INTEGRATED ANNUAL REPORT 2011 GRI RESPONSES  

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. It addresses ethics and governance, including the commitment at the top, code of conduct, systems infrastructure and due-diligence standards. The compliance standards provide the operational requirements for setting and maintaining policies, training, communication and reporting. 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 whistleblowers ensures transparency and promotes ethical conduct and the identity of whistleblowers 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 wellbeing 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 90 and 91 of the integrated annual 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 and in which 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 appraised of 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 has undertaken to include compliance with laws, rules, codes and standards as a regular board agenda item.

Corporate governance

The King Report on Governance for South Africa (King III) became effective for our 2011 financial year. The board initiated a gap analysis to determine the extent to which Barloworld applied the principles and recommended practices in King III. This analysis identified the governance principles already being applied and those which the company needed to address. The analysis also identified 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.

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. In relevant sections of this integrated annual report the group refers to areas where further improvements or enhancements in governance practices may be required or have explained where the group applies a King III recommended practice differently.

The company's 2010 annual report was ranked third in the Nkonki Financial Mail Integrated Reporting Awards held in July 2011. The awards considered the extent to which companies on the JSE Top 40 index and on the JSE Socially Responsible Investment index complied with the integrated reporting disclosure requirements of King III.

The same report was again rated 'excellent' in the Ernst & Young 2011 survey of excellence in corporate reporting in South Africa.

Regulatory compliance

Barloworld is listed on the JSE Limited 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 Limited. 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 anticorruption. 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 has noted the following significant legislative developments during the year under review in jurisdictions in which the group operates:

the Companies Act – effective 1 May 2011 in South Africa
the Consumer Protection Act – effective 1 April 2011 in South Africa and
the UK Bribery Act – effective 1 July 2011.

The board has appointed a social, ethics and transformation committee and has also identified the company's prescribed officers and disclosed their remuneration in terms of the Companies Act. The board has also placed the UK Bribery Act on its compliance agenda by adopting an ethics and compliance programme that takes cognisance of the provisions of the act.

The ethics and compliance programme seeks to strengthen the existing compliance framework, systems, processes and procedures all of which assist the board to ensure the group's compliance with applicable laws, rules, codes and standards.

During the year under review the company did not receive any requests for access to information in terms of the Promotion of Access to Information Act.

The board is yet to adopt formal dispute resolution processes for external disputes and consider selecting appropriate individuals to represent the company in alternative dispute resolution.

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.

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.

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 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 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 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. On the recommendation of the audit committee, the board has considered and approved the company's integrated annual 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 five-year 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. Eight non-executive directors are independent and only one director is not independent.

  Name   Year
appointed
Audit General purposes Nomina-
tion
Remunera-
tion
Risk and
sustain-

ability
Social,*
Ethics and
Transformation
 
  Independent                  
  non-executive directors                  
  DB Ntsebeza (chairman) Dumisa 1999   Chairman Chairman Member   Member  
  SAM Baqwa Selby 2005 Member Member Member     Member  
  AGK Hamilton Gordon 2007 Chairman Member Member Member Member    
  SS Mkhabela Sibongile 2006     Member     Chairman  
  MJN Njeke Johnson 2009 Member     Member Member    
  SS Ntsaluba Sango 2008 Member     Member Chairman    
  SB Pfeiffer Steve 2001   Member Member Chairman      
  G Rodriquez de Castro Gonzalo 2004           Member  
  Garcia de los Rios                  
  Non-independent,                  
  non-executive directors                  
  TH Nyasulu Hixonia 2007   Member          
  Executive directors                  
  CB Thomson Clive 2003   Member     Member Member  
  (chief executive)                  
  PJ Blackbeard John 2004         Member Member  
  PJ Bulterman Peter 2009         Member    
  M Laubscher Martin 2005         Member    
  OI Shongwe Isaac 2007         Member Member  
  DG Wilson Don 2006         Member    

* Previously the empowerment and transformation committee, the committee was reconstituted as the social, ethics and transformation committee.

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 as approved by the chairman. 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 eight of the nine non-executive directors are independent.

Hixonia Nyasulu is not regarded as independent in view of her participation, either directly or indirectly, in the black ownership transaction that resulted in about 10% of the company's equity being subscribed for and issued to black partners. Despite the determination reached on Ms Nyasulu, the board believes the skills, knowledge and experience of this director 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.

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. Advocate Dumisa Ntsebeza SC, an independent non-executive director, is chairman of the board and Clive Thomson, an executive director, is chief executive. The roles of the chairman and chief executive are thus separate and clearly defined. 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 co-ordinates 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. A number of 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 five meetings were held in South Africa and one in Namibia on 21 July 2011.

Name 11 Nov
2010
26 Jan
2011
30 Mar
2011
13 May
2011
21 Jul
2011
28 Sept
2011
DB Ntsebeza (chairman)
CB Thomson (chief executive officer)
SAM Baqwa * *
PJ Blackbeard
PJ Bulterman
AGK Hamilton
M Laubscher
SS Mkhabela
MJN Njeke
SS Ntsaluba
TH Nyasulu
SB Pfeiffer
G Rodriquez de Castro Garcia de los Rios
OI Shongwe
DG Wilson
* Taken ill.            

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 appraised, 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. The recent performance assessment indicated that the board and the board committees are functioning effectively and efficiently. No major issues were raised. In line with King III the evaluations will in future be done by an external service provider.

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 during which 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. Details of 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 124 to 134 of the integrated annual report.

Company secretary

Mr Bethuel Ngwenya is the group company secretary, duly appointed by the board in accordance with the Companies Act. Mr Ngwenya succeeded Mr Sibani Mngomezulu who resigned as company secretary with effect from 30 January 2011 to take up another position in the group. 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 Limited 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 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 (previously the Empowerment and Transformation Committee)
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 take 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 sub-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 Johnson Njeke 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 26 January 2011. In terms of both the previous and current Companies Act, the committee reports directly to shareholders. Advocate Selby Baqwa SC was nominated to the Committee with effect from 20 July 2011, 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 as to 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 annual report, prospectus or any other documentation to be published by the company and recommending the adoption of such statements by the board;
reviewing compliance with applicable laws, best corporate governance practices, accounting standards and regulatory requirements;
reviewing the effectiveness of the group risk management assessment process, adequacy of accounting records and internal control systems;
assisting the board in its deliberations regarding the company's continuing viability as a going concern and the liquidity and solvency tests required in terms of the Companies Act;
considering the appropriateness of the expertise and adequacy of 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 chief financial officer of the company; and
monitoring and supervising the functioning and performance of internal audit.

The committee reviewed the combined assurance model which is being developed to ensure that all significant risks identified are adequately addressed by management as well as internal and external assurance providers. 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 five scheduled meetings were held with attendance shown below.

Name
10 Nov
2010
25 Jan
2011
29 Mar
2011
12 May
2011
27 Sept
2011
AGK Hamilton (chairman)
SAM Baqwa n/a* n/a* n/a* n/a*
MJN Njeke
SS Ntsaluba

* Joined on 20 July 2011.

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 page 142 of the integrated annual report.

Social, ethics and transformation committee (previously the empowerment and transformation committee)

The empowerment and transformation committee comprised independent non-executive directors Ms Sibongile Mkhabela (chairman), Advocates Selby Baqwa SC and Dumisa Ntsebeza SC, and executive directors Messrs Isaac Shongwe and Clive Thomson.

The committee monitored the group's initiatives to promote diversity and advance the objectives of non-discrimination and supported management in embracing the principles of transformation across all facets of the group's activities. In South Africa, the committee received reports from group companies on progress against the broad-based black economic empowerment (B-BBEE) scorecard developed by the South African Department of Trade and Industry. The committee could consult, whenever appropriate, with any other member of the board or expert on any subject matter to be dealt with by the committee.

The executive responsible for transformation in the group attended all meetings. Representatives from group companies managing the transformation portfolio, including the CEOs who retain ultimate responsibility for transformation in their respective divisions, are invited to provide reports to the committee from time to time.

Attendance

During the year under review, the Committee (while constituted as the Empowerment and Transformation Committee), held two scheduled meetings with attendance shown below:

Name 25 Jan
2011
29 Mar
2011
SS Mkhabela (chairman)
SAM Baqwa * *
DB Ntsebeza
OI Shongwe
CB Thomson
* Taken ill.    

The Companies Act requires the company to appoint a social and ethics committee within 12 months from 1 May 2011. In July 2011, the board approved new terms of reference for the empowerment and transformation committee in terms of which it was restructured and reconstituted as the social, ethics and transformation committee.

The committee comprises all members of the previous empowerment and transformation committee namely, Ms Sibongile Mkhabela (chairman), Advocates Dumisa Ntsebeza SC and Selby Baqwa SC (independent non-executive directors), and Messrs Isaac Shongwe, Clive Thomson (executive directors) and two new members, Messrs Gonzalo Rodriguez de Castro Garcia de los Rios (independent non-executive director) and John Blackbeard (executive director).

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

Additional functions cover the following broad areas:

Empowerment and transformation
Stakeholder relations

Attendance

After it was reconstituted the committee held its first meeting on 27 September 2011. The company will report in detail on this committee in 2012.

Name 27 Sept
2011
SS Mkhabela (chairman)
SAM Baqwa
PJ Blackbeard
DB Ntsebeza
Gonzalo Rodriguez de Castro Garcia  
de los Rios
OI Shongwe
CB Thomson

Risk and sustainability committee

For the year ended 30 September 2011, the risk and sustainability committee comprised three independent non-executive directors Messrs Sango Ntsaluba (chairman), Gordon Hamilton and JJ Njeke, and Messrs John Blackbeard, Peter Bulterman, Martin Laubscher, Isaac Shongwe, Clive Thomson and Don Wilson, who are executive directors.

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 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, and
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.

Name 09 Nov
2010
29 Mar
2011
11 May
2011
12 Aug
2011
SS Ntsaluba (chairman)
PJ Blackbeard
PJ Bulterman
AGK Hamilton
M Laubscher
MJN Njeke
OI Shongwe
CB Thomson
DG Wilson

Risk management process

The risk management policy and plan were approved by the board on 11 November 2010.

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 self-assessment 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 government framework. The audit committee is responsible for monitoring divisional and business-unit disaster-recovery readiness and adherence to group information security management policies.

The steering committee is currently investigating a system for automatic data classification as well as extending the implementation of data archiving and e-discovery solutions for various group information management systems. These improvements to data management should be addressed in the new financial year.

Remuneration committee

The committee comprises only independent non-executive directors, Messrs Steven Pfeiffer (chairman), Gordon Hamilton, JJ Njeke, Sango Ntsaluba and Advocate Dumisa Ntsebeza SC. Messrs Njeke and Ntsaluba were appointed to the committee on 21 July 2011. The chief executive may be invited to attend meetings, but may not participate in any discussion on his own remuneration.

The committee makes recommendations to the board on the structure and development of 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 sub-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 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.

During the year under review, the committee considered the issue of prescribed officers as required by the Companies Act, and resolved that Messrs Viktor Salzmann, Dominic Sewela and Ian Stevens are prescribed officers within the meaning of the Act.

The remuneration report is set out on pages 124 to 134 of the integrated annual report.

Attendance

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

Name 10 Nov
2010
25 Jan
2011
18 Feb
2011
29 Mar
2011
12 May
2011
20 Jul
2011
27 Sept
2011
SB Pfeiffer (chairman)
AGK Hamilton
MJN Njeke n/a* n/a* n/a* n/a* n/a* *
SS Ntsaluba n/a* n/a* n/a* n/a* n/a* *
DB Ntsebeza
* Joined on 21 July 2011              

Nomination committee

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

The committee makes recommendations to the board on the composition of the board and balance between executive, non-executive 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:

Name 10 Nov
2010
25 Jan
2011
29 Mar
2011
12 May
2011
20 Jul
2011
27 Sept
2011
DB Ntsebeza (chairman)
SAM Baqwa # #
AGK Hamilton
SS Mkhabela
SB Pfeiffer
* Taken ill            

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

Messrs John Blackbeard, Sango Ntsaluba, Steven Pfeiffer, Gonzalo Rodriguez de Castro Garcia de los Rios and Ms Sibongile Mkhabela are required to retire by rotation. All retiring directors are eligible and available for re-election.

At its meeting in November 2011, the committee considered candidates standing for election or re-election at the forthcoming annual general meeting (see ordinary resolutions (2) to (6) in the notice of annual general meeting on pages 255 and 256 of the integrated annual report). 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 Advocates Dumisa Ntsebeza SC (chairman) and Selby Baqwa SC and Messrs Gordon Hamilton, Steven Pfeiffer (independent non-executive directors) and Ms Hixonia Nyasulu (non-independent non-executive director) and Mr Clive Thomson, executive director. Advocate Baqwa SC and Ms Nyasulu were appointed to the committee on 21 July 2011.

Attendance

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

Name 10 Nov
2010
25 Jan
2011
18 Feb
2011
29 Mar
2011
12 May
2011
20 Jul
2011
27 Sept
2011
DB Ntsebeza (chairman)
SAM Baqwa n/a* n/a* n/a* n/a* n/a*
AGK Hamilton
TH Nyasulu n/a* n/a* n/a* n/a* n/a*
SB Pfeiffer
CB Thomson

* Joined on 20 July 2011

The committee's role 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 2011, the committee comprised Messrs:

Clive Thomson (chief executive)
John Blackbeard
Peter Bulterman
Martin Laubscher
Viktor Salzmann
Dominic Sewela
Ian Stevens
Isaac Shongwe
Don Wilson

Ms Khanya Kweyama and Mr Sibani Mngomezulu resigned from the committee with effect from 30 June 2011 and 30 January 2011 respectively.

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 officer to guide and control the overall direction of the company, monitor business performance and act as a medium of communication and co-ordination between business units, group companies and the board.

Attendance

Name 18 Oct
2010
08 Nov
2010
10 Dec
2010
20 Jan
2011
17 Feb
2011
22 Mar
2011
14 Apr
2011
10 May
2011
15 Jun
2011
18 Jul
2011
16 Aug
2011
26 Sep
2011
CB Thomson
(chairman)
PJ Blackbeard
PJ Bulterman
K Kweyama n/a* n/a* n/a*
M Laubscher
S Mngomezulu n/a* n/a* n/a* n/a* n/a* n/a* n/a* n/a*
V Salzmann
DM Sewela
OI Shongwe
IG Stevens
DG Wilson
* Resigned                        

Internal audit

Role of internal audit

The purpose, authority and responsibility of the internal audit function are defined in a board-approved 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 co-ordinates 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 2010. Audit findings were formally reported to divisional audit review committees, and to the audit committee in April/May and at financial year-end.

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

No employee, his/her nominee or members of his/her immediate family may deal directly or indirectly, at any time, in the securities of the company on the basis of unpublished price-sensitive information. No director or officer may deal in the securities of the company during the embargo period determined by the board in terms of a formal policy implemented by the company secretary. Periods of embargo are from the end of the interim and annual reporting periods to 24 hours after announcing financial and operating results for those periods. 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 shareholders

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

The chief executive, finance director and the investor relations officer have regular dialogue with institutional shareholders. Significant feedback from these visits is shared with the board. The chairman offers key shareholders the opportunity of meeting to discuss governance, strategy or other matters. The interests of private shareholders remain paramount and, in recognition of their needs, the company's website contains a range of investor relations 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 annual report.

The annual general meeting is normally attended by all directors. Shareholders 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 on pages 255 to 264 of this integrated annual report.