“Corporate governance
is a way of life and not merely a set of rules.”
Brian Joffe, chief executive
Introduction
Corporate governance entails
the accountable and transparent governance of
the Group’s structures and systems within
an ethical framework that will promote responsible
consideration of all stakeholders.
The board and the individual directors have long
recognised that good corporate governance is compatible
with and mutually dependent on strong leadership.
The board is committed to conforming to good corporate
governance processes that will complement Bidvest’s
entrepreneurial flair. This commitment involves
leading the enterprise with integrity and in compliance
with international practices, whilst taking cognisance
of the value systems of the countries and communities
in which it operates.
The decentralised, entrepreneurial and incentivised
environment in which the Group operates called
for governance processes to be considered, implemented
and embedded into the Group structure, through
the introduction of the Group governance policy.
This serves to guide all operations within the
Group in applying corporate governance practices
at their respective levels within the Group.
Corporate code
of conduct
The board, its committees,
individual directors, officers of the Group and
senior management acknowledge their responsibility
to ensure that the principles set out in the code
of conduct are observed.
Bidvest, through its corporate code of conduct,
is committed to:
►
the highest standards
of integrity and behaviour in all dealings
with stakeholders and society-at-large;
►
conducting business based
on fair commercial competitive practices;
►
trading with customers
and suppliers who subscribe to ethical business
practices;
►
non-discriminatory employment
practices and the promotion of employees
to realise their potential through training
and development of their skills; and being
proactive towards environmental, social
and sustainability issues.
Code of ethics
The Group has adopted a code
of ethics that ensures business practices are
conducted in a manner that is beyond reproach.
The code of ethics is promoted across the Group
and clearly states the acceptability of business
practices by guiding policy and providing a set
of ethical corporate standards that will encourage
ethical behaviour and decision-making of the board,
managers and employees at all levels. The code
will guide and sensitise ethical infringements,
whilst specifying the enterprise’s social
responsibility towards stakeholders.
The board has been proactive in identifying the
following aspects and has pursued a process in
each division for the:
►
regular and formal identification
of ethical risk areas;
►
development and strengthening
of monitoring and compliance policies, procedures
and systems;
►
establishment of easily
accessible, safe reporting (whistle blowing)
channels;
►
alignment of the Group’s
disciplinary code with its code of ethical
practice;
►
integrity assessment
as part of selection and promotion procedures;
►
induction of new appointees;
►
training on ethical principles,
standards and decision- making;
►
regular monitoring of
compliance with ethical principles and standards
using the internal audit function;
►
reporting to stakeholders
on compliance; and
►
independent verification
of conformance to established principles
and ethical behaviour.
Corporate style,
values and ethics
Bidvest’s corporate value
system promotes:
►
Accountability
to our employees and shareholders
►
Acquisitiveness
to expand and grow the business
►
Decentralisation
to put decision-making close to the customer
►
Entrepreneurship
to find innovative ways to grow the business
►
Equal
opportunity to perform and be rewarded
►
Fairness
in our interactions with stakeholders
►
Honesty in all our dealings with our stakeholders
►
Innovative in our business practices
►
Respect
for human dignity, human rights and social
justice
for the dignity and rights of people and
for the environment
►
Service
excellence
to provide a compelling place to work and
do business
►
Transparency in maintaining open lines of communications
with our stakeholders.
THE BOARD OF
DIRECTORS
Bidvest is a unique company,
which is reflected in the composition and size
of its board. The board comprises seven non-executive
independent directors, five non-executive, and
twelve executive directors.
MC Ramaphosa conducted the role of non-executive
chairman and B Joffe, chief executive.
The completely decentralised decision-making structure,
the independence and the character of the individual
board members provide for open and transparent
governance. Successful entrepreneurial individuals,
whose recognition and ongoing participation in
Bidvest is vital, manage the decentralised business
units. In addition to the divisional chief executives,
key operating executives responsible for significant
operations are included on the board.
Board changes took place with the appointment
of AW Dawe, NG Payne and FDP Tlakula as directors
and DE Cleasby as financial director designate
(alternate to P Nyman). Resignations were received
from NA Cassim, M Chipkin and TH Reitman
as non-executive directors; LI Chimes, AM Griffith,
RW Graham, DR Rosevear, CE Singer, PD Womersley
and PC Steyn as executive directors, and HL Greenstein
as an alternate. While the executive directors
are responsible for implementing strategies and
operational decisions within the Group’s
businesses, the non-executive directors are viewed
as independent by the board and support the skills
and experience of the executive directors. Their
role is to bring judgement to bear, independent
of management, on issues of strategy, budgets,
performance, resources, transformation, diversity,
employment equity, standards of conduct and evaluation
of performance, while contributing to the formulation
of policy and decision making through, inter alia,
their knowledge and experience.
The board gives strategic direction to the Group,
appoints the chief executive and the non-executive
chairman and ensures that succession is planned.
The non-executive directors ensure that the chair
encourages proper deliberation of all matters
requiring the board’s attention.
Functions of the
board
The board charter sets out
clear direction with regard to the purpose of
the board, responsibilities of board members,
composition and requirements for board meetings.
The board charter also calls for an annual self-assessment
applicable to the chief executive and the individual
directors. The board is ultimately responsible
for ensuring that the business remains a going
concern and that it thrives. The board retains
full and effective control over the Group and
monitors risk management and implementation of
plans and strategies through a structured approach
to reporting and accountability.
The board is committed to an appropriate balance
of power and authority to ensure that no one individual
or group of individuals can dominate the board’s
decision-making process.
The board met four times during the period and
has a formal schedule of matters reserved to it
as recorded in the board charter, directors’
report for attendance register .
The board has developed a formal corporate governance
manual which, inter alia, includes a corporate
code of conduct and board committee charters.
Board committee charters define the purposes,
authority and responsibility of the various board
committees and have been developed for the:
►
Board of directors;
►
Group executive committee;
►
Audit committee;
►
Nomination committee;
►
Remuneration committee;
and
►
Acquisition committee.
A formal charter for the risk
committee is being developed. The divisional boards
have adopted the governance manual, where applicable.
The process to entrench the corporate governance
manual and the principles of good corporate practice
and governance throughout the Group has been implemented
under the auspices of the audit committee.
The purpose, objectives and responsibility of
the Transformation committee are defined in the
Bidvest Charter.
The board and its committees are supplied with
complete, relevant and timeous information, enabling
them to fulfil their responsibilities. Directors
have unrestricted access to Group information,
records, documents and property. Non-executive
directors have access to, and are encouraged to
meet with, management. The information needs of
the board are well defined and regularly monitored.
All directors have access to the advice and services
of the Group secretariat and there is an agreed
procedure by which directors may obtain independent
professional advice at the Group’s expense,
should they deem this necessary.
The Group has adopted a formal policy, in line
with the Insider Trading Act, that prohibits directors,
officers and other selected employees in dealing
with securities for a designated period preceding
the announcement of its financial results or in
any other period considered sensitive.
The board defines levels of materiality, reserving
specific power and delegating other matters with
the necessary written authority to management.
These matters are monitored and evaluated on a
regular basis. The board has developed a formal
delegation of authority matrix guideline, which
is being utilised by all Group companies.
Formal and transparent appointment procedures
are in place and the board is assisted by the
nomination committee. Periodically, directors
visit the Group’s businesses and have meetings
with senior management to facilitate their understanding
of the Group and their fiduciary responsibilities.
The board is cognisant of the duties imposed on
the company secretary who is accordingly empowered
to properly fulfil those duties. In addition to
the extensive statutory duties, the company secretariat
provides the board and directors individually
with detailed guidance as to how their responsibilities
should be properly discharged in the best interests
of the Group. The company secretariat is the central
source of information relative to guidance and
advice to the board, and within the Group, on
matters of ethics and good governance.
The board ensures that the Group complies with
all relevant laws, regulations and codes of business
practice and that it communicates with its shareholders
and relevant internal and external stakeholders
openly, promptly and with substance prevailing
over form.
The board identifies the key risk areas and key
performance indicators for the Group, which are
regularly updated. The entrepreneurial culture
of the Group requires thorough risk control processes
that identify and mitigate risks and ensure that
the Group’s objectives are attained. This
control environment sets the tone for the Group
and covers, inter alia, ethical values, management’s
philosophy and the competence of employees. In
general, risk areas confronting the Group are:
►
Currency and economic
volatility;
►
HIV/Aids in Africa ;
►
Human capital or “people
risk” mitigated through intensive
skills development programmes; and
►
Market risk caused by
fluctuations in demand and competitive activity.
The most fundamental mechanism
for managing these risks is the diversified Bidvest
business model that makes “owner-managers”
accountable for all aspects of performance.
Through the audit committee, the board regularly
reviews processes and procedures to ensure the
effectiveness of internal systems of control so
that its decision-making capability and the accuracy
of its reporting are maintained at a high level.
The board identifies and monitors the non-financial
aspects relevant to the business of the Group
and reviews appropriate non-financial information
that goes beyond assessing the financial and quantitative
performance of the Group. Other qualitative performance
factors, which take into account broader stakeholder
issues, are considered.
Board committees
The board has established a
number of committees, which are responsible to
the board. Specific responsibilities have been
formally delegated to these committees with clearly
defined terms of reference, in respect of duration
and function, reporting procedures and written
scope of authority documented in a formal charter.
There is transparency and full disclosure from
the board committees to the board. Board committees
are free to take independent outside professional
advice, as and when necessary, and are subject
to regular evaluation by the board to ascertain
their performance and effectiveness. The principal
board committees are as follows:
Group executive
committee
The Group executive committee
consists of the chief executive, the divisional
chief executives of major business units and DE
Cleasby. The executive committee considers and
refers major decisions, which have their sanction,
to the board for approval. Non-executive directors
are invited to attend these meetings.
South African
executive committee
The South African executive
committee consists of the chief executive (chairman),
the Group Financial director (and designate) the
divisional chief executives, MBN Dube, LI Jacobs,
L Madikizela, SG Mahlalela and AC Salomon. The
committee considers major decisions, related specifically
to the South African operations.
Remuneration committee
The remuneration committee
consists of DDB Band (chairman), DE Cleasby, D
Masson, P Nyman and JL Pamensky. The committee
is responsible for the performance assessment
and approval of a remuneration strategy for the
board directors, including the chairman, chief
executive and divisional executives, in consultation
with the chief executive. The executive director,
who is a member of the Remuneration committee,
is excluded from the review of his own remuneration.
The remuneration committee’s overall strategy
is to ensure that employees are rewarded for their
contribution to the Group’s operating and
financial performance, by taking into account
industry, market and country benchmarks. In order
to promote an identity of interests with shareholders,
share incentives are considered to be critical
elements of executive incentive pay. Schedules
setting out directors’ remuneration and
equity interests appear in the directors’
report.
Audit committee
An audit committee was established
in 1995 and is an important element of the board’s
system of monitoring internal controls. The members
of the committee are JL Pamensky (chairman), DDB
Band, DE Cleasby, RW Graham, D Masson, BE Moffat,
P Nyman, NG Payne and AC Salomon. The committee
meets at least four times a year and the Group
internal audit manager and external auditors are
invited to attend every meeting. Other members
of the management team attend, as required.
The audit committee charter defines and guides
the audit committee with adequate reference to
its purpose, membership, authority and duties.
The committee is responsible for reviewing the
interim and final financial statements and assesses
whether these are appropriate to meet the current
and future needs of the business. Their duties
further include assessing whether significant
business, statutory and financial risks have been
identified and are being monitored and managed
through internal financial control procedures,
and that appropriate standards of accounting,
governance, reporting and compliance are in operation.
The audit committee has a responsibility to recommend
to the board, for its consideration and acceptance
by shareholders, the appointment of external auditors.
The audit committee also sets out the principles
for the performance of non-audit services by the
external auditors. The audit committee reviews
divisional audit committee reports.
Each division has its own audit committee, which
subscribes to the same Group audit philosophies
and reports to both the divisional board and the
Group audit committee. Each divisional audit committee
has at least one member who is a non-executive
to the division. A non-executive chairs the committee
where appropriate.
Risk committee
The risk committee is currently
run under the auspices of the audit committee.
A charter is being drawn up and on finalisation
the risk committee will become self-standing.
The members of the risk committee are NG Payne
(chairman), the divisional chief executives, the
Group financial director (and designate), D Masson
and AC Salomon.
Acquisition committee
Acquisitions with perceived
potential conflicts are referred to the acquisition
committee for an in-principle decision as to whether
the acquisition should be investigated and pursued.
This committee consists of DDB Band (chairman),
MC Berzack, DE Cleasby, B Joffe, D Masson,
JL Pamensky and LP Ralphs. Acquisitions are, depending
on their magnitude, sanctioned by the executive
committee and submitted to the board for approval.
Nomination committee
The nomination committee constitutes
a majority of non-executive directors so as to
ensure its independence and objectivity. The committee
comprises DDB Band (chairman), B Joffe, JL Pamensky,
MC Ramaphosa and T Slabbert.
The primary purpose of the committee, as set out
in the nomination committee charter, is to ensure
that the procedures for the appointments to the
board are formal and transparent. The committee
considers the composition of the board, retirements,
appointments of additional and replacement directors
and makes appropriate recommendations to the board.
Executive directors are appointed to the board
on the basis of skill, experience and level of
contribution to the Group and are responsible
for the running of their businesses. Non-executive
directors are selected on the basis of industry
knowledge, professional skills and experience.
The committee is responsible for ensuring that
nominees are not disqualified from being directors
and, prior to their appointment, investigate their
backgrounds in line with the requirements for
listed companies set by the JSE.
Executive and non-executive directors retire by
staggered rotation and stand for re-election at
least every three years in accordance with the
articles of association. The re-appointment of
non-executive directors is not automatic. Directors
are subject to re-election by shareholders and
sufficient biographical information is provided
to shareholders enabling an informed decision.
The committee annually reviews the board’s
required mix of skills and experience and other
qualities such as its demographics and diversity
in order to assess the effectiveness of the board,
its committees and the contribution of each director.
Transformation
committee
Following the successful implementation
of the Dinatla initiative, a transformation committee
was formed to facilitate the socio-economic transformation
process within the Group. Key functional resources
were designated within each business unit to continue
the socio-economic transformation drive at business
unit level. The transformation committee has developed
an enterprise-based charter, the Bidvest Charter,
that guides the Bidvest BEE transformation strategy.
The transformation committee comprises MBN Dube
(chairman), the South African divisional chief
executives, MJ Finger, LI Jacobs, B Joffe, SG
Mahlalela, T Slabbert and FDP Tlakula
ACCOUNTABILITY
Going concern
The directors endorse and are
of the opinion that the Group has sufficient resources
to maintain the business for the future. Consequently,
the going-concern basis for preparing the financial
statements is adopted.
The board minutes the facts and assumptions used
in the assessment of the going-concern status
of the Group at the financial year-end. At the
interim reporting stage, the directors consider
their assessment at the previous yearend of the
Group’s ability to continue as a going concern
and determine whether any of the significant factors
in the assessment have changed to such an extent
that the appropriateness of the going-concern
assumption at the interim reporting stage has
been affected.
Auditing and accounting
The board is of the opinion
that their auditors observe the highest level
of business and professional ethics and that their
independence is maintained.
The Group aims for efficient audit processes using
its external auditors in combination with the
internal audit function. Management encourages
unrestricted consultation between external and
internal auditors resulting in periodic meetings
to discuss matters of mutual interest, the exchange
of working papers and management letters and reports,
and a common understanding of audit techniques,
methods and terminology.
Internal financial
controls
The directors are responsible
for adequate internal control systems that will
provide reasonable assurance regarding the safeguarding
of assets and the prevention of their unauthorised
use or disposition, the maintenance of proper
accounting records and the reliability of financial
and operational information used in the businesses.
The system of internal control is designed to
manage, rather than eliminate, the risk of failure
to achieve business objectives and can provide
reasonable, not absolute, assurance against material
misstatement or loss. There is an ongoing process
for identifying, evaluating, managing, monitoring
and reporting on significant risks faced by the
Group.
The Group’s system of internal financial
control includes policies and procedures, clearly
defined lines of accountability and delegation
of authority, and makes provision for comprehensive
reporting and analysis against approved standards
and budgets. Compliance is tested by way of management
review, internal audit check and external audit.
The Group’s various divisional audit committees
consider the results of these reviews on a regular
basis and confirm the appropriateness and satisfactory
nature of these systems, while ensuring that breakdowns
involving material loss, if any, together with
remedial actions, have been reported to the respective
boards of directors.
Internal audit
function
The internal audit departments
are independent appraisal functions, whose primary
mandate is to examine and evaluate the effectiveness
of the applicable operational activities and the
attendant business risks. The internal audit function
includes the examination of the systems of internal
financial control, so as to bring material deficiencies,
instances of non-compliance and development needs
to the attention of the audit committee, external
auditors and operational management for resolution.
Internal audit is an independent and objective
assurance and consulting activity designed to
add value to and improve the Group’s operations.
Internal audit undertakes a continual function
in measuring, evaluating and reporting on the
effectiveness of risk, control, governance systems
and processes. It considers their economy of application
and efficiency in meeting the objectives of the
organisation using a systematic, disciplined approach.
Internal audit further provides:
►
assurance that the management
processes are adequate to identify and monitor
significant risks;
►
confirmation of the adequacy
and effective operation of the established
internal control systems;
►
credible processes for
feedback on risk management and assurance;
and
►
objective confirmation
that the board receives the appropriate
quality of assurance and reliable information
from management.
The purpose, authority and
responsibility of the internal audit function
is formally defined in an internal audit charter,
which has been approved by the board and which
is consistent with the Institute of Internal Auditors’
definition of internal auditing. Divisional internal
audit committees have their own internal audit
function that ensures that the necessary controls
are in place for effective risk management and
monitoring.
The activities of the divisional internal auditors
are co-ordinated by the Group internal audit manager
based at the corporate office, who has unrestricted
access to the audit committee and its chairman.
The Group internal audit manager reports at all
audit committee meetings and attends divisional
audit committee meetings.
The internal audit function communicates with
other internal and external auditors to ensure
proper coverage and to minimise duplication of
effort. The external auditors also review reports
issued by internal audit.
The audit committee is satisfied that adequate,
objective internal audit assurance standards and
procedures exist within the Group. At committee
meetings internal audit reports on the major business
units are reviewed, together with proposals for
the ongoing internal assurance processes. The
adequacy and capability of the Group’s internal
audit structures are subject to review annually.
Audit plans for each business segment are tabled
annually to take account of changing business
needs. Follow-up audits are conducted in areas
where major weaknesses are identified.
The internal audit plan, approved by the audit
committee, is based on risk assessment, which
is of a ongoing nature in an attempt to identify
not only existing and residual risks, but also
emerging risks, as well as issues highlighted
by the audit committee and senior management.
Self-assessment questionnaires are completed on
a regular basis by several divisions. Internal
audits are conducted formally at each business
unit at least once in a two-year cycle. This risk
assessment is coordinated with the board’s
own assessment of risk.
Where the external auditors also perform the internal
audit function, due care is taken to ensure that
there is adequate segregation between the two
functions in order to ensure that their independence
is not impaired.
Risk management
The board is responsible for
the total process of risk management. It sets
the risk strategy, which is based on the need
to identify, assess, manage and monitor all known
forms of risk across the Group. Risk management
is conducted after consulting with the executive
directors and senior management.
Management is accountable to the board for designing,
implementing and monitoring the processes of risk
management and integrating them into the day-to-day
activities of the Group. The risk aversion philosophy
is communicated to all managers and employees
in an endeavour to incorporate this philosophy
into the language and culture of the Group. Risk
management and internal control are practised
throughout the Group and are embedded in day-to-day
activities.
The audit committee attests that there are adequate
systems of internal control in place to mitigate
the significant risks faced by the Group to an
acceptable level. The systems are designed to
manage, rather than eliminate, the risk of failure
or to maximise opportunities to achieve business
objectives. Risk is not only viewed from a negative
perspective. The review process also identifies
areas of opportunity, such as where effective
risk management can be turned to a competitive
advantage.
The management of risk and loss control is decentralised,
but in compliance with Group policies on risk
financing and self-insurance. Compliance measurement
is conducted through the review of periodic risk
activity reports including measurement of identified
losses. The decentralised structure and geographic
spread ensures that the overall Group risk is
balanced and minimised.
At operational level, senior management identifies
major business risks, promotes awareness, introduces
applicable control environments and procedures
and applies risk-monitoring techniques. The divisional
audit committees identify the manner and extent
to which risk is controlled and/or reduced, while
monitoring the process.
Bidvest’s decentralised structure forms
the basis of the Group’s business continuity
plan with each of the operations being self-sufficient
with regard to disaster recovery and management
succession plans. The individual business units
are sufficiently small and independent of each
other to eliminate Group-wide disaster risk.
In addition to the Group’s other compliance
and enforcement activities, the board recognises
the need for a confidential reporting process
(“whistle blowing”) covering fraud
and other risks. The whistle-blowing reporting
procedures and 24-hour call centre ensure formal
reporting and feedback.
While operating risk can never be fully eliminated,
the Group endeavours to minimise it by ensuring
that the appropriate infrastructure, controls,
systems and human resources are in place throughout
the businesses. Key policies employed in managing
operating risk involve the segregation of duties,
transaction authorisation, monitoring and financial
and managerial reporting.
The effectiveness of the internal control systems,
including the potential impact of changes in the
operating and business environments, is monitored
through regular management reviews (with representation
letters on compliance signed annually by the chief
executive and chief financial officer of each
major business unit), testing by internal auditors
and testing of certain aspects of internal financial
control systems by the external auditors during
the course of their statutory examinations. Directors
make annual written declarations of interests
and are obliged to report any potential or actual
conflicts.
RELATIONS WITH
SHAREHOLDERS
The Group pursues dialogue
with institutional investors based on constructive
engagement and the mutual understanding of objectives,
having regard to statutory, regulatory and other
directives regulating the dissemination of information
by companies and their directors. To achieve this
dialogue there have been a number of presentations
to, and meetings with, investors and analysts
to communicate the strategy and performance of
the Group. The quality of this information is
based on the standards of promptness, relevance
and transparency. The Group makes every effort
to ensure that information is distributed via
a broad range of communication channels, including
the internet, having regard for security and integrity
while bearing in mind the need that critical financial
information reaches all shareholders simultaneously.
The board accepts its duty to present a balanced
and understandable assessment of the Group’s
position in reporting to stakeholders, taking
into account the circumstances of the communities
in which it operates and the greater demands for
transparency and accountability regarding non-financial
matters. Reports address material matters of significant
interest and concern to all stakeholders and present
a comprehensive and objective assessment of the
Group so that all stakeholders with a legitimate
interest in the Group’s affairs can obtain
a full, fair and honest account of its performance.
►