Our detailed assessment of compliance to King IVTM is set out in the table below:
|Number||Principles||Applicable policies and processes|
||1.1||The governing body should set the tone and lead ethically and effectively.||
|The governing body should ensure that the organisation is a responsible corporate citizen.||
|2.1||The governing body should lead the value creation process by appreciating that strategy, risk and opportunity, performance and sustainable development are inseparable elements.||
|The governing body should ensure that reports and other disclosures enable stakeholders to make an informed assessment of the performance of the organisation and its ability to create value in a sustainable manner.||
|Adequate and effective control
||3.1||The governing body should serve as the focal point and custodian of corporate governance in the organisation.||
|The governing body should ensure, in its composition, a balance of the skills, experience, diversity, independence and knowledge needed to discharge its role and responsibilities.||
|The governing body should consider creating additional governing structures to assist with balancing power and effective discharge of responsibilities without abdicating accountability.||
|The governing body should ensure that the appointment of and delegation to competent executive management contributes to an effective arrangement through which authority and responsibilities are exercised.||
|The governing body should ensure that the evaluation of its own performance and that of its committees, its chair and its individual members supports continuous improvement in its performance and effectiveness.||
|The governing body should govern risk and opportunity in a way that supports the organisation in defining core purpose, and to set and achieve strategic objectives.||
|The governing body should govern technology and information in a way that supports the organisation in defining core purpose and to set and achieve strategic objectives.||
|The governing body should govern compliance with laws and ensure consideration of adherence to non-binding rules, codes and standards.||
|The governing body should ensure that the organisation remunerates fairly, responsibly and transparently to promote the creation of value in a sustainable manner.||
|The governing body should ensure that assurance results in an effective control environment and integrity of reports for better decision making.||
|Trust, good reputation and legitimacy||4.1||As part of its decision making in the best interests of the organisation, the governing body should ensure that a stakeholderinclusive approach is adopted, which takes into account and balances legitimate and reasonable needs, interests and expectations.||
Our board assumes ultimate accountability and responsibility for the performance and affairs of the company and, in doing so, effectively represents and promotes the legitimate interests of the company while, as a responsible corporate citizen, also taking into consideration the legitimate interests and expectations of its material stakeholders and thereby making a positive contribution to society.
The board exercises its leadership role by:
The board confirms that it has complied in all material aspects with the Companies Act, 2008 (Act 71 of 2008) (the Companies Act), the memorandum of incorporation and the JSE Listings requirements for the period under review.
“Integrity is a key principle underpinning good corporate governance. Put clearly, good corporate governance is based on a clear code of ethical behaviour and personal integrity exercised by the board, where communications are shared openly.”
The principle finds centre stage with our board and sets the tone for an ethical culture within the company and the group. The board monitors ethical culture within the group through its reporting structures, which include two board committees: the social and ethics committee and the audit committee, as well as the ethics committee which is a management committee.
Ethics involves applying moral standards – standards of good, right and fair conduct – which are supported by our values in order to shape the decisions and actions of individuals within the company in the pursuit of our business objectives. In pursuit of the company’s vision to outperform the mining and mineral sector in creating value for all stakeholders through exceptional people and superior processes, the conduct of the company’s businesses and its employees are characterised by the following fundamental values:
The values have been developed for the benefit of the company and its employees to guide the moral way of acceptable and responsible behaviour without which business life cannot be sustained. Everyone within the group is therefore motivated to act ethically with accountability and against misconduct in order to build a safe and healthy working environment.
Code of ethics
As the board assumes the responsibility for the governance of ethics, it also sets the direction for manner in which ethics should be approached and addressed by the organisation. Following a group-wide assessment, the board approved and endorsed a revised code of ethics in September 2018, which expressed the board’s commitment to comply with the letter and spirit thereof. The revised code of ethics was rolled out within the group throughout 2019.
The code of ethics is read in conjunction with all the company’s policies and procedures, with specific reference to the following policies that supports the establishment of an ethical culture:
Fraud and ethics hotline
As part of our ethical culture, Exxaro encourages all employees and stakeholders to report any suspected fraud or corruption on its fraud and ethics hotline, which is managed independently and reported through the ethics committee to the social and ethics committee.
Board charter and code of conduct
Our board charter and code of conduct (board charter) regulates the parameters within which the board operates and ensures the application of the principles of good corporate governance in all dealings by, in respect and on behalf of, the company and the group, and sets out the roles and responsibilities of the board and individual directors, including the composition and relevant procedures of the board. Our board charter is subject to an annual review to ensure it remains relevant to the business objectives of the company and aligned with best practice.
Due to the importance of our board charter, the chairman of the board requested the chairman of the audit committee and the chief executive officer to benchmark the governance responsibilities and adequacy of resources, including independence and objectivity of the risk and assurance functions in the organisation. This was done with a view to ensure that the risk management function is a robust second line of defence, overseen by a chief risk officer. Furthermore that the risk function should be separated from the assurance function, which should be independent and have a direct reporting line to the audit committee. The request culminated from the many corporate failures globally and locally as well as the associated risks. An amended board charter was subsequently approved by the board following the external review.
The board charter requires that all members of the board must be individuals of calibre and credibility with the necessary skills and experience. In this regard, the remuneration and nomination committee (remco) must ensure continuity of directorships and undertake succession planning on behalf of the board, which includes the identification, mentorship and development of future candidates. Engagement with shareholders takes place regarding the required skills, competencies, gender and diversity targets required for the effective functioning of the board.
A formal succession planning process commenced during February 2020 where the skills, experience and independence of every board committee member were assessed against the specific requirements of every board committee. During the one-on-one interviews scheduled by the chairman with individual board members, it was confirmed that the vast majority of members would be available to act as board members for the foreseeable future.
Exxaro recognises that the skills complement needed to be reviewed continuously together with the annual review of the strategy, and frequently engaged with the broader stakeholder community in this regard.
The board charter also sets the requirement that new directors on appointment must undergo an induction programme to facilitate their understanding of the business and regulatory environments and markets in which the company and the group operates. This programme is facilitated by the group company secretary and includes, inter alia, information and guidance on:
Furthermore, in terms of the board charter, all directors are required to undergo continuing professional development, as approved by the board, from time to time on recommendation by the remco, and to attend regular briefings as arranged by the company on changes in legislation, governance and the business environment. During the year under review, considerable emphasis was placed on training in the following roles of the board:
Avoiding conflicts of interest
In addition to the King IVTM principles, the Companies Act also places specific duties on directors and prescribed officers in relation to the disclosure of personal financial interests. In order to give effect to ethical and responsible leadership as well as effective governance practices, a revised conflict of interest policy was adopted and rolled out within the organisation. This policy places a responsibility on directors, prescribed officers and employees to avoid conflicts of interest. The responsibility does not end with individual employees, prescribed officers and directors but extends to their close family and related parties as defined in the Companies Act.
Directors and prescribed officers are obliged to provide the group company secretary annually with a general declaration of all outside interests in accordance with the group-wide conflict of interest policy, which is aligned with King IVTM and section 75(4) of the Companies Act. In addition to the general declaration of outside interests, an item dealing with declarations of interests at the beginning of each meeting appears on every executive committee, board and board committee agenda at which time all attendees are required to formally declare (and recorded in the minutes as such) that none of them nor their related parties have any personal financial interests in any matter on the agenda. A director or prescribed officer is similarly required to indicate any personal financial interest in a matter that is to be decided by written resolution by informing the group company secretary.
Supplier code of conduct
The group also has a supplier code of conduct that communicates standards that Exxaro regards as mandatory for its suppliers and requires all Exxaro suppliers to live up to this code. These mandatory standards are reflected in the code:
Responsible corporate citizenship
As the organisation is an integral part of society, the board assumes the responsibility for corporate citizenship by setting the direction and ensuring that the company’s responsible corporate citizen efforts include compliance with the Constitution of South Africa (including the Bill of Rights), the law, leading standards, and adherence to its own codes of conduct and policies. The board therefore has oversight of the organisation’s strategy and conduct, and it ensures that these are congruent with being a responsible corporate citizen.
Continued training at strategic, tactical and operational level ensures that every director and employee understands the importance of good corporate governance and that all need to play a part in ensuring the group acts as a responsible corporate citizen.
The company’s short, medium and long-term strategy, as formulated and developed by management, must be approved by the board. In considering a proposed new strategy for approval, the board would consider it with reference to, among others, the following:
In formulation of a new strategy for the company, the board engaged with the executive and senior management in several strategy sessions throughout the year. The board therefore appreciates that the company’s core purpose, its risks and opportunities, strategy, business model, performance and sustainable development are all inseparable elements of the value creation process. The insight that conditions are changing and that there is a need to become future-fit is used to drive decisions and measure transition going forward.
The board ensures the integrity of the company’s integrated report as well as the alignment thereof with best practices in the area of integrated reporting, including any other reporting done by the company from time to time. The Exxaro sustainability key performance indicators are assured annually by PwC prior to publication.
The board also oversees and signs off on the full suite of Exxaro reports, which includes:
Other online or printed information or reports are issued as necessary to comply with legal requirements and/or to meet the legitimate and reasonable information needs of material stakeholders. Reports issued by the organisation strive to enable stakeholders to make informed assessments of the organisation’s performance as well as its short, medium and long-term prospects.
|Our climate change position statement is available on our website (www.exxaro.com).|
The board of Exxaro requested that an independent evaluation be done in respect of the performance and effectiveness of the board, its committees and specific individuals. The purpose was to also identify and record possible areas for strengthening and/or refinement while taking into consideration internal and external dynamics, and factors that may positively or negatively impact on the board’s ability to enhance its performance and effectiveness in these areas.
Performance and transformation
The board leads the value creation process through strategy, risk and opportunity, performance and sustainable development. The following awards confirms the performance and value creation:
Our corporate governance structure
The Exxaro corporate governance structure supports the group’s ability to create value in the short, medium and long term. The structure is constantly assessed to ensure agile decision making and supporting different business requirements within the organisation. Through this structure, the board exercises effective control, and builds and protects the organisation’s reputation and legitimacy. We consider good corporate governance as the responsibility of our board and the executive management as well as all our employees.
As Exxaro recognises the integral link between strategy, operating model and the corporate governance structures, the company continuously evaluates and monitors these elements to ensure that it is fit for purpose and that it drives shareholder value.
Our corporate governance structure
Accountability to shareholders and stakeholders
Governance framework through delegations, policies, processes and systems
Detailed reports from each of the board committees are on Audit committee report, Investment committee report, Remuneration and nomination committee report, Social and ethics committee report and Sustainability, risk and compliance committee report.
The board retains full and effective control over the business and affairs of the company and the board does not assume the functions of management, which remain the responsibility of the executive directors, prescribed officers and other members of senior management.
Group governance framework: Subsidiary companies
The board, on behalf of the company, recognises the statutory and fiduciary duties of the directors of subsidiary companies and in particular their duty to act in the best interests of the subsidiary company at all times whether or not the director is nominated to the board of the subsidiary company by the company (in its capacity as holding company). In the case of a conflict between the duties of a director to a subsidiary company and the interests of the company, as holding company, the duties of the director to the subsidiary company must prevail.
To the extent provided for in the formal delegation of authority framework, adopting and implementing policies and procedures of the company as holding company in the operations of the subsidiary company should be a matter for the board of the subsidiary company to consider and approve, if the subsidiary company’s board considers it appropriate.
As part of the formal delegation of authority framework and its regular review process, the board shall consider and articulate the holistic group governance framework to effectively describe and give effect to its direction on relationships and the exercise of authority across the group.
The board has requested a phased review of the group governance framework in 2020 following the approval of a new strategy for the company.
Delegation of approval framework
The Exxaro delegation of approval framework and policy are reviewed continuously to ensure agile decision making that provides direction and clear delegation of power to management. This framework is also adopted by our subsidiary company boards and implemented throughout the group.
The purpose of the framework is to:
The board is satisfied that the delegation of authority framework contributes to role clarity and the effective exercise of authority and responsibilities.
Technology and information
Technology and information management are governed by the board in a way that supports the organisation setting and achieving its strategic objectives. As information management and the governance thereof form an integral part of the overall enterprise governance, the board adopted the following policies:
Enterprise risk management
Exxaro’s enterprise risk management provides a framework and process for all types of risk management, regardless of risk or impact type at all levels of the organisation. The same terminology and assessment mechanism are used for finance, projects, safety and operational risk management. One set of risk names are used, one impact scale and one likelihood that cut across all the different disciplines to ensure that management concentrate their efforts and resources on material activities.
The company has linked all assurance activities and material issues to ensure that the company reduces assurance cost and derives greater value from auditing controls. Exxaro currently uses a tracking and monitoring system to afford transparency of all audit findings that need to be closed out. The findings are reported by the chief audit officer directly to the audit committee.
The risk management function, through the combined assurance model, coordinates with internal audit to obtain evidence on the effectiveness of treatment/control activities in achieving the desired/planned risk treatments. Through the combined assurance model, assurance providers such as internal audit, sustainability KPI audits and external assurance providers, self-assessments and accreditation reviews monitor the effectiveness of significant risk treatments and compliance with regulatory requirements, non-binding rules, codes and standards that the company has adopted as well as policies and procedures.
The board is satisfied that the company and group have a mature risk process that ensures identification of risks that may impact on the strategic objectives that management pursue in creating shareholder value.
|For more information on our material matters and risks, please see page 6 of this report. Alternatively, please see our integrated report at https://www.exxaro.com/investor/ integrated-reports2019/index.php.|
As an organisation, the group is committed to maintaining high standards of integrity, professionalism and ethical behaviour in all its relationships. While it is Exxaro’s aim to comply with all relevant legal requirements in jurisdictions of its operation, it is equally important to stress that the law serves as a minimum standard of conduct. Beyond complying with the law, it is important that each director and employee is sensitive even to the appearance of improper conduct, asking first if our actions are honest and responsible.
The group’s compliance philosophy is captured in a compliance policy that supports the organisation being an ethical and responsible corporate citizen, and seeks to create sustainable value for all stakeholders by striving for operational efficiency, growth and regulatory compliance within the framework of a responsible corporate citizen.
The regulatory environment within which the group operates are continuously revisited in order to assess the robustness of the regulatory universe, which has also been refocused to ensure that regulatory instruments are prioritised from a licence to operate risk perspective.
Electronic control self assessments have been created for prioritised legislation included in the regulatory universe. The control self assessments are high-level questionnaires that are utilised to provide a view on the level of compliance at functional and business unit level. The results of these assessments seek to provide a basis for the company’s Compliance Assurance Plan as well as intervention efforts required to assist the functions and business units to improve the level of compliance.
The board is kept abreast of the latest national and international regulatory developments via formal reports presented by the legal department to ensure group-wide compliance.
Strategic performance dashboard
We use a strategic performance dashboard to measure whether the company is on track to achieve its strategic objectives. This is a practical tool that was developed to add value and assist the company and the board in understanding the licence to operate requirements as part of the broader materiality concept and the development of KPIs to measure compliance with these requirements. Reporting on the status of the strategic dashboard is done at each of the board and the board committee meetings throughout the year to assist the board in tracking the achievement of the strategic objectives.
|See Strategic performance dashboard for more information.|
In support of the company’s purpose of powering better lives in Africa and beyond, the company continues to work towards improving the quality of our relationships with stakeholders and building long-term, stable and trusting relationships that will create shared value for all our stakeholders.
|More information on our stakeholder engagements can be found on Stakeholder review of this report.|
The AGM minutes of the company can be made available on request.
Apply and explain
As King IVTM has moved to “apply and explain” as a way of supporting a claim that good governance is practised, the table above sets out each principle together with an explanation of steps taken as well as policies and processes relating to the principles supporting Exxaro’s claim of practising good corporate governance.