Corporate governance report

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 characteristic of the group since the company’s 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.

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

Our 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.

In May 2011, the board approved an ethics and compliance programme for the group. The programme is designed to further entrench and integrate the requirements of good corporate governance throughout the group. In line with the maturity model contained in the ethics and compliance programme, the group will perform an assessment of ethical risks and opportunities and integrate these into the risk management process and, thereafter, continually assess, 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 code of ethics enjoins Barloworld directors, management and employees to:
  obey the law,
  respect others,
  be fair, honest, and
  protect the environment.

The company maintains an ethics hotline introduced in 2002. This is an independent and confidential system for 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 and the identity of whistle-blowers is protected by the service provider.

The group’s comprehensive risk management approach covers all 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 aspects of 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 forum meetings – reinforce the company’s commitment to its values and expected behaviour. Facilitated by legal and human resource practitioners, structured sessions take place with group and divisional executives to review business conduct and compliance with legislation, company ethics, codes and policies.

Corporate citizenship

The board and management recognise that Barloworld is an economic entity and also a corporate citizen and, as such, it has a social and moral standing in society with all the attendant responsibilities. The board is therefore responsible for ensuring that the group protects, enhances and invests in the well-being of the economy, society and natural environment, and pursues its activities within the limits of social, political and environmental responsibilities outlined in international conventions on human rights. Under the auspices of the board, the group is involved in a number of corporate social investment projects, which are covered on pages 92 and 93 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 which are at different levels of maturity. In these jurisdictions the rule of law exists in varying degrees and hybrid systems of governance are developing.

Through the audit, risk and sustainability, and social, ethics and transformation committees the board ensures that appropriate 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 to management the task of implementing an effective compliance framework and processes. The board regularly considers compliance with laws, rules, codes and standards as a part of its meetings.

Corporate governance

The King Report on Governance for South Africa (King III) became effective from the 2011 financial year. The board continuously reviews the extent to which Barloworld applies the principles and recommended practices in 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 could be enhanced.

We confirm that 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.

Barloworld is one of six JSE ‘Top Performer’ companies to be included in the Carbon Disclosure Project’s Carbon Performance Leadership Index (CPLI) for 2012 and remained in the ‘Best Performer’ category of the JSE’s Socially Responsible Investment Index (JSE SRI). Our integrated report for 2011 was ranked third in the Nkonki Top 100 integrated reporting awards and fourth in the Integrated Reporting and Assurance Services review of sustainability reporting in South Africa in accordance with the Global Reporting Initiative (GRI) guidelines.

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

King III review table

Applied   In progress        
Number Principle Applied How principle is applied or other relevant explanation
Chapter 1Ethical leadership and corporate citizenship
1.1   The board should provide effective leadership based on an ethical foundation.     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.     The board is responsible for ensuring that the group protects, enhances and invests in the wellbeing 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.     In May 2011 the board approved an ethics and compliance programme for the group. The programme is designed to further entrench and integrate the requirements of good corporate governance throughout the group. The business of the group is also governed by a worldwide code of conduct and a code of ethics, both approved by the board.
Chapter 2 – Board and directors
2.1   The board should act as the focal point for and custodian of corporate governance.     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.     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.     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.     The board is responsible for ensuring that the group protects, enhances and invests in the wellbeing of the economy, society and natural environment, and pursues its activities within the limits of social, political and environmental responsibilities outlined in applicable codes and standards.
2.5   The board should ensure that the company’s ethics are managed effectively.     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 performs an assessment of ethical risks and opportunities and integrate these into the risk management process and, thereafter, continually assess, 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.     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.     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 for information technology (IT) governance.     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.     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 and hybrid systems of governance are developing.
2.10   The board should ensure that there is an effective risk-based internal audit.     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.     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.     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.     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.     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.     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.     Advocate Dumisa Ntsebeza SC, an independent nonexecutive 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.     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.     Considerable thought is given to board balance and composition. The board has fifteen directors, comprising nine non-executive directors, and six executive directors. Seven non-executive directors are independent and two directors are not independent.
2.19   Directors should be appointed through a formal 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.
2.20   The induction of and ongoing training and development of directors should be conducted through formal processes.     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.     Mr Bethuel Ngwenya 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.     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.     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.     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.     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.     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.     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
3.1   The board should ensure that the company has an effective and independent audit committee.     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.     All audit committee members are evaluated by the nomination committee as being independent with experience in financial, legal, IT and commerce.
3.3   The audit committee should be chaired by an independent non-executive director.     The chairman of the audit committee is regarded as independent non-executive director by the nominations committee.
3.4   The audit committee should oversee integrated reporting.     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.     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.     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 of internal audit.     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.     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.     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.     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
4.1   The board should be responsible for the governance of risk.     Formal processes are in place reflecting the board’s leadership with regard to the governance of risk.
4.2   The board should be responsible for the governance of risk.     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.     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.     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.     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.     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.     The implementation of controls, existing and new, is monitored on an ongoing basis.
4.8   The board should ensure continual risk monitoring by management.     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.     Barloworld internal audit services provides assurance to the board in respect of divisional and group risk management activities.
4.10   The board should ensure that there are processes in place enabling complete, timely, relevant, accurate and accessible risk disclosure to stakeholders.     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
5.1   The board should be responsible for information technology (IT) governance.     The IT steering committee is empowered by the risk and sustainability committee (a sub-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.     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.     The IT steering committee is empowered by the risk and sustainability committee (a sub-committee of the board) to guide IT governance in the group.
5.4   The board should monitor and evaluate significant IT investments and expenditure.     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.     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 is currently testing a system for information classification as well as implementing changes to information management practices. The required improvements to information management, information security and privacy should be addressed over the next 18 months.
5.7   A risk committee and audit committee should assist the board in carrying out its IT responsibilities.     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
6.1   The board should ensure that the company complies with applicable laws and considers adherence 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 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.     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.     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.     Barloworld has developed an ethics and compliance programme which has been approved by the board and which is in the process of being rolled out across the group. The Worldwide Code of Conduct, which sets out the standards to which each employee is asked to hold him/herself accountable, has been distributed group-wide.
Chapter 7 Internal audit
7.1   The board should ensure that there is an effective risk-based internal audit.     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.   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.     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.     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.     The head of internal audit has unrestricted access to members of the audit committee and executives of the organisation. He 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
8.1   The board should appreciate that stakeholders’ perceptions affect a company’s reputation.     Engagements with stakeholders are aimed at establishing open, interactive and mutually beneficial relationships. Stakeholder research is 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, new methodologies (eg relational proximity research) are being explored to identify and address mismatches in perception and report on the “health” of strategic stakeholder relationships.
8.2   The board should delegate to management to proactively deal with stakeholder relationships.     A group policy and guidelines for managing stakeholder engagement, based on international best practice, and approved by the board has been published on the company website and is being 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 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.   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.     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.     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.     The group has a well-development commercial relationships management practice 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
9.1   The board should ensure the integrity of the company’s integrated report.     The board reviews the integrated report and related complementary reports. Structured authorisation and review processes are in place which include board sub-committees, external and internal assurance reviews.
9.2   Sustainability reporting and disclosure should be integrated with the company’s financial reporting.     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 (GRI G3.1) and the South African Integrated Reporting Committee.
9.3   Sustainability reporting and disclosure should be independently assured.     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 sub-committees, review integrated report and complementary reports.

Regulatory compliance

Barloworld is listed on the 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 non-financial aspects, the company has adopted the Global Reporting Initiative’s (GRI G3.1) sustainability reporting guidelines on economic, environmental and social performance.

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.

Statutory compliance

Compliance remains a core focus of the board, which is ultimately responsible for ensuring that the group identifies and complies with applicable laws.

The board regularly notes and keeps abreast of significant legislative developments in jurisdictions in which it operates. The board is cognisant of draft legislation for the protection of personal information in South Africa and electronic communications related to legislation that is already law. The board is also aware of other important pending legislation such as the revised code of Good Practice in terms of South African broad-based black economic empowerment laws.

Standards of directors’ conduct

The board always acts consistently in its duties of care, skill and diligence as well as its fiduciary duties. These are now partly codified in the Companies Act as standards of directors’ conduct.

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 on disclosing or avoiding conflicts of interest. 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 that addresses the acceptance of gifts which requires that gifts be officially declared and registered on the company’s gift register.

Statutory powers

Section 66(1) of 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 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
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
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 renewed 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; 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 fiveyear forward-looking strategic plan presented by divisional heads. The five-year forward-looking strategic plan is debated by the executive committee before being consolidated and presented to the board after reviewing each division’s internal strategic plans.

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 nine non-executive directors, and six executive directors. Seven non-executive directors are independent and two directors are not independent.

Number Year
appointed
Audit General
purposes
Nomination Remuneration Risk and
sustainability
Social,
ethics and
transformation
Independant non-executive directors                        
DB (Dumisa) Ntsebeza (chairman)   1999       Chairman   Chairman   Member       Member
AGK (Gordon) Hamilton   2007   Chairman   Member   Member   Member   Member    
SS (Bongi) Mkhabela   2006           Member           Chairman
B (Babalwa) Ngonyama   2012   Member                    
SS (Sango) Ntsaluba   2008   Member           Member   Chairman    
SB (Steve) Pfeiffer   2001       Member   Member   Chairman        
G (Gonzalo) Rodriquez de Castro Garcia de los Rios   2004                       Member
Non-independant, non-executive directors                        
NP (Neo) Dongwana   2012                        
AGK (Gordon) Hamilton   2007       Member                
Executive directors                        
CB (Clive) Thompson
(chief executive)
  2003       Member           Member   Member
PJ (John) Blackbeard   2004                   Member   Member
PJ (Peter) Bulterman   2009                   Member    
M (Martin) Laubscher   2005                   Member    
OI (Isaac) Shongwe   2007                   Member   Member
DG (Don) Wilson   2006                   Member    

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 independent non-executive directors. The board considered the issue of independence of directors, evaluating the rationale and meaning of the requirements of independence according to King III. An assessment, considering the salient factors and unique circumstances of each director, was performed for each non-executive director. Furthermore, the independence of non-executives who have served on the board for longer than nine years was assessed. The board is satisfied that seven of the nine non-executive directors are independent.

Hixonia Nyasulu is not regarded as independent in view of her participation in the black ownership transaction that resulted in the transfer to her, indirectly or directly, of shares that are considered to be material in relation to her personal wealth. Neo Dongwana is not considered independent as she was a partner in Deloitte and Touche, the company’s external auditors, until December 2010. Despite the determination reached, the board believes the skills, knowledge and experience of these directors 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.

Having reached retirement age, Mr G Rodriquez de Castro Garcia de los Rios will retire from the board and will not be available for re-election at the annual general meeting in January 2013.

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 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 six meetings were held in South Africa and one in Mozambique in July 2012.

Names   10 Nov
2011
  25 Jan
2012
  28 Mar
2012
  17 May
2012
  25 Jul
2012
  21 Sept
2012
 
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DB Ntsebeza (chairman)              
CB Thomson (chief executive)              
SAM Baqwa         n/a   n/a   n/a  
PJ Blackbeard              
PJ Bulterman              
NP Dongwana   n/a   n/a   n/a        
AGK Hamilton              
M Laubscher              
SS Mkhabela              
B Ngonyama   n/a   n/a   n/a        
MJN Njeke       n/a   n/a   n/a   n/a  
SS Ntsaluba         tick      
TH Nyasulu              
SB Pfeiffer              
G Rodriquez de Castro Garcia de los Rios              
OI Shongwe              
DG Wilson              

Director development

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

Directors are informed, wherever 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 a director also has unrestricted access to the chairman, executive directors and company secretary. Where a non-executive or independent director takes reasonable action and costs are incurred, these are borne by the company.

Board and board committees’ performance assessment

Annually, the performance of the board as a whole and the board committees individually is appraised. In line with the requirements of King III, the assessment of the performance of the board for the year under review was independently conducted by an external service provider. The performance assessment indicated that the board and the board committees are performing their duties and responsibilities satisfactorily. 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, and he deals with 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. The remuneration policy of the company as it pertains to executive, non-executive directors and prescribed officers are set out in the remuneration report on pages 56 to 67 of the AGM document.

Company secretary

Mr Bethuel Ngwenya is the group company secretary, duly appointed by the board in accordance with the Companies Act. The company secretary is not a director of the company. 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. He 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. He 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. He also assists in developing the annual board plan, 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 sub-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, 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 auditors 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), Sango Ntsaluba and Ms Babalwa Ngonyama, all of whom are independent non-executive directors. The chairman of the company is not a member of the committee. The audit committee was appointed by shareholders on 25 January 2012. In terms of both the previous and current Companies Act, the committee reports directly to shareholders.

Mr Johnson Njeke and Adv Selby Baqwa SC resigned from the committee on 29 February 2012 and 10 May 2012 respectively and Ms B Ngonyama was appointed to the committee with effect from 1 May 2012, subject to the approval of shareholders at the annual general meeting.

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

Considering the independence of the external auditors and making recommendations to the shareholders on the appointment or dismissal of the external auditors
Evaluating the independence, effectiveness and performance of the external auditors and considering and confirming the external audit fees
Considering and pre-approving any non-audit services rendered by those auditors, including satisfying themselves of the validity of the non-audit services and defining any limits in this regard.
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 internal audit junction adequacy of the resources in the group’s financial function as well as the expertise of senior financial management
Reviewing and confirming the suitability and expertise of the head of internal audit and the chief financial officer of the company
Monitoring and supervising the functioning and performance of internal audit.

Based on a review and evaluation of the nature and extent of the documented review of internal financial controls performed by internal audit and the reports prepared by the internal auditors, external auditors, management and other assurance providers, the committee reports annually to the board and stakeholders on the effectiveness of the company’s internal financial controls.

The chairman of the committee reports to the board on the activities and recommendations made by the committee.

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

Attendance

During the year under review six scheduled meetings and one special meeting were held with attendance shown below.

Audit committee

Names   10 Nov
2011
  24 Jan
2012
  27 Mar
20
  16 May
201
  29 May
2012
  23 Jul
2012
  25 Sept
2012
 
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AGK Hamilton (chairman)                
SAM Baqwa       n/a   n/a   n/a   n/a   n/a  
B Ngonyama   n/a   n/a   n/a          
MJN Njeke       n/a   n/a   n/a   n/a   n/a  
SS Ntsaluba                

Annually the committee assesses the qualifications, expertise, resources and independence of the company’s auditors. This assessment is based on reports produced by the auditors, the committee’s own dealings with the auditors and feedback from the executive team.

The independence and objectivity of the auditors is regularly considered by the committee in relation to proposed non-audit services.

The report of the audit committee is on pages 7 and 8 of the consolidated annual financial statements on the AGM document CD.

Social, ethics and transformation committee

The social, ethics and transformation committee (SET) comprises independent non-executive directors Ms Sibongile Mkhabela (chairman), Adv Dumisa Ntsebeza SC and Gonzalo Rodriguez de Castro de los Rios and executive directors Messrs John Blackbeard, Isaac Shongwe and Clive Thomson.

Adv Selby Baqwa SC resigned from the committee on 10 May 2012. 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.

Attendance

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

Social, ethics and transformation committee

Names   24 Jan
2012
  27 Mar
2012
  20 Sept
2012
 
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SS Mkhabela (chairman)        
SAM Baqwa       n/a  
PJ Blackbeard        
DB Ntsebeza        
G Rodriquez de Castro Garcia de los Rio        
OI Shongwe        
CB Thomson        

The functions of the committee are prescribed by the Companies Act and cover the following broad areas:

Social and economic development
Corporate citizenship
Environment, health and public safety
Consumer relationships
Labour and employment
Empowerment and transformation
Stakeholder relations.

Risk and sustainability committee

For the year ended 30 September 2012, the risk and sustainability committee comprised two independent non-executive directors, Messrs Sango Ntsaluba (chairman) and Gordon Hamilton, and Messrs John Blackbeard, Peter Bulterman, Martin Laubscher, Isaac Shongwe, Clive Thomson and Don Wilson, who are executive directors.

Mr Johnson Njeke resigned from the committee on 29 February 2012.

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 progressively implemented and functioning 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:

Setting out 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 stakeholders’ expectations, corporate governance codes and best-practice guidelines relating to risk issues
Receiving reports on substantive environmental and health and safety risks
Reviewing and approving the insurance renewal programme
Reviewing and approving reports on sustainability performance
Determining, and recommending to the board for approval, Barloworld’s risk appetite
Compliance with laws, rules, standards and codes
Assisting the board with activities relating to the governance of information technology.

Attendance

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

Risk and sustainability committee

Names   8 Nov
2011
  27 Mar
2012
  14 May
2012
  25 Sept
2012
 
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SS Ntsaluba (chairman)          
PJ Blackbeard          
PJ Bulterman          
AGK Hamilton          
M Laubscher          
MJN Njeke     n/a   n/a   n/a  
OI Shongwe          
CB Thomson          
DG Wilson          

Risk management process

In terms of a written risk management philosophy statement issued by the chief executive and endorsed by the directors, 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 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.

Divisional boards and senior managers conduct ongoing selfassessment of risk. This process identifies critical business, operational, financial and compliance exposures facing the group 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 the process from the perspective of strategic direction, ongoing improvement in methodology and process, and technical assistance. The internal auditors assist 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. By integrating the risk management process with the group’s strategic process and direction, the risk-return trade-off is optimised. This enhances competitive advantage, growth and employment of capital. For joint ventures and associates, the company encourages adherence to the same risk management philosophy and policies.

IT governance

The board, which bears ultimate responsibility 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.

The steering committee comprises divisional CEOs and the group CEO and finance director. Divisional chief information officers and the head of internal audit attend steering committee meetings by invitation. Considering the size and structures within the group, 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 focuses on monitoring and evaluating 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 management practices. The required improvements to information management, information security and privacy should be addressed over the next 18 months.

Remuneration committee

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

Mr Johnson Njeke resigned from the committee on 29 February 2012.

The committee makes recommendations to the board on the structure and development of 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:

Determining any criteria necessary to measure the performance of executive directors in discharging their functions and responsibilities
Reviewing terms and conditions of the chief executive and executive directors’ 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 to enhancing the company’s performance
Determining specific remuneration packages for the chief executive and executive directors, including basic salary, benefits in kind, annual bonuses, performance-based incentives, share-based incentives, pensions and other benefits
Determining any grants to executive directors and other senior employees made under any executive share scheme adopted by the company in general meeting.

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 Messrs Viktor Salzmann, Dominic Sewela and Ian Stevens are prescribed officers within the meaning of the Act.

The remuneration report is on pages 56 to 65 of this document.

Attendance

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

Remuneration committee

Names   8 Nov
2011
  25 Jan
2012
  28 Mar
2012
  17 May
2012
  25 Jul
2012
  21 Sept
2012
 
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SB Pfeiffer (chairman)              
AGK Hamilton              
MJN Njeke       n/a   n/a   n/a   n/a  
SS Ntsaluba              
DB Ntsebeza              

Nomination committee

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

Advocate Selby Baqwa SC resigned from the committee on 10 May 2012.

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, nonexecutive and independent directors. Skill, 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, six scheduled meetings were held with attendance shown below:

Nomination committee

Names   9 Nov
2011
  25 Jan
2012
  27 Mar
2012
  16 May
2012
  23 Jul
2012
  21 Sept
2012
 
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DB Ntsebeza (chairman)              
SAM Baqwa         n/a   n/a   n/a  
AGK Hamilton              
SS Mkhabela              
SB Pfeiffer              

In addition the committee recommends for re-election directors who retire in terms of the company’s memorandum of incorporation.

Advocate DB Ntsebeza SC, Messrs M Laubscher, OI Shongwe and DG Wilson are required to retire by rotation at the next annual general meeting and, being available and eligible, offer themselves for re-election. Ms Dongwana and Ngonyama being directors appointed during the financial year under review are required to retire and, being available and eligible, offer themselves for re-election. At its meeting in November 2012, the committee considered candidates standing for election or re-election at the forthcoming annual general meeting (see ordinary resolutions 2 to 7 in the notice of annual general meeting on pages 2 and 3 of this document). Based on the skills, experience and contributions of each director, the board recommends to shareholders the re-election of each of these directors.

General purposes committee

The general purposes committee comprises Advocate Dumisa Ntsebeza SC (chairman) and Messrs Gordon Hamilton, Steven Pfeiffer (independent non-executive directors), Ms Hixonia Nyasulu (non-independent non-executive director) and Mr Clive Thomson, executive director. Advocate Selby Baqwa SC resigned from the committee on 10 May 2012.

Attendance

During the year under review, the committee held eight meetings and the attendance was:

General purpose committee

Names   9 Nov
2011
  25 Jan
2012
  9 Feb
2012
  27 Mar
2012
  16 May
2012
  23 Jul
2012
  22 Aug
2012
  21 Sept
2012
 
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DB Ntsebeza (chairman)                  
SAM Baqwa           n/a   n/a   n/a   n/a  
AGK Hamilton                  
TH Nyasulu                  
SB Pfeiffer                  
CB Thomson                  

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 such as acquisitions and disposals, which require the attention of the board, are timeously submitted for consideration.

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

Executive committee

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

At 30 September 2012, the committee comprised Messrs:
Clive Thomson (chief executive)
John Blackbeard
Peter Bulterman
Martin Laubscher
Viktor Salzmann
Dominic Sewela
Isaac Shongwe
Ian Stevens
Don Wilson

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 held 12 formal and two strategy getaway meetings during the year under review and additional sessions were held focusing on strategy and initiatives to develop intellectual capital in the group. 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

Names   17 Oct
2011
7 Nov
2011
9 Dec
2011
19 Jan
2012
23 Feb
2012
20 Mar
2012
18 Apr
2012
15 May
2012
19 Jun
2012
18 Jul
2012
20 Aug
2012
19 Sept
2012
 
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CB Thomson (chairman)    
PJ Blackbeard    
PJ Bulterman    
M Laubscher    
V Salzmann    
DM Sewela    
OI Shongwe    
IG Stevens    
DG Wilson    

Internal audit

Role of internal audit

The purpose, authority and responsibility 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.

Internal audit’s independence

The head of internal audit reports functionally to the chairman of the audit committee. He has unrestricted access to members of the audit committee and executives of the organisation. In addition, 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’s approach and plan

The head of internal audit coordinates the internal audit function worldwide. A risk-based methodology has been applied for the year under review, with input from divisional management and aligned to the organisation’s risk management processes. Internal audit plans were approved in November 2011. Audit findings were formally reported to divisional 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 a recent independent external quality assurance review, conducted every five years as required by the IIA standards.

Internal audit continued to function independently and objectively throughout the group in the past year. Internal audit has focused on the following main areas, as required by King III:

Evaluating the company’s governance processes, including ethics
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 a source of information, as appropriate, on instances of fraud, corruption, unethical behaviour and irregularities.

Combined assurance

Although not reliant on external auditors for any resource support, the internal audit function, in accordance with the organisation’s combined assurance model, continues to liaise with the external auditors, and other assurance providers identified, to maximise efficiencies in assurance coverage on key risks.

During the year under review, internal audit used the services of independent external firms to supplement its own resources in conducting planned audit coverage. This was managed strictly by applying best-practice standards on obtaining external service providers to support or complement the internal audit activity.

Internal audit assessment

Based on the work carried out during the year under review, controls evaluated were assessed as adequate and effective to provide a reasonable level of assurance that risks are being managed and that group objectives should be met.

Insider trading

Through appropriate procedures, the board ensures that no director, manager, prescribed officer, employee or nominees or members of their immediate family deals directly or indirectly in the securities of the company on the basis of unpublished price-sensitive information nor during the embargo period determined by the board in terms of a formal policy implemented by the company secretary. 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 Limited 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 within 48 hours specifically 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 non-beneficial 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 any cessions of options over these shares is conducted by completing an application form, in the case of securities subject to the Barloworld share option scheme or the forfeitable share plan, or a letter in any other case. 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 this document on pages 2 to 10.

 

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