Barloworld

Governance and ethics

Governance and ethics

Governance framework

The company’s governance framework supports our strategic focus areas. The board plays a pivotal role in strategy planning and establishes clear benchmarks to measure the company’s strategic objectives. It ensures that a sound structure and governance framework that will enhance good corporate governance, improve internal controls and company performance is in place. In carrying out company priorities the board ensures the existence of the necessary committee structures, including the executive committee with clear terms of reference that assist it in discharging its responsibilities. This is cascaded down in the business to subsidiary and divisional levels to ensure that the business is also provided with structure within which management can operate effectively.

The group 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.

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 Limited and other applicable laws, rules and codes of governance. 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.

The general 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 a general meeting.

The board always acts consistently in its duties of care, skill and diligence as well as its fiduciary duties.

Ethical leadership

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 characteristic of the company since its establishment in 1902.

The fundamental objective has always 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.

The group is governed by the Barloworld Worldwide Code of Conduct and Code of Ethics. The Code of Ethics requires Barloworld directors, management and employees to obey the law, to respect others, to be fair, honest and to protect the environment. The Worldwide Code of Conduct articulates Barloworld’s commitment to doing business the right way, according to best practices, guided by our values.

Our values

4.1 to 4.17, HR1 to HR11

Corporate citizenship

The board and management recognise that Barloworld is an economic entity and also a corporate citizen. As such, it has a social and moral standing in society with all the attendant responsibilities. Further information on corporate citizenship is provided in our corporate social investment (CSI) report in Sustainable development.

Compliance with laws, rules, codes, regulations 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 which are at different levels of maturity and in which the rule of law exists in varying degrees.

Barloworld is listed on the JSE Limited and maintains secondary listings on the London Stock Exchange (LSE) and the Namibia Stock Exchange. The board annually confirms that the company complies with the Listings Requirements of the JSE Limited.

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 15 directors, comprising 10 non-executive directors and five 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 in accordance with 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 regarded as independent.

Mr Martin Laubscher, an executive director of the company retired from the board with effect from 4 February 2015 for health-related reasons. Mr Alexander Landia will resign from the board with effect from 31 December 2015, as a result of increased external business commitments. Mr Gordon Hamilton, having reached retirement age, will retire from the board and as chairman of the audit committee and member of other sub-committees of the board at the forthcoming AGM.

Board demographics as at 30 September 2015:

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Chairman and chief executive

The responsibility for running the board and executive responsibility for conducting the business are differentiated. The chairman of the board, Adv Dumisa Ntsebeza SC, is an independent non-executive director and the chief executive, Mr Clive Thomson, is an executive director. 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 for consideration by the board.

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.

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. Decisions not taken at a board meeting are adopted by way of written resolutions 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. The board meets as scheduled and, where necessary, special meetings are held to deal with specific aspects.

COMMITTEE		RESPONSIBILITIES		MEMBERSHIP		MEETINGS ATTENDED
Board		During the 2015 financial year, the board fulfilled the following functions in accordance with its mandate: Performed a comprehensive review of the terms of reference to align with applicable legislation, sound corporate governance principles and the company’s Memorandum of Incorporation Confirmed that the company complies with applicable law, relevant listings requirements and best corporate governance practice Exercised independent, informed and effective judgement to bear on material decisions of the company and group companies Set the tone of the company values including principles of ethical business practice and the requirements of being a responsible corporate citizen Approved the revised group approvals framework Informed and approved the strategies and strategic objectives of the compa Approved the close-out of the 2008 B-BBEE transaction in a fair and equitable manne		DB Ntsebeza (Chairman) CB Thomson PJ Blackbeard PJ Bulterman NP Dongwana FNO Edozien AGK Hamilton A Landia M Laubscher* SS Mkhabela B Ngonyama SS Ntsaluba SB Pfeiffer DM Sewela OI Shongwe DG Wilson * Retired with effect 4 February 2015.		6/6 6/6 6/6 6/6 6/6 6/6 6/6 5/6 2/2 6/6 5/6 6/6 6/6 6/6 5/6 6/6
FOCUS AREAS FOR 2016 Progressing the strategic options approved by the board

Board committees

The board has established six standing committees with delegated authority from the board. Each board committee is chaired by an independent non-executive director.

These committees play an important role in enhancing good corporate governance, improving internal controls and, thus, the performance of the company. Each board committee acts according to written terms of reference which are reviewed annually and approved by the board.

COMMITTEE		RESPONSIBILITIES		MEMBERSHIP		MEETINGS ATTENDED
Audit		During the 2015 financial year, the committee had, in addition to the statutory functions prescribed in the Companies Act and other regulations, focused on the following: Received a presentation on the revised JSE Listings Requirements Monitored the appropriateness of the company’s combined assurance model Reviewed and recommended for adoption by the board such financial information that is publicly disclosed Monitored and supervised the functioning and performance of internal audit, compliance with its charter and reviewed and approved the annual risk-based audit plans, resources and budgets Received and reviewed reports from both internal and external auditors concerning the effectiveness of the internal control environment, systems and processes management Reviewed the group information security policy and the results of the internal self-assessments of the levels of control in place across the group Considered to its satisfaction the independence, objectivity and effectiveness of the external auditors Reviewed the performance and expertise of the group finance director, head of internal audit and overall finance function		AGK Hamilton (Chairman) B Ngonyama SS Ntsaluba		6/6 6/6 6/6
FOCUS AREAS FOR 2016 The revised auditor’s report King IV

COMMITTEE		RESPONSIBILITIES		MEMBERSHIP		MEETINGS ATTENDED
Social, ethics and transfromation		Approved diversity and inclusion targets to 2020 to align with the company’s strategy across the group Approved the stakeholder engagement strategy for the public sector Received reports on the new B-BBEE Codes of Good Practice and Priorities for South Africa and Barloworld initiatives Considered the programme relating to the effective management of ethics Received reports on key labour relations issues across the group		SS Mkhabela (Chairman) PJ Blackbeard NP Dongwana DB Ntsebeza OI Shongwe CB Thomson		5/5 5/5 5/5 5/5 3/5 5/5
FOCUS AREAS FOR 2016 Consumer protection Roll out of public sector engagement strategy in southern Africa Diversity and inclusion programmes

COMMITTEE		RESPONSIBILITIES		MEMBERSHIP		MEETINGS ATTENDED
Remuneration		Determined the criteria necessary to measure the performance of executive directors in discharging their functions and responsibilities Considered the structure and development of the company’s general policy on executive directors and prescribed officer remuneration Reviewed the appropriateness and effectiveness of the short and long-term incentive schemes Reviewed and approved the remuneration policy of the company Ensuring that the remuneration report is accurate, complete and transparent; provides clear explanation of how the remuneration policy has been impl Received reports from the company’s independent remuneration advisers (PwC and PE Corporate Services) on global trends relating to executive and non-executive pay		SB Pfeiffer (Chairman) AGK Hamilton B Ngonyama SS Ntsaluba DB Ntsebeza		5/5 ^2/2 5/5 ^2/2 5/5 ^2/2 5/5 ^0/2 5/5 ^2/2 ^ During the 2015 financial year the committee held an additional two special
FOCUS AREAS FOR 2016 Incentive schemes structures Performance metrics

COMMITTEE		RESPONSIBILITIES		MEMBERSHIP		MEETINGS ATTENDED
Nomination		Performed a comprehensive review of the terms of reference to align with sound corporate governance principles Reviewed the succession plans in place for directors, in particular for the chairman and chief executive Made recommendations to the board on the size and composition of the board generally and its committees Evaluated the performance of the board, its committees and individual directors in order to assess the effectiveness of the board as a whole, its committees and the contribution of each director and PE Corporate Services) on global trends relating to executive and non-executive pay		DB Ntsebeza (Chairman) AGK Hamilton SS Mkhabela SB Pfeiffer		4/4 4/4 4/4 4/4
FOCUS AREAS FOR 2016 Incentive schemes structures Performance metrics

COMMITTEE		RESPONSIBILITIES		MEMBERSHIP		MEETINGS ATTENDED
Risk and sustainability		Reviewed the adequacy and effectiveness of the risk management process Addressed sustainable development in the company including climate change and environmental stewardship Evaluated the non-financial audit matrix and determined the material elements of integrated reporting Reviewed and approved the insurance renewal programme and the extent that the group should retain risk		SS Ntsaluba (Chairman) PJ Blackbeard PJ Bulterman NP Dongwana AGK Hamilton M Laubscher* OI Shongwe CB Thomson DG Wilson * Retired with effect from 4 February 2015		4/4 4/4 4/4 3/4 4/4 n/a 2/4 4/4 4/4
FOCUS AREAS FOR 2016 Effectiveness of the ethics and compliance programme Emerging risks Governance of information technology Safety, health and environmental issues

COMMITTEE		RESPONSIBILITIES		MEMBERSHIP		MEETINGS ATTENDED
General purposes		Performed a comprehensive review of the terms of reference to align with sound corporate governance principles and the needs of the company Considered key strategic matters including significant acquisitions and disposals, group restructuring and funding decisions Reviewed the implementation of, or adjustments to, the group’s strategic plan Received reports on matters having political, economic, legal and social implications regarding the affairs of the company		DB Ntsebeza (Chairman) AGK Hamilton A Landia SB Pfeiffer CB Thomson		6/6 ^3/3 6/6 ^3/3 5/6 ^2/3 6/6 ^3/3 6/6 ^3/3 ^ During the 2015 financial year the committee held three additional special meetings
FOCUS AREAS FOR 2016 Group’s strategic options

Executive committee

The company has an established executive committee (Exco) which is not a committee of the board. Exco comprises nine members, led by the chief executive. Exco meets on a regular basis and guides the chief executive in managing the day-to-day business of the group, monitors business performance against established best management practices and functional standards and acts as a medium of communication and coordination between business units, group companies and the board.

Board and committee 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.

Company secretary

Ms Lerato Manaka is the company secretary, duly appointed by the board in accordance with the Companies Act and the JSE Listings Requirements. The company secretary is not a director of the company.

The board of directors annually considers and is satisfied that the company secretary is properly qualified and experienced to carry out the duties and responsibilities of a company secretary and that there is an arm’s-length relationship between itself and the company secretary.

The directors of the company have unrestricted access to the company secretary for advice on matters of governance and other services. The company secretary provides the board as a whole and directors individually with guidance on discharging their responsibilities.

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. An ongoing systematic enterprise-wide risk assessment process supports the group philosophy. 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. The group risk department oversees strategic direction and continual improvement in methodology and process, as well as providing technical assistance.

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’ definition of internal auditing, and the principles of King III. The charter is updated and approved by the board annually. Internal audit follows a risk-based audit approach. In line with the integrated risk and assurance approach, internal audit continues to liaise with the risk and compliance managers and other assurance providers to maximise efficiencies in assurance on critical risks.

Integrated risk and assurance

Assurance matrix

Reporting aspect assured

Independent assurance providers

Scope of review

Framework/standard

Output

Frequency

Annual financial statements

External audit (Deloitte)

Annual financial statements audit

IFRS Companies Act International Standards on Auditing (ISA)

External audit opinion

Annual

Interim financial results

External audit (Deloitte)

Review of interim financial results

International Standard on Assurance Engagements (ISAE 2410). Companies Act International Standards on Auditing (ISA)

Assurance statement

Annual

Internal controls and risk management process

Barloworld group internal audit

Review of risk management, operational and nonfinancial reporting processes

Institute of Internal Auditors (IIA) International Standards for the Professional Practice of Internal Auditing. Barloworld group internal audit methodology

Internal audit opinion on the adequacy and effectiveness of controls and risk management processes

Annual

Internal financial controls

Barloworld group internal audit

Assurance on the adequacy and effectiveness of financial controls

Institute of Internal Auditors (IIA) International Standards for the Professional Practice of Internal Auditing Barloworld group internal audit methodology Barloworld internal financial control framework

Internal audit opinion on financial controls

Annual

Key non-financial indicators

External audit (Deloitte)

Assurance on selected key non-financial performance indicators

International Standard on Assurance Engagements (ISAE 3000)

Assurance report

Annual

GRI G3.1 response Application Level

External audit (Deloitte)

Assurance of selfdeclared Application Level

Global Reporting Initiative Sustainability Reporting Guidelines (GRI G3.1) International Standard on Assurance Engagements (ISAE 3000)

Assurance report

Annual

Black economic empowerment rating

Empowerdex

Verification of empowerment status

Department of Trade and Industry (dti) Broad-Based Black Economic Empowerment (B-BBEE)

Empowerment rating certificate

Annual

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 relevant stakeholders at general meetings and maintains an investor relations programme which, inter alia, arranges regular meetings between corporate and divisional executives, shareholders, potential investors and other relevant stakeholders. Further information on stakeholder management is provided in our stakeholder report.

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