulates Barloworld’s commitment to doing business the right way, according to best practices, guided by the values of integrity, excellence, teamwork and commitment.
CHAPTER 7 – INTERNAL AUDIT
NO   PRINCIPLE   APPLIED   HOW PRINCIPLE IS APPLIED OR OTHER RELEVANT EXPLANATION
7.1   The board should ensure that there is an effective risk-based internal audit.   tick   An effective risk-based internal audit function has been established. The purpose, authority and responsibilities of the internal audit function are defined in the board-approved internal audit charter that is consistent with the Institute of Internal Auditors’ definition of internal auditing, and the principles of King III.
7.2   Internal audit should follow a risk-based approach to its plan.   tick   A risk-based approach to internal audit planning is adopted in assessing the company’s control environment. This approach is informed by the strategy of the company and aligned to the risk assessment process.
7.3   Internal audit should provide a written assessment of the effectiveness of the company’s system of internal control and risk management.   tick   A written assessment regarding the effectiveness of the system of internal controls and risk management is tabled to the board annually, covering not only financial matters but also operational, compliance and sustainability issues.
7.4   The audit committee should be responsible for overseeing the internal audit.   tick   The head of internal audit reports directly to the chairman of the audit committee, and is present at all meetings. The audit committee approves the annual internal audit work plan and monitors the performance of internal audit. The internal audit function is subject to an independent quality review on a five-year cycle.
7.5   Internal audit should be strategically positioned to achieve its objectives.   tick   The head of internal audit has unrestricted access to members of the audit committee and executives of the company. She attends both the audit committee and risk and sustainability committee meetings. The function is adequately skilled and resourced. A rigorous quality assurance and improvement programme is in place to ensure this, and keeps pace with the volume of risk assurance needs.
CHAPTER 8 – GOVERNING STAKEHOLDER RELATIONSHIPS
NO   PRINCIPLE   APPLIED   HOW PRINCIPLE IS APPLIED OR OTHER RELEVANT EXPLANATION
8.1   The board should appreciate that stakeholders’ perceptions affect a company’s reputation.   tick   Engagements with stakeholders are aimed at establishing open, interactive and mutually beneficial relationships. Stakeholder perceptions, value and satisfaction are researched and conducted at various levels of the group, the findings of which are reported and reviewed regularly in appropriate operational, executive and board structures. A comprehensive table of stakeholders, engagements, issues raised and actions taken by the company is included in integrated reporting. To complement ongoing stakeholder engagement processes in the group, best practice is shared though a group forum. A group reporting regime has been established on issues raised and addressed at group function and divisional level to monitor and address the health of strategic stakeholder relationships.
8.2   The board should delegate to management to proactively deal with stakeholder relationships.   tick   A group policy and guidelines for managing stakeholder engagement, based on international best practice, and approved by the board, have been published on the company website and have been rolled out across the divisions through a network of stakeholder engagement champions. The group policy takes into account the principles and standards outlined in the AA1000 assurance standard, on which King III on stakeholder management is based, and which is aimed at meeting stakeholder demand for meaningful assurance. The annual general meeting is attended by relevant stakeholders and the board always encourages them to ask questions during the meeting. A wide range of formal and informal stakeholder engagement processes are undertaken across the group and these are disclosed in the integrated report.
8.3   The board should strive to achieve the appropriate balance between its various stakeholder groupings, in the best interests of the company.   tick   Stakeholders are identified through a wide range of channels. Where concerns are legitimate, the company addresses these, listens to suggestions and engages honestly.
8.4   Companies should ensure the equitable treatment of shareholders.   tick   The company is a strong proponent of transparency, best practice disclosure, consistent communication and equal and timely dissemination of information to all shareholders and the legitimate interests of minority shareholders are protected in accordance with the Companies Act and JSE Listings Requirements.
8.5   Transparent and effective communication with stakeholders is essential for building and maintaining their trust and confidence.   tick   Stakeholders are communicated with regularly, in a balanced manner through a range of channels. The Global Reporting Initiative G3 guidelines, which Barloworld follows, are recommended by King III as providing a comprehensive reporting framework that represents international best practice. Communication guidelines are encoded in the group policy. The group discloses the number and nature of requests for information received during the financial year.
8.6   The board should ensure disputes are resolved as effectively, efficiently and expeditiously as possible.   tick   The group has a well development commercial relationships management regime that ensures that alternative dispute resolution provisions are incorporated in agreements. Each dispute is handled in accordance with the provisions of the governing agreement, the primary objective being to ensure that disputes are resolved as effectively, efficiently and expeditiously as possible.
CHAPTER 9 – INTEGRATED REPORTING AND DISCLOSURE
NO   PRINCIPLE   APPLIED   HOW PRINCIPLE IS APPLIED OR OTHER RELEVANT EXPLANATION
9.1   The board should ensure the integrity of the company’s integrated report.   tick   The board reviews the integrated report and related complementary reports. Structured authorisation and review processes are in place which includes board committees, external and internal assurance reviews.
9.2   Sustainability reporting and disclosure should be integrated with the company’s financial reporting.   tick   An integrated report is produced which, together with complementary reports, addresses the sustainability of the company, including financial and non-financial aspects such as strategy, risk, environmental, social and governance issues. Reporting is prepared in line with recognised guidelines that include International Financial Reporting Standards (IFRS), King III, Global Reporting Initiative Sustainability Reporting Guidelines (GRI G3.1) and the South African Integrated Reporting Committee.
9.3   Sustainability reporting and disclosure should be independently assured.   tick   External assurance is obtained on the GRI application level, and on material elements of sustainability reporting using the ISAE 3000 standard. In some instances the methodologies of AA1000AS overlap with the GRI G3.1 requirements. Consideration is being given to obtaining an AA1000 assurance. Internal audit provides assurance on aspects of sustainability reporting. The board, its audit as well as risk and sustainability committees, review the integrated report and complementary reports.

Statutory powers of the board

The Companies Act provides that the business and affairs of a company must be managed by or under the direction of its board which has the authority to exercise all the powers and perform all the functions of the company, except to the extent that the act or the company’s memorandum of incorporation provides otherwise. The specific powers of the directors are set out in the company’s memorandum of incorporation. The directors have further unspecified powers and authority for matters that may be exercised and dealt with by the company, which are not expressly reserved to shareholders of the company in general meeting.

Role and function of the board

The board functions in accordance with the requirements of King III and within the context of the Companies Act, the Listings Requirements of the JSE and other applicable laws, rules and codes of governance. The board always acts consistently in its duties of care, skill and diligence as well as its fiduciary duties. The board is responsible for, among other things, the governance of risk and information technology and has ensured that the company has an effective, independent audit committee and an effective risk-based internal audit function. On the recommendation of the audit committee, the board has considered and approved the company’s integrated report. Based on the report of the audit committee and the written assessment of the company’s internal auditor, the board is satisfied that the company’s system of internal controls is effective.

The main responsibilities of the board, as set out in the board charter, are:

Approving the strategic plan and annual business plan, setting objectives and reviewing key risks and performance areas especially in respect of technology and systems
Monitoring the implementation of board plans and strategies against a background of economic, environmental and social issues relevant to the company and international political and economic conditions, as well as the mitigation of risks by management
Appointing the chief executive and maintaining a succession plan
Nominating and appointing directors, subject to election by members in general meeting
Determining overall policies and processes to ensure the integrity of the company’s management of risk and internal control.

The board charter, which is reviewed annually, expresses the board’s philosophy on customer satisfaction; quality and safety of products and services; optimising the use of assets and maximising employees’ productivity; respect for human dignity and observance of fundamental human rights; and national and international corporate citizenship, including sound relationships with regulatory authorities.

While retaining overall accountability and subject to matters reserved to itself, the board has delegated to the chief executive and other executive directors authority to run the day-to-day affairs of the company. Annually, the board considers a five-year forward-looking strategic plan presented by divisional heads. The five-year strategic plan is debated by the executive committee before being consolidated and presented to the board.

Composition of the board

Considerable thought is given to board balance and composition. Collectively, the board believes the current mix of knowledge, skill and experience meets the requirements to lead the company effectively. The board has 16 directors, comprising 10 non-executive directors and six executive directors.

Ms Ngozichukwuka Edozien and Mr Dominic Sewela were appointed to the board on 19 March 2014 as independent non-executive director and executive director respectively.

Name Year
appointed
  Audit   General
purposes
  Nomination   Remuneration   Risk and
sustainability
  Social,
ethics
and
transformation
 
Independent non-executive directors                            
DB Ntsebeza (chairman) 1999       chairman   chairman   member       member  
NP Dongwana 2012                   member   member  
FNO Edozien* 2014                          
AGK Hamilton 2007   chairman   member   member   member   member      
A Landia 2013       member                  
SS Mkhabela 2006           member           chairman  
B Ngonyama 2012   member           member          
SS Ntsaluba 2008   member           member   chairman      
HT Nyasulu#         member                  
SB Pfeiffer 2001       member   member   chairman          
Non-independent non-executive directors                            
OI Shongwe 2007                   member   member  
Executive directors                            
CB Thomson (chief executive) 2003       member           member   member  
PJ Blackbeard 2004                   member   member  
PJ Bulterman 2009                   member      
M Laubscher 2005                   member      
DM Sewela* 2014                          
DG Wilson 2006                   member      
# Retired with effect from 29 January 2014.
* Appointed with effect from 19 March 2014.

Board appointment process

To ensure a rigorous and transparent procedure, any new appointment of a director is considered by the board as a whole, on the recommendation of the nomination committee. The selection process involves considering the existing balance of skills and experience and a continual process of assessing the needs of the company.

Non-executive directors are required to devote sufficient time to the company’s affairs. While there is no formal limitation on the number of other appointments directors can hold, approval from the chairman must be obtained prior to accepting additional commitments that may affect the time they can devote to the company. Non-executive directors are required to advise the board of any subsequent changes to or additional commitments from time to time. Executive directors are permitted to accept external non-executive board appointments limited to a single external for profit board.

Independence of non-executive directors

The board comprises a majority of non-executive directors. The board has evaluated the rationale and meaning of the requirements of independence of directors according to King III. An assessment of the salient factors and unique circumstances of each non-executive director is performed annually. The independence of non-executives who have served on the board for longer than nine years is also assessed annually. The board is satisfied that nine of the 10 non-executive directors are independent.

Mr Isaac Shongwe is not considered independent as he was an executive director of Barloworld Limited until 31 May 2014. Despite the determination reached, the board believes that his skills, knowledge and experience remain valuable to the organisation.

Retirement of directors

In terms of the company’s memorandum of incorporation, at every annual general meeting at least one third of the directors retire from the board. According to the Companies Act, a director appointed by the board to fill a vacant seat will serve as a director of the company on a temporary basis until the vacancy has been filled by election. Executive directors, in accordance with the company’s practice, retire from the board at the age of 63 years, while non-executive directors retire at the annual general meeting immediately following the director’s 70th birthday.

Chairman and chief executive

No individual has unfettered powers of decision-making. Responsibility for running the board and executive responsibility for conducting the business are differentiated. Adv Dumisa Ntsebeza SC, an independent non-executive director, is chairman of the board and Mr Clive Thomson, an executive director, is chief executive. The roles of the chairman and chief executive are thus separate and clearly defined. The chairman is responsible for leading the board, ensuring its effectiveness and setting its agenda. The chief executive leads the executive team in running the business and coordinates proposals developed by the executive committee for consideration by the board.

Board meetings and attendance

Board meetings are convened by formal notice incorporating a detailed agenda and relevant written proposals and reports. Information is distributed in good time before board meetings, to enable adequate preparation for thorough discussion at these meetings. Some decisions are taken between board meetings by written resolution in accordance with the company’s memorandum of incorporation and these are tabled for noting at each subsequent board meeting.

When directors are not able to attend in person, video and teleconferencing facilities allow them to participate fully. Where directors are unable to attend a meeting in person or via video/teleconference, they are able to make submissions in advance on matters to be discussed and these submissions are recorded at the meeting.

Board attendance

During the year under review all the meetings were held in South Africa. The board had six scheduled meetings and one special meeting.

Applied
Cross Apology
N/A Not appointed/retired

Attendance 14/11/13   29/01/14   19/03/14   15/05/14   22/07/14   02/10/14  
DB Ntsebeza (chairman) tick   tick   tick   tick   tick   tick  
CB Thomson (chief executive) tick   tick   tick   tick   tick   tick  
PJ Blackbeard tick   tick   tick   tick   tick   tick  
PJ Bulterman tick   tick   tick   tick   tick   tick  
NP Dongwana tick   tick   tick   tick   tick   tick  
FNO Edozien* N/A   N/A   tick   tick   tick   tick  
AGK Hamilton tick   tick   tick   tick   tick   tick  
A Landia tick   tick   tick   tick   tick   tick  
M Laubscher tick   tick   tick   tick   tick   tick  
B Ngonyama tick   tick   tick   tick   tick   tick  
SS Mkhabela tick   tick   tick   tick   tick   tick  
SS Ntsaluba tick   tick   tick   tick   tick   tick  
TH Nyasulu# tick   tick   N/A   N/A   N/A   N/A  
SB Pfeiffer tick   tick   tick   tick   tick   tick  
DM Sewela* N/A   N/A   tick   tick   tick   tick  
OI Shongwe tick   tick   tick   tick   tick   tick  
DG Wilson tick   tick   tick   tick   tick   tick  
# Appointed with effect from 19 March 2014.
* Retired with effect from 29 January 2014.

Director development

The company secretary arranges an appropriate induction programme for new directors. This includes an explanation of their fiduciary duties and responsibilities and visits to operations where discussions with management facilitate an understanding of the company’s affairs and operations.

Directors are informed, where relevant, of new legislation and changing commercial risks that may affect the company. The board supports the development of directors and, where applicable, training is made available depending on each director’s requirements and the quality and relevance of training available.

In certain circumstances it may become necessary for a non-executive or independent director to obtain independent professional advice to act in the best interests of the company. Such director also has unrestricted access to the chairman, executive directors and company secretary. Where a director takes reasonable action to obtain professional advice, the costs incurred are borne by the company.

Board and board committees’ performance assessment

The performance of the board as a whole and the board committees individually is appraised annually. The recent performance assessment indicated that the board and the board committees are performing their duties and responsibilities effectively and efficiently. Areas of improvement have been identified and will be addressed during the year.

Individual director performance assessment

The performance evaluation of each director by his or her peers is undertaken annually. The chairman discusses the results of the performance assessment with each individual director. He addresses issues raised by peers and provides guidance and offers assistance where necessary.

Remuneration of directors and senior executives

Remuneration plays a critical role in attracting, motivating and retaining high-performing and talented individuals to achieve Barloworld’s business objectives. The remuneration report was prepared by the remuneration committee and has been approved by the board. The report sets out the company’s remuneration philosophy, policy and practice for executive directors, non-executive directors and senior executives.

Conflict of interest

The board recognises the importance of acting in the best interest of the company and protecting the legitimate interests and expectations of its stakeholders. The board consistently applies the provisions of the Companies Act in disclosing personal financial interests. Directors are required to declare their interests in general, annually and specifically at each meeting of the board. Among other measures to deal with conflicts of interest, the company has a policy on the acceptance and receiving of gifts which requires that gifts be officially declared and registered on the company’s gift register.

Company secretary

Ms Lerato Manaka is the company secretary, duly appointed by the board in accordance with the Companies Act. The board of directors considered and is satisfied that the company secretary is properly qualified and experienced to competently carry out the duties and responsibilities of company secretary and that there is an arm’s-length relationship between itself and the company secretary.

The company secretary provides the board as a whole and directors individually with guidance on discharging their responsibilities. She is also a central source of information and advice to the board and the company on matters of ethics and good corporate governance. The company secretary ensures that, in accordance with pertinent laws, the proceedings and affairs of the board and its members, the company itself and, where appropriate, the owners of securities in the company are properly administered. She also assists and ensures that the board, individual directors and board committees are evaluated annually.

The company secretary ensures compliance with the Listings Requirements of the JSE and, where appropriate, other stock exchanges on which the company’s securities are listed. She also assists in developing the annual board and board committee plans, administers the long-term incentive schemes and ensures compliance with the statutory requirements of the company and its subsidiaries in South Africa.

Board committees

The board has seven committees that assist it in discharging its responsibilities. These committees, listed below, play an important role in enhancing good corporate governance, improving internal controls and thus the performance of the company:

Audit
Social, ethics and transformation
Risk and sustainability
Remuneration
Nomination
General purposes
Executive.

Each board committee acts according to written terms of reference, approved by the board and reviewed annually, setting out its purpose, membership requirements, and duties and reporting procedures. (Copies of the terms of reference, including the board charter, are posted on the company’s website: www.barloworld.com.) Board committees may seek independent professional advice at the company’s expense. The committees are subject to annual evaluation by the board on performance and effectiveness.

Chairmen of the board committees and the lead client service partner of the external auditor are required to attend annual general meetings to answer questions raised by shareholders.

The board has determined that the seven committees have fulfilled their responsibilities for the year under review in compliance with their terms of reference.

Audit committee

The committee comprises Messrs Gordon Hamilton (chairman) and Sango Ntsaluba and Ms Babalwa Ngonyama, all independent non-executive directors. The chairman of the company is not a member of the committee. The audit committee was appointed by shareholders on 29 January 2014. In terms of the Companies Act, the committee reports directly to shareholders.

The audit committee’s terms of reference include, inter alia:

Considering the independence of the external auditor and making recommendations to the shareholders on the appointment or dismissal of the external auditor
Evaluating the effectiveness and performance of the external auditor and considering and confirming the external audit fees
Considering the validity of and preapproving any non-audit services rendered by the auditor, in line with the Barloworld policy for non-audit services
Considering and reviewing the reliability and accuracy of financial information and appropriateness of accounting policies and disclosure practices and recommending to the board corrective actions to be taken as a consequence of audit findings
Examining and reviewing the interim report, final profit statement, annual financial statements, the integrated report, prospectus or any other documentation to be published by the company and recommending the adoption of such statements by the board
Reviewing compliance with applicable laws, best corporate governance practices, accounting standards and regulatory requirements
Reviewing the effectiveness of the group risk management assessment process, adequacy of accounting records and internal control systems
Assisting the board in its deliberations regarding the company’s continuing viability as a going concern and the liquidity and solvency tests required in terms of the Companies Act
Considering the appropriateness of the expertise and adequacy of resources of the group’s finance function and internal audit function and experience of the senior members of management responsible for the finance function and internal audit function
Reviewing and confirming the suitability and expertise of the head of internal audit and the group finance officer of the company
Monitoring and supervising the functioning and performance of internal audit.

The committee reports annually to the board and stakeholders on the effectiveness of the company’s internal financial controls based on evaluation of the review of internal financial controls performed by internal audit and the reports prepared by the internal auditor, external auditor, management and other assurance providers.

The finance director, head of internal audit and the external audit partner attend all meetings.

Attendance

During the year under review six scheduled meetings were held with attendance shown below.

Attendance 13/11/13   28/01/14   18/03/14   14/05/14   21/07/14   30/09/14
AGK Hamilton (chairman) tick   tick   tick   tick   tick   tick
B Ngonyama tick   tick   tick   tick   tick   tick
SS Ntsaluba tick   tick   tick   tick   tick   tick

The report of the audit committee is on pages 7 to 8 of the consolidated annual financial statements.

Social, ethics and transformation committee

The social, ethics and transformation committee (SET) comprises non-executive directors Ms Sibongile Mkhabela (chairman), Ms Neo Dongwana, Adv Dumisa Ntsebeza SC and Mr Isaac Shongwe and executive directors Messrs John Blackbeard, and Clive Thomson.

The executive for human resources, strategy and sustainability, and the representatives from group companies managing the SET portfolio, including the chief executive officers who retain ultimate responsibility for SET in their respective divisions, are invited to provide reports to the committee from time to time.

The functions of the committee are prescribed by the Companies Act and consolidated into formal written terms of reference and include, inter alia:

Monitoring the company’s activities, having regard to any relevant legislation, other legal requirements or prevailing codes of best practice, with regard to matters relating people, social and economic development and good corporate citizenship
Encouraging, supporting, promoting and protecting diversity and equality within the group
Monitoring the integration of the Barloworld Worldwide Code of Conduct into the business strategies and operations in accordance with the King lll report on corporate governance
Monitoring and assessing the execution of the ethics and compliance programme through various Barloworld policies and procedures, relative to, among others, the King III governance principles and standards on ethical leadership and corporate citizenship, relevant local and international laws, including but not limited to anti-bribery and corruption laws, codes, rules and standards
Developing, for adoption by the board, a strategy and suitable policies for the management of the company’s relations with all stakeholder groupings and ensure that stakeholder relationships are managed effectively
Ensuring that the company addresses sustainable development as it relates to environmental stewardship.

Attendance

During the year under review, the committee held four scheduled meetings with attendance shown below.

Attendance 12/11/13   18/03/14   14/05/14   01/10/14  
SS Mkhabela (chairman) tick   tick   tick   tick  
PJ Blackbeard tick   tick   tick   tick  
N Dongwana tick   tick   tick   tick  
DB Ntsebeza tick   tick   tick   tick  
OI Shongwe tick   tick   tick   tick  
CB Thomson tick   tick   tick   tick  

Risk and sustainability committee

The committee comprises four non-executive directors, Messrs Sango Ntsaluba (chairman), Gordon Hamilton, Isaac Shongwe and Ms Neo Dongwana, and five executive directors, Messrs John Blackbeard, Peter Bulterman, Martin Laubscher, Clive Thomson and Donald Wilson.

The committee assists the board in recognising all material risks and sustainability issues to which the group is exposed and ensuring that the requisite risk management culture, policies and systems are implemented and function effectively.

These include business continuity management, occupational health and safety, environmental management and ethical commercial behaviour.

The functions of the committee are governed by written terms of reference approved by the board and include, but are not limited to:

Ensuring the development, distribution and communication of a formal policy and plan for the management of risks
Reviewing and assessing the integrity and effectiveness of the risk management process annually
Considering annually the consolidated risk assessment results and determining trends, common areas of concern, emerging risks, and the most significant risks for reporting to the board
Monitoring and reviewing changes in corporate governance codes and best practice guidelines relating to risk issues
Monitoring and receiving reports with regard to risks relating to the environment, health and public safety, including the impact of the company’s activities and its products or services and provide reports to the board
Reviewing and approving the insurance renewal programme and the extent to which the company should retain risk
Monitoring the company’s progress in realising external and internal opportunities arising from sustainable development
Determining Barloworld’s risk appetite limits and the levels or risk tolerance and recommending this to the board for approval
Assisting the board with activities relating to the governance of information technology.

Attendance

During the year under review, the committee held four scheduled meetings were held with attendance shown below.

Attendance 12/11/13   18/03/14   12/05/14   30/09/14  
SS Ntsaluba (chairman) tick   tick   tick   tick  
PJ Blackbeard tick   tick   tick   tick  
PJ Bulterman tick   tick   tick   tick  
NP Dongwana tick   tick   tick   tick  
AGK Hamilton tick   tick   tick   tick  
M Laubscher tick   tick   tick   tick  
OI Shongwe tick   tick   tick   tick  
CB Thomson tick   tick   tick   tick  
DG Wilson tick   tick   tick   tick  

Risk management process

A written risk management philosophy issued by the chief executive and endorsed by the directors states that the company is committed to managing its risks and opportunities in the interests of all stakeholders. Every employee has a responsibility to act appropriately.

An ongoing systematic, enterprise-wide risk assessment process supports the group philosophy. This ensures that risks and opportunities are adequately identified, evaluated and managed in each division and their individual and joint impact on the group is considered.

Divisional boards and senior managers conduct ongoing self-assessment of risk to identify critical business, operational, financial and compliance exposures and the adequacy and effectiveness of control factors at all levels. The assessment methodology considers severity and probability of occurrence and applies a rating based on the quality of control to rank risks and set priorities. Top risks, elevated to group level, are addressed through action plans with assigned responsibilities.

The group risk department oversees strategic direction and continuous improvement in methodology and process, as well as providing technical assistance. The internal auditors assist both the risk and sustainability committee as well as the audit committee in evaluating the effectiveness of the risk management process and comment on this in their own assessment reports.

As the group develops new business and expands into new markets and territories, it faces increasingly complex and changing environments. The risk return trade-off is optimised by integrating the risk management process with the group’s strategic process and direction. This enhances competitive advantage, growth and employment of capital. The company encourages adherence to the same risk management philosophy and policies for joint ventures and associates.

IT governance

The board, which is responsible for information technology (IT) governance, has delegated responsibility for developing an IT governance framework to the risk and sustainability committee. The board has approved the IT governance charter which defines the structures, processes and responsibilities for IT governance.

The group IT steering committee is the management structure responsible for implementing the IT governance framework, including IT risk management.

In the year under review a group information security officer was appointed to provide a consistent and sustained approach to information security across the group and allow Barloworld to capitalise on newer technologies that enable innovation and business efficiency.

The steering committee comprises divisional chief executive officers and the group chief executive and finance director. The group information security officer, divisional chief information officers, group legal counsel, and the head of internal audit attend IT steering committee meetings by invitation.

The group finance director has been allocated responsibility for managing group IT and for reporting IT governance to the risk and sustainability committee and the board. The board receives a quarterly IT report that monitors and evaluates significant IT investments and expenditure, IT resources including human capital, innovation, IT risk management and compliance with the governance framework. The audit committee is responsible for monitoring divisional and business unit disaster recovery readiness and adherence to group information security management policies.

The company is currently testing a system for information classification as well as implementing changes to information security management practices. The required improvements to information management, information security and privacy should be addressed over the next 15 months.

Sustainability

As one of six strategic focus areas, sustainable development highlights the group’s commitment to responsible value creation, articulated through its value-based management approach which requires integrated and coordinated activities addressing economic, environmental and social aspects; and balancing the short and long-term interests of all stakeholders.

This approach is realised through structured strategic planning and risk management initiatives, a leadership philosophy and management approach that entrench accountability for sustainable value creation, and a commitment to consistent, transparent and comparable reporting.

While sustainable development incorporates a wide range of aspects, the committee focuses on risks relating to the environment, health and public safety, including the impact of the company’s activities and its products and services. It also monitors progress towards achieving strategic objectives as well as realising internal and external sustainable development opportunities, and it identifies material aspects of the portfolio.

During the period attention centred on:

Health and safety of employees, our operations and those who use our products and services
Energy consumption and related greenhouse gas emissions
Water stewardship
Waste management and product lifecycle responsibility
Integrating sustainability into management responsibility and accountability
Legitimacy of value chains including reducing the environmental impact of products and services and evolving customer solutions to address environmental issues
Providing stakeholders with relevant, transparent and reliable information through integrated reporting.

Responsibility and accountability for sustainable value creation rests with the group’s CEO and board, which is then delegated to divisional CEOs and their respective boards to ensure operational integration and execution.

The committee receives and considers quarterly group safety, health and environment reports and appropriately directs the group to respond to identified issues that require attention.

Remuneration committee

The committee comprises only independent non-executive directors, Messrs Steven Pfeiffer (chairman), Gordon Hamilton, Sango Ntsaluba, Adv Dumisa Ntsebeza SC and Ms Babalwa Ngonyama. The chief executive may be invited to attend meetings but may not participate in any discussion on his own remuneration.

The committee makes recommendations to the board on the structure and development of the policy on executive and senior management remuneration, taking into account market conditions. It determines the criteria necessary to measure the performance of executive directors in discharging their functions and responsibilities. It also determines remuneration packages for the chief executive and executive directors.

For non-executive directors, the committee makes recommendations to the board on fees to be paid to each director for services rendered as a member of the board or a board committee.

Where appropriate, the committee consults with the chief executive or other executive or non-executive directors to fulfil the duties set out in its terms of reference.

The key responsibilities and role of the committee are contained in written terms of reference approved by the board and include but are not limited to:

Reviewing and approving the remuneration policy of the company
Reviewing and approving performance criteria and measurements for incentive scheme and ensuring the continued contribution to shareholder value
Determining any criteria necessary to measure the performance of executive directors in discharging their functions and responsibilities
Reviewing the terms and conditions of the chief executive, executive directors and prescribed officers’ service agreements, taking into account relevant market information and information from comparable companies where relevant, to ensure that they are fairly, but responsibly appraised and rewarded for their individual contributions towards enhancing the company’s performance
Approving specific remuneration packages for the chief executive officer, executive directors and prescribed officers of the company, including but not limited to basic salary, benefits in kind, any annual bonuses, performance-based incentives, share-based incentives, pensions and other benefits
Ensuring that the remuneration report is accurate, complete and transparent; provides clear explanation of how the remuneration policy has been implemented; and provides sufficient forward-looking information for the shareholders to pass a special resolution in terms of the Companies Act, 2008.

The committee retained PricewaterhouseCoopers (PwC) as its independent remuneration adviser for the period under review.

The committee reviewed the issue of prescribed officers as required by the Companies Act and was satisfied that Mr Viktor Salzmann is a prescribed officer within the meaning of the Act.

The summarised remuneration report is on pages 128 to 134 of this document. The full remuneration report is available of the company’s website, www.barloworld.com.

Attendance

During the year under review, the committee held five scheduled meetings and one special meeting with attendance shown below:

Attendance 13/11/13   28/01/14   18/03/14   21/07/14   01/10/14  
SB Pfeiffer (chairman) tick   tick   tick   tick   tick  
AGK Hamilton tick   tick   tick   tick   tick  
B Ngonyama tick   tick   tick   tick   tick  
SS Ntsaluba tick   tick   tick   tick   tick  
DB Ntsebeza tick   tick   tick   tick   tick  

Nomination committee

The nomination committee comprises Adv Dumisa Ntsebeza SC (chairman), Messrs Gordon Hamilton and Steven Pfeiffer and Ms Sibongile Mkhabela, all independent non-executive directors.

The committee operates according to written terms of reference approved by the board. The committee makes recommendations to the board on the composition of the board and balance between executive, non-executive and independent directors. Skills, experience and diversity are considered in this process.

The committee is responsible for identifying and nominating candidates for approval by the board as additional directors or to fill any board vacancies as they arise. It also advises the board on succession planning, particularly for the chairman and chief executive.

Attendance

During the year under review, the committee held four scheduled meetings with attendance shown below:

Attendance 13/11/13   28/01/14   18/03/14   01/10/14  
SB Pfeiffer (chairman) tick   tick   tick   tick  
AGK Hamilton tick   tick   tick   tick  
SS Mkhabela tick   tick   tick   tick  
SB Pfeiffer tick   tick   tick   tick  

In addition, the committee recommends re-election for directors who retire in terms of the company’s memorandum of incorporation and at its meeting in 1 October 2014, the committee considered candidates standing for election or re-election at the forthcoming annual general meeting. Messrs John Blackbeard, Martin Laubscher, Sango Ntsaluba, Adv Dumisa Ntsebeza SC and Ms Sibongile Mkhabela retire by rotation and Ms Ngozichukwuka Edozien and Mr Dominic Sewela must stand for election at the annual general meeting (see ordinary resolutions 2 to 8 in the notice of annual general meeting). The board recommends to shareholders the re-election of each of these directors based on their skills, experience and contributions.

General purposes committee

The general purposes committee comprises non-executive directors Adv Dumisa Ntsebeza SC (chairman) and Messrs Gordon Hamilton, Alexander Landia and Steven Pfeiffer and executive director Mr Clive Thomson.

Mr Alexander Landia was appointed to the committee with effect from 19 March 2014.

Attendance

During the year under review, the committee held six scheduled meetings with attendance shown below:

Attendance 13/11/13   28/01/14   18/03/14   14/05/14   21/07/14   01/10/14  
DB Ntsebeza (chairman) tick   tick   tick   tick   tick   tick  
AGK Hamilton tick   tick   tick   tick   tick   tick  
A Landia* N/A   N/A   N/A   tick   tick    
TH Nyasulu# tick     N/A   N/A   N/A   N/A  
SB Pfeiffer tick   tick   tick   tick   tick   tick  
CB Thomson tick   tick   tick   tick   tick   tick  
# Appointed in 19 March 2014.
* Retired with effect from 29 January 2014.

The committee’s role, which is governed by written terms of reference approved by the board, is to consider issues of significance to the company. It advises the board on matters with local and international political, economic and social implications for the company. Progress on the strategic plan is reviewed and recommendations on any adjustments required are submitted to the board for approval.

The committee ensures that material matters which require the attention of the board, such as acquisitions and disposals, are timeously submitted for consideration.

In addition, the committee receives feedback from the annual board and board committee effectiveness exercises which assess performance of these bodies against their respective mandates. The chairman progresses matters identified for action.

Executive committee

The executive committee comprises six executive directors and an additional two executive members.

At 30 September 2014 the committee comprised Messrs:

Clive Thomson (chief executive)
John Blackbeard
Peter Bulterman
Martin Laubscher
Sibani Mngomezulu
Viktor Salzmann
Dominic Sewela
Donald Wilson.

Mr Sibani Mngomezulu was appointed executive member to the committee with effect from 1 June 2014.

The board has delegated a wide range of matters relating to the company’s management to the executive committee, including:

Financial, strategic, operational, governance, risk and functional issues
Formulation of group strategy and policy
Alignment of group initiatives.

The committee assists the chief executive to guide and control the overall direction of the company, monitor business performance and act as a medium of communication and coordination between business units, group companies and the board.

Attendance

During the year under review, the committee held 12 scheduled meetings with attendance shown below.

Attendance 14/10/13 11/11/13 06/12/13 17/01/14 24/02/14 17/03/14 22/04/14 13/05/14 18/06/14 17/07/14 20/08/14 29/09/14
CB Thomson (chairman) tick tick tick tick tick tick tick tick tick tick tick tick
PJ Blackbeard tick tick tick tick tick tick tick tick tick tick tick tick
PJ Bulterman tick tick tick tick tick tick tick tick tick tick tick tick
M Laubscher tick tick tick tick tick tick tick tick tick tick tick tick
S Mngomezulu* N/A N/A N/A N/A N/A N/A N/A N/A tick tick tick
V Salzmann tick tick tick tick tick tick tick tick tick tick tick
DM Sewela tick tick tick tick tick tick tick tick tick tick tick
OI Shongwe# tick tick tick tick tick tick tick tick N/A N/A N/A N/A
DG Wilson tick tick tick tick tick tick tick tick tick tick tick tick
* Appointed with effect from 1 June 2014.
# Resigned from the executive management of the company with effect from 31 May 2014.

Internal accountability

Role of internal audit

The purpose, authority and responsibility of the internal audit function are defined in the internal audit charter that is consistent with the Institute of Internal Auditors’ (IIA) definition of internal auditing and the principles of King III. The charter is reviewed and approved by the audit committee annually. Internal audit executed a comprehensive plan which focused mainly on the following:

Evaluating the company’s governance processes
Objectively assessing the effectiveness of the risk management process and internal control framework;
Systematically analysing and evaluating business processes and associated controls against those documented in the risk and control framework
Providing information, as appropriate, on instances of fraud, corruption, unethical behaviour and irregularities.

Internal audit is a key assurance provider and provides the audit committee with a report of its activities which, along with other sources of assurance, is used by the audit committee to report on its assessment of the system of internal controls and risk management for Barloworld group.

Internal audit’s independence

The head of internal audit reports functionally to the chairman of the audit committee. She has unrestricted access to members of the audit committee and executives of the organisation. Regular separate meetings took place between the head of internal audit and the chairman of the audit committee during the year under review.

Internal audit continued to function independently and objectively throughout the group in the past year.

Internal audit’s approach and plan

The group has an integrated approach to risk management and internal controls. As a result, the internal audit plan was informed by the organisation’s risk assessment, with input from management. The head of internal audit coordinates the internal audit function for the group worldwide. Internal audit plans for the year under review were approved in September 2013. Internal audit formally reported on its activities to thedivisional audit review committees and to the audit committee in May and at financial year-end.

The internal audit function operates in accordance with international standards for the professional practice of internal auditing as prescribed by the Institute of Internal Auditors (IIA), which has been confirmed by an independent external quality assurance review. The reviews are conducted every five years as required by the IIA standards.

Combined assurance

The aim of combined assurance is to optimise assurance provided by various assurance providers, management, third-party assurance providers and independent assurance providers. In accordance with the organisation’s combined assurance model, the internal audit function continues to liaise with these assurance providers to maximise efficiencies in assurance coverage on key risks.

Internal audit assessment

Based on the work carried out during the year under review, controls evaluated were overall assessed as adequate and effective to provide a reasonable level of assurance that the group has implemented appropriate controls to mitigate the risks in order to achieve the business objectives.

Share dealing

The groups’ share dealing policy prescribes that no director, officer, employee or nominees or members of their immediate family deals directly or indirectly in the securities of the company neither on the basis of unpublished price sensitive information nor during the embargo period determined by the board. A list of people who are restricted for this purpose has been approved by the board and is revised from time to time. A register of directors and officers is available for inspection at the company’s registered office in Sandton, South Africa.

The Listings Requirements of the JSE extend obligations on transactions in the company’s securities to include those of any major subsidiary. Those officers whose trading transactions have to be disclosed to the market include directors and the company secretary, but now also embrace any associate of the directors or company secretary or any independent entity or investment managers through which the directors or company secretary may derive a present or future beneficial or nonbeneficial interest.

Directors or officers of the company’s major subsidiaries, whether wholly or partially owned, are also included in the list of directors, company secretary and other officers.

Trading in the company’s shares and exercising any rights over these shares is conducted by completing an application form in the case of securities subject to the Barloworld share appreciation right scheme or the forfeitable share plan. Authorisation for the transaction is given in writing by the chairman of the board, chief executive or a divisional chief executive, as appropriate. The written authority is kept by the company secretary with the record of the particular transaction. If the chairman wishes to trade, permission is obtained from designated directors.

Dealings in the company’s securities by directors and officers are listed and circulated at every board meeting for noting.

Relationship with stakeholders

The company is a strong proponent of transparency, best practice disclosure, consistent communication and equal and timely dissemination of information to stakeholders. It encourages the active participation of stakeholders at general meetings and maintains an investor relations programme which, inter alia, arranges regular meetings between corporate and divisional executives and shareholders, potential investors and other stakeholders.

The chief executive, finance director and the investor relations officer have regular dialogue with institutional shareholders as well as other stakeholders. Significant feedback from these visits is shared with the board. The chairman offers stakeholders the opportunity of meeting to discuss governance, strategy or other matters. The interests of stakeholders remain paramount and, in recognition of their needs, the company’s website contains a range of information and materials, including an update on the group’s activities, copies of all presentation materials given to institutional investors and further explanation of matters contained in the integrated report.

The annual general meeting is normally attended by all directors. Shareholders and other stakeholders are encouraged to attend and to ask questions during the meeting. They also have the opportunity to meet with directors after formal proceedings have ended.

The notice of annual general meeting, detailing all proposed resolutions, is contained in the AGM booklet.