KING III INDEX King III application

Ethical leadership and corporate citizenship

	Effective leadership based on an ethical foundation
	Responsible corporate citizen
	Effective management of Clover’s ethics

Boards and Directors

	The board should act as the focal point for and custodian of corporate governance
	The board should appreciate that strategy, risk, performance and sustainability are inseparable
	The board should provide effective leadership based on an ethical foundation
	The board should ensure that the company is and is seen to be a responsible corporate citizen
	The board should ensure that the company’s ethics are managed effectively
	The board should ensure that the company has an effective and independent audit committee
	The board should be responsible for the governance of risk
	The board should be responsible for information technology (IT) governance
	The board should ensure that the company complies with applicable laws and considers adherence to non-binding rules, codes and standards
	The board should ensure that there is an effective risk-based internal audit
	The board should appreciate that stakeholders’ perceptions affect the company’s reputation
	The board should ensure the integrity of the company’s integrated report
	The board should report on the effectiveness of the company’s system of internal controls
	The board and its directors should act in the best interests of the company
	The board should consider business rescue proceedings or other turnaround mechanisms as soon as the company is financially distressed as defined in the Act
	The board should elect a chairman of the board who is an independent non-executive director. The CEO of the company should not also fulfil the role of chairman of the board
	The board should appoint the chief executive officer and establish a framework for the delegation of authority
	The board should comprise a balance of power, with a majority of non-executive directors. The majority of non-executive directors should be independent
	Directors should be appointed through a formal process
	The induction of and ongoing training and development of directors should be conducted through formal processes
	The board should be assisted by a competent, suitably qualified and experienced company secretary
	The evaluation of the board, its committees and the individual directors should be performed every year
	The board should delegate certain functions to well-structured committees but without abdicating its own responsibilities
	A governance framework should be agreed between the group and its subsidiary boards
	Companies should remunerate directors and executives fairly and responsibly
	Companies should disclose the remuneration of each individual director and prescribed officer
	Shareholders should approve the company’s remuneration policy

Audit Committee

	The board should ensure that the company has an effective and independent audit committee
	Audit committee members should be suitably skilled and experienced independent non-executive directors
	The audit committee should be chaired by an independent non-executive director
	The audit committee should oversee integrated reporting
	The audit committee should ensure that a combined assurance model is applied to provide a coordinated approach to all assurance activities
	The audit committee should satisfy itself of the expertise, resources and experience of the company’s finance function
	The audit committee should be responsible for overseeing of internal audit
	The audit committee should be an integral component of the risk management process
	The audit committee is responsible for recommending the appointment of the external auditor and overseeing the external audit process
	The audit committee should report to the board and shareholders on how it has discharged its duties

The governance of risk

	The board should be responsible for the governance of risk
	The board should determine the levels of risk tolerance
	The risk committee or audit committee should assist the board in carrying out its risk responsibilities
	The board should delegate to management the responsibility to design, implement and monitor the risk management plan
	The board should ensure that risk assessments are performed on a continual basis
	The board should ensure that frameworks and methodologies are implemented to increase the probability of anticipating unpredictable risks
	The board should ensure that management considers and implements appropriate risk responses
	The board should ensure continual risk monitoring by management
	The board should receive assurance regarding the effectiveness of the risk management process
	The board should ensure that there are processes in place enabling complete, timely, relevant, accurate and accessible risk disclosure to stakeholders

The governance of information technology

	The board should be responsible for information technology (IT) governance
	IT should be aligned with the performance and sustainability objectives of the company
	The board should delegate to management the responsibility for the implementation of an IT governance framework
	The board should monitor and evaluate significant IT investments and expenditure
	IT should form an integral part of the company’s risk management
	The board should ensure that information assets are managed effectively
	A risk committee and audit committee should assist the board in carrying out its IT responsibilities

Compliance with laws, codes, rules and standards

	The board should ensure that the company complies with applicable laws and considers adherence to nonbinding rules, codes and standards
	The board and each individual director should have a working understanding of the effect of the applicable laws, rules, codes and standards on the company and its business
	Compliance risk should form an integral part of the company’s risk management process
	The board should delegate to management the implementation of an effective compliance framework and processes

Internal audit

	The board should ensure that there is an effective risk based internal audit
	Internal audit should follow a risk based approach to its plan
	Internal audit should provide a written assessment of the effectiveness of the company’s system of internal controls and risk management
	The audit committee should be responsible for overseeing internal audit
	Internal audit should be strategically positioned to achieve its objective

Governing stakeholder relationships

	The board should appreciate that stakeholders’ perceptions affect a company’s reputation
	The board should delegate to management to proactively deal with stakeholder relationships
	The board should strive to achieve the appropriate balance between its various stakeholder groupings, in the best interests of the company
	Companies should ensure the equitable treatment of shareholders
	Transparent and effective communication with stakeholders is essential for building and maintaining their trust and confidence
	The board should ensure that disputes are resolved as effectively, efficiently and expeditiously as possible

Integrated reporting and disclosure

	The board should ensure the integrity of the company’s integrated report
	Sustainability reporting and disclosure should be integrated with the company’s financial reporting
	Sustainability reporting and disclosure should be independently assured ③

	Apply
	Under review/ Do not apply

Exceptions

① The Chairman of the Board, WI Büchner, is a Non-executive Director who is not independent insofar as he is a milk producer and supplier of raw milk to the Group. In the opinion of the Board, it is in the interests of the Group to maintain a close relationship with its raw milk suppliers and his appointment services the long-term interests of the Group. As recommended by the Code, TA Wixley has been appointed as Lead Independent Director to fulfill the functions of the Chairman whenever a conflict arises and in the other circumstances envisaged in the Code. The role of Chairman and Chief Executive vest in two separate individuals as required by the Code.

② Although the majority of directors are non-executives, the independent Non-executive Directors and Non-executive Directors are equal in number. The Non-executive Directors who are not independent are milk producers who supply raw milk to the Group. In the opinion of the Board, the present composition of the Board is in the interests of the Group for reasons of continuity, maintaining a close relationship and an effective channel of communication with its raw milk suppliers.

③ Until the Group’s sustainability reporting systems have matured sufficiently, it is the opinion of the Board that no purpose will be served by having its Report on Sustainability independently assured.