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
The governance of risk
IT Governance
Compliance with laws, codes, rules and standards
Internal Audit
Integrated reporting
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
REPORT ON GOVERNANCE, RISK AND COMPLIANCE
Clover vigilantly protects and builds on its reputation, having been voted the most reputable brand in South Africa for 2016 and 2017.*
*2016 and 2017 South Africa Reptrak® Study.
2017 KEY GOVERNANCE MILESTONES
Clover achieved the following salient governance milestones during the year under review:
- Following the retirement of several board members in the prior financial year, the board and sub-committee compositions were reviewed and were confirmed as adequate in terms of regulatory guidelines and the Company’s needs.
- In addition, the board and sub-committee charters were reassessed to ensure that the content remains relevant, complete, accurate and compliant and were subsequently tabled for board approval.
- The board adopted a new Gender Diversity Policy with the aim to guide and assist the board in promoting gender diversity at board level and to achieve diversity and transformation goals.
- The independence of the auditors was reviewed by the audit and risk committee to ensure the autonomy and objectivity of internal and external auditors.
- The board were continuously updated on topical issues affecting the business and, in particular, new developments in the regulatory and compliance sphere. Since the release of the draft King IV code on governance, information sessions on the proposed changes have been delivered to the board and a gap analysis vis-à-vis King III was performed with no material gaps identified.
- The board adopted a new Transfer Pricing Policy to ensure that arm’s length principles are followed by Clover employees in their dealings with, inter alia, connected persons who are not tax residents of South Africa.
- The internal auditors were reviewed by the audit and risk committee focusing on their performance, competency and independence. After due consideration, the audit and risk committee were satisfied with the performance, competency and independence of the internal auditors.
Reputation as a value driver
Clover achieved the distinction of being awarded the coveted title of “most reputable company in South Africa” for the second consecutive year in the Reputation Institute’s RepTrak study.
The study, conducted by Reputation House, measures reputation against 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 public. Fifty well recognised companies in South Africa, across various industries from retail to financial and telecommunications, were measured.
Clover scored 80.3 out of a possible 100 (78.1 in 2016). In terms of the seven reputation dimensions, Clover placed first in products/services and citizenship, second in performance and innovation and third in workplace, leadership and governance.
RepTrak model
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 which is available on here of this integrated report. During the year under review the new King IV code was published, effective 1 April 2017. Clover has reviewed its conformance the new King IV code and will report on its compliance therewith in its next integrated report.
Deloitte Touche Tohmatsu Limited (Deloitte) performed the function of Internal Auditor and assessed the governance structures and processes that executive management has established. Deloitte found the internal controls over reviewed operations and related activities to be adequate and effective in all significant respects. Deloitte did provide recommendations to further improve and mature some of the controls. Deloitte also found Clover’s governance practices to be adequate and effective.
The table below indicates management’s conclusions over Clover’s management process:
| Review area | Management view on adequacy | Management view on effectiveness |
| Ethical leadership and corporate citizenship | Adequate | Effective |
| Board of directors | Adequate | Effective |
| Audit and Risk committee | Adequate | Effective |
| Governance of risk | Adequate | Effective |
| 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 sessions reinforce Clover’s ethics hotline as a key feedback channel and educates employees 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. Management, employees and other stakeholders are encouraged to make use of the Clover’s ethics hotline. This facilitates reporting of any suspicion and/or awareness of non-adherence to the code of ethics. Clover’s ethics hotline is managed independently by Deloitte who has been contracted to treat every incident reported as confidential.
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 sub-committees 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 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 penalties, fines or criminal procedures.
The board is ultimately responsible for effective corporate governance.
The board’s terms of reference are formalised in a board charter (“Board Charter”). The Board Charter sets out the responsibilities which is reviewed on an annual basis. During the annual review for the reporting period, consideration was paid to the reduced size of the board. Following an intensive evaluation process, it was concluded that the smaller board encourages greater interaction, more robust discussion by all members and stronger participation at sub-committee level. In addition, the current board composition was confirmed as meeting regulatory standards and guidelines. All board sub-committees operate under board approved mandates and terms of reference. Save for the executive committee, all other committees are chaired by an independent non-executive director.
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 sub-committee 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. During the year under review, the board adopted a Gender Diversity Policy with the aim to guide and assist the board in promoting gender diversity at board level. The board acknowledges the importance of diversity in the boardroom as a driver of board effectiveness and embraces the benefits of having a diverse board. Increasing diversity at board level as an essential element in maintaining a competitive advantage.
The Board will use its best endeavours to ensure that the Board at all times have at least 2 (two) female directors appointed to the Board. The target has been achieved for the year under review.
Notwithstanding the aforementioned voluntary targets, all appointments to the Board will be made on merit while taking into account suitability for the role, board balance and composition, the required mix of skills, background, experience and gender.
Further, the Board will consider the balance and mix of skills, experience, independence and knowledge and the diversity representation on the Board, including gender and race, how the Board works together as a unit, and any other factors relevant to its effectiveness when considering the appointment of any director.
The Nomination Committee will annually consider and determine whether the existing voluntary targets, for achieving diversity on the Board should be amended and recommend the same to the Board for approval and adoption.
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.
To ensure conflicts of interest are avoided the board members annually provide a general disclosure of their personal financial interests in terms of section 75 of the Companies Act 2008, and are reminded at the commencement of every board and board committee meeting that they are required to declare any material personal financial interests that they may have in contracts entered into or authorised by the company or in any matters to be discussed at the meeting, as well as any changes to their interests as previously declared.
The board is required to assess its performance against the Board Charter requirements on an annual basis. The assessment was completed and it was found that in all material respects the board complied with these requirements. The chairman continues to monitor and manage the participation of the board’s members, and considered the development requirements, if any, of each director.
Board composition
At the end of the review period, the board consisted of two executive directors and five non-executive directors, three of whom are independent.
Mr Tom Wixley, who served as Clover’s lead independent director since listing, announced his retirement effective from 28 November 2016 (date of the annual general meeting). Following Mr Wixley’s retirement, Dr Steve Booysen fulfilled the role of lead independent director.
Mr Peter Griffin, a non-executive director retired from the board also effective 28 November 2016. Further, Mr Johan du Plessis, a non-executive director announced his retirement from the board effective 11 January 2017. The board does not anticipate appointing a new Non-Executive director.
Subsequent to the financial year-end, Mr Elton Bosch, the company’s Chief Financial Officer, announced his resignation. Mr Bosch’s employment and directorship will continue until the end of December 2017 and he has committed to assist us during this transitional period to ensure the desired continuity in the business. The process to appoint a successor and achieve a smooth transition is underway.
In terms of the Company’s Memorandum of Incorporation and best practice, at least one-third of the board’s members retire each year at the annual general meeting. Retiring directors are eligible for re-election.
Details of the directors are available here of 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.
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 an important communication channel 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 sub-committees 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 of this Integrated Annual Report.
Board committees
The board has mandated several sub-committees to assist it in discharging its responsibilities. Each sub-committee’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
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 – (retired 11 January 2017)
B Ngonyama – Chairperson
TA Wixley – (retired 28 September 2016)
N Mokhesi – (appointed 1 January 2017)
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 on pages here of 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 – (retired 11 January 2017)
TA Wixley – (retired 28 November 2016)
N Mokhesi – (appointed 1 January 2017)
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 on here and sets out its responsibilities as well as its delivery against these.
Social and ethics committee
Dr SF Booysen ER Bosch
N Mokhesi – Chairperson
TA Wixley – (retired 28 November 2016)
N Smith – (appointed 28 November 2017)
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 sub-committee 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 workplan, 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 of this report.
Nomination committee
Dr SF Booysen – Chairperson (elected 28 November 2016)
WI Büchner
TA Wixley (retired 28 November 2016)
N Mokhesi – (appointed 28 November 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 sub-committee 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 (retired 28 November 2016)
B Ngonyama – (appointed 1 January 2017)
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.
