Governance, risk and compliance, and remuneration reports
report on governance, risk and compliance
COMPANIES ACT:
REGULATION 43
* Social and Economic Development
Good corporate citizenship
* Environmental, Health and Public Safety
* Consumer relationship
* Labour and employment
* Dealt with in the Report on Six Capitals.
report on governance,
risk and compliance
Ethical leadership and corporate citizenship
Board and Directors
Audit Committees
IT Governance
Compliance with laws, codes, rules and standards
Internal Audit
Integrated reporting
SIX CAPITALS
KING III
Ethical leadership and corporate citizenship
Board and Directors
Audit Committees
The governance of risk
IT Governance
Compliance with laws, codes, rules and standards
* Governing stakeholder relationships
Internal Audit
Integrated reporting and disclosure
Reputation as a value driver
In June 2016, Clover was awarded the first prize in the Reputation Institute's study of the most reputable companies in South Africa. This is the first time that Clover participated, following the addition of the leading branded food and beverage company industry category this year.
Reputation House's study measures reputation in terms of four key themes, namely esteem, admire, trust and feeling. It also includes seven reputation dimensions: product/services, innovation, workplace, governance, citizenship, leadership and performance.
To be included in the study, companies had to score at least a 50% familiarity level with the general public. Fifty well recognised companies in South Africa, across various industries from retail to financial and telecommunications, were measured.
Clover scored 78 out of a possible 100. In terms of the seven reputation dimensions, Clover placed first in governance and citizenship, second in products and services, workplace, leadership and performance and third in innovation.
More information is available here.
Responsibility to ensure good governance
Good corporate governance underpins transparency, fairness, integrity and accountability in Clover's daily interactions with all stakeholders and the environment. The underlying objective of governance is to counterbalance the interests of investors, consumers, producers, the environment, employees, communities, government and any other groups impacted by Clover's business.
Statement of compliance
The Board endorses the King Code of Governance Principles for South Africa 2009 (“King III” or “the Code”) and has satisfied itself that Clover conformed throughout the reporting period to King III and the JSE's listings requirements with certain limited exceptions. Where Clover has partially complied or not complied with these provisions, we have provided motivations and reasons as listed in the King III index here in this report.
Deloitte Touche Tohmatsu Limited (Deloitte) performed the function of Internal Auditor and conducted an audit review to assess the governance infrastructure and processes that executive management has established. Deloitte found the internal controls over all operations of the corporate governance process and related activities to be adequate and effective. Deloitte also found Clover's governance practices to be mature.
The table below indicates management's conclusions on Clover's governance process:
| Review area | Conclusion regarding adequacy |
Conclusion regarding effectiveness |
|---|---|---|
| Ethical Leadership and Corporate Citizenship | Adequate | Effective |
| Boards and Directors | Adequate | Effective |
| Audit and Risks Committee | Adequate | Effective |
| The Governance of Risk | Adequate | Effective |
| The Governance of Information Technology | Adequate | Effective |
| Compliance with laws, Codes, Rules and Standards | Adequate | Effective |
| Internal Audit | Adequate | Effective |
| Governing stakeholder Relationships | Adequate | Effective |
| Integrated Reporting and Disclosure | Adequate | Effective |
Ethical leadership and corporate citizenship
The Board has adopted a Code of Ethics which is continuously reviewed and updated as required. This code defines Clover's main ethical standards of responsibility, integrity, fairness, accountability and respect. The Code of Ethics contains examples of unethical conduct and disclosure requirements for gifts and outside interests that would require pre-approval.
Employees are kept aware of the importance of ethical behaviour through regular branch level ethics awareness sessions. These position Clover's Ethics Hotline as a key feedback channel and educate on when and how it should be used. This code is used as a benchmark against which Clover is managed, taking into consideration the social, political and operational environments in which the business conducts itself.
As an iconic brand in the branded consumer goods industry, Clover is aware of and vigilantly protects its outstanding reputation. During the reporting period, no material ethical leadership or corporate citizenship deficiencies were identified or reported.
The Board is responsible for Clover's compliance with the Code of Ethics. It has delegated the responsibility of oversight and monitoring to the Audit and Risk Committee as well as the Social and Ethics Committee, which are both subcommittees of the Board. These Committees monitor and measure compliance through various reporting channels, such as:
- its Internal Audit department, outsourced to Deloitte
- the Ethics Hotline
- Clover's competition law centre of excellence.
No requests for information in terms of the Promotion of Access to Information Act (PAIA) were received during the reporting period. Clover complied in all material aspects with all relevant legislation and was not subject to any material penalties, fines or criminal procedures.
The Board is ultimately responsible for effective corporate governance.
Governance structure
The Board's responsibilities are formalised in a charter, which is reviewed on an annual basis. All Board subcommittees operate under Board approved mandates and terms of reference. Save for the Executive Committee, all other Committees are chaired by Independent Non-Executive Directors.
The Board
The Board is accountable to shareholders and ultimately responsible for the management of Clover's business, including determining strategies and policies. The Board is also responsible for approving the Group's financial objectives and targets.
Although the Board members are appointed by Clover's shareholders, the Board has the authority to appoint directors to fill any vacancy that may arise from time to time. These appointments are ratified by shareholders at the subsequent Annual General Meeting.
Directors are appointed based on their specific skills set, industry expertise and experience, as well as the overall level of contribution they can offer. The Nomination Committee, as a subcommittee of the Board, is tasked with identifying and recommending suitable candidates for the Board's formal consideration. Clover's empowerment and transformation objectives are considered as part of this exercise.
New appointees are formally inducted and familiarised with Clover's business.
Clover's day-to-day business activities are overseen by its Executive Committee. This Committee is responsible for ensuring that Board decisions are effectively implemented in line with its mandates.
Clover's memorandum of incorporation gives the Board the authority to indemnify directors. Deeds of indemnification have been issued to all directors and prescribed officers of Clover, to the extent permitted by the Companies Act. During the reporting period, appropriate director and prescribed officer liability insurance was in place.
Board composition
At the end of the review period, the Board consisted of three Executive Directors and eight Non-Executive Directors, five of whom are independent.
During the review period, Dr Chris Lerm and Mr Jacques Botha retired as Executive: Brands and Marketing and Chief Financial Officer respectively. Mr Elton Bosch was appointed as Chief Financial Officer, following Mr Botha's retirement. It is not anticipated that a third Executive Director will be appointed.
Mr Tom Wixley, who served as Clover's lead independent director since listing, announced his retirement subsequent to the year end, effective from 28 November 2016 (date of the Annual General Meeting). Following Mr Wixley's retirement, Dr Steve Booysen will fulfil the role of lead independent director. No new Non-Executive Director will be appointed in Mr Wixley's stead.
Mr Peter Griffin, a Non-Executive Director has also indicated that he will retire from the Board and did not offer himself for re-election at the upcoming Annual General Meeting scheduled to take place on 28 November 2016. The Board does not anticipate appointing a new Non-Executive Director.
Following the above retirements, the Board will consist of two Executive Directors and six Non-Executive Directors, four of whom are independent.
Ms Babalwa Ngonyama has been appointed as chairperson of the Audit and Risk Committee with effect from 1 May 2016, while Ms Neo Mokhesi was appointed as the chairperson of the Social and Ethics Committee with effect from 1 May 2016.
Details of the directors are available here in this report. Clover's Board comprises a majority of Independent Non-Executive Directors, to entrench the desirable balance of power and authority at Board level. No individual director has unfettered powers of decision-making.
| Director | Board | Audit & Risk Committee | Remuneration Committee | Social & Ethics Committee | Investment Committee | Nomination Committee | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Independent Non-Executive | A | B | A | B | A | B | A | B | A | B | A | B |
| TA Wixley | 5 | 5 | 4 | 4 | 3 | 3 | 4 | 4 | 3 | 3 | 2 | 2 |
| Dr SF Booysen | 5 | 5 | 4 | 4 | 3 | 3 | 4 | 4 | 3 | 3 | 2 | 2 |
| JNS du Plessis | 5 | 5 | 4 | 4 | 3 | 3 | - | - | - | - | - | - |
| NV Mokhesi | 5 | 5 | – | – | – | – | 4 | 4 | – | – | – | – |
| B Ngonyama | 5 | 5 | 4 | 4 | – | – | – | – | – | – | – | – |
| Non-Executive | ||||||||||||
| WI Büchner | 5 | 5 | – | – | 3 | 3 | – | – | 3 | 3 | 2 | 2 |
| NA Smith | 5 | 5 | – | – | – | – | – | – | 3 | 3 | – | – |
| PR Griffen | 5 | 5 | – | – | – | – | – | – | – | – | – | – |
| Executive | ||||||||||||
| JH Vorster | 5 | 5 | – | – | – | – | – | – | – | – | – | – |
| LJ Botha (resigned 2 January 2016) | 2 | 2 | – | – | – | – | – | – | – | – | – | – |
| Dr CP Lerm (retired 30 June 2016) | 5 | 5 | – | – | – | – | – | – | – | – | – | – |
| ER Bosch | 3 | 3 | – | – | – | – | 4 | 4 | – | – | – | – |
|
A – Number of meetings held during the period the director was a member of the Board/Committee. B – Number of meetings attended during the period the director was a member of the Board/Committee. |
||||||||||||
Company Secretary
Mr J van Heerden is the Company Secretary of Clover and was appointed as such with effect from 1 September 2012. He is not a director of Clover, although he serves as a director on the Boards of various Clover subsidiaries. This relationship does not affect his arm's length relationship with the Board. The Company Secretary is appointed and removed by the Board and is responsible to the Board for ensuring that procedures and regulations are complied with and that directors are conversant with their duties and responsibilities. Clover's directors have unfettered access to the advice and services of the Company Secretary and may seek independent professional advice on Clover's affairs if they believe that such actions will best serve the interests of Clover.
The Company Secretary is further responsible for the duties set out in section 88 of the Companies Act and for ensuring compliance with the listings requirements of the JSE Limited. The Company Secretary also provides a communication link with investors and liaises with the Group's transfer secretaries and sponsors on relevant matters. As required by King III, the Company Secretary also acts as secretary to the various subcommittees of the Board and attends all meetings of the Board and the Committees. The Company Secretary is also the compliance officer and ensures that the Group complies with all the required legislation and regulations applicable to its various business activities.
In compliance with the JSE Listings Requirements, a detailed assessment was conducted by the Board to satisfy itself of the competence, qualifications and experience of the Company Secretary. This was performed through:
- A review of qualifications and experience: Mr van Heerden holds a LLB (with distinction) degree from the University of Pretoria and is an associate of Chartered Secretaries of Southern Africa.
- Assessments by the directors of the competency of the Company Secretary: A formal assessment is done by the Board annually requesting the views of each director on his/her view on the competence, qualifications and experience of the Company Secretary. No exceptions were noted during any of the assessments conducted since Mr van Heerden's appointment.
Having duly considered the above, the Board is comfortable that the Company Secretary maintains an arm's length relationship with the Board and individual directors in terms of Section 3.84(j) of the JSE Listings Requirements and is satisfied with the competence, qualifications and experience of Mr van Heerden to act as the Company Secretary.
The certificate of Jacques van Heerden, the Company Secretary, appears here in this Integrated Annual Report.
Board Committees
The Board has mandated a number of subcommittees to assist it in discharging its responsibilities. Each subcommittee's scope and nature of authority is stipulated in its terms of reference, which is approved by the Board. Clover's Audit and Risk Committee as well as its Social and Ethics Committee have certain specific responsibilities in terms of the Companies Act and its regulations. Copies of the respective terms of reference are available at www.clover.co.za.
Executive Committee
ER Bosch
Dr JHF Botes
LJ Botha (resigned 2 January 2016)
Dr CP Lerm (retired 30 June 2016)
H Lubbe
MM Palmeiro
J van Heerden
JH Vorster – Chairperson
Directors, executives and operational management have clearly defined responsibilities and levels of authorisation for their respective areas of the business. The delegation of these responsibilities is reviewed annually.
The Executive Committee reviews and identifies risk, current operations and the management thereof. This Committee is tasked with developing strategies and recommending policies for the Board's consideration, as well as the implementation of the Board's directives and decisions.
Audit and risk committee
Dr SF Booysen
JNS du Plessis
B Ngonyama (appointed as chairperson – 1 May 2016)
TA Wixley – Chairman (retired as chairperson – 1 May 2016)
The Audit and Risk Committee comprises only of Independent Non-Executive Directors. The CEO, CFO as well as other Executive and Non-Executive Directors attend meetings of the Audit and Risk Committee by invitation.
The report of the Audit and Risk Committee is available here in this report and sets out the responsibilities and delivery of the Committee against these objectives during the review period.
Remuneration committee
Dr SF Booysen – Chairperson
WI Büchner
JNS du Plessis
TA Wixley
The Chief Executive and other Executives attend meetings of the Remuneration Committee as invitees and are recused from discussions pertaining to their own remuneration and benefits. The report of the Remuneration Committee is here and sets out its responsibilities as well as its delivery against these.
Social and ethics committee
Dr SF Booysen
ER Bosch
N Mokhesi (appointed as chairperson – 1 May 2016)
TA Wixley – Chairman (retired as chairperson – 1 May 2016)
The mandate of this Committee is specified in Regulation 43(5) of the Companies Act. Its responsibilities and functions are governed by terms of reference that are regularly reviewed and approved by the Board. As a subcommittee of the Board, the Social and Ethics Committee is tasked with the monitoring, developing, reviewing and improvement of Clover's social, ethical, environmental impact and governance policies against pre-set benchmarks. In terms of the Committee's work plan, the implementation of certain actions has been prioritised to enable it to fully discharge its statutory functions over a three-year period. This Committee meets four times per year and reports through one of its members to shareholders at the company's Annual General Meeting on all sustainable matters within its mandate. Its report on the six capitals approach to Clover's sustainability is available on www.clover.co.za as well as here in this report.
Nomination committee
Dr SF Booysen – Chairperson (retired as chairperson – 1 March 2016)
WI Büchner
TA Wixley (appointed as chairperson – 1 March 2016)
The Nomination Committee is tasked with the regular review of the Board's structure, size and composition and with making recommendations in this regard, taking cognisance of the company's strategies and operating environments. The Committee will nominate applicant directors to the full Board, which will formally and transparently consider these nominations. The Committee is furthermore responsible for ensuring that an appropriate balance exists between Executive, Non-Executive and Independent Non-Executive Directors, as well as for classifying directors as being independent in line with King III principles. It assists with the identification and nomination of potential new directors for appointment by the Board and/or shareholders and oversees the induction and training of the directors. The Nomination Committee assists the Chairperson of the Board with the annual performance reviews of Board and subcommittee members. It supports the proper and effective functioning of the Board, including appropriate succession planning. This Committee meets as and when required during every financial year.
Investment committee
Dr SF Booysen – Chairperson
WI Büchner
NA Smith
TA Wixley
The Investment Committee guides and acts as a sounding Board for the Executive Committee when considering growth plans, especially with regards to mergers and acquisitions. The Investment Committee has been mandated with the authority to approve transactions ranging in value from R50 million to R350 million and meets as and when required during the course of the financial year.
