King IV application register

Our detailed King IV application register aligns with King IV's recommendation to apply and explain how we practice good governance. We explain actions taken, policies and processes used by Exxaro.

Ethical culture 1.1 to 1.3

Principle

The governing body should set the tone and lead ethically and effectively [1.1]

Applicable actions, policies and processes

• Exxaro reviewed the board charter, board committees' membership, terms of reference, annual work plans and key focus areas in 2022
• The board charter states that directors have a duty to exercise a degree of care, skill and diligence expected of a reasonably diligent person with general knowledge, skill and experience, and a fiduciary duty to act in good faith and in a manner that is in Exxaro's best interest
• In terms of our board charter, directors shall be individuals of calibre, integrity and credibility
• The nomination committee appointed five new directors on 7 February 2022 and 3 January 2023 after assessing their skills and competence, and conducting background checks. The board considers succession planning and board refreshment as a key element for a sustainable company
• The board applies a zero tolerance approach to actions taken without integrity
• The first theme for internal director development focused on ethics talk to set the tone at the top
• Exxaro's board approves the strategic direction and budget, and sets performance targets
• Policies supporting this principle include, among others, the code of ethics, conflicts of interest, anti-bribery and anti-corruption, fraud prevention and response, gifts and benefits, and whistleblowing

Principle

The governing body should ensure that the organisation's ethics are managed effectively [1.2]

Applicable actions, policies and processes

• Ongoing monitoring and reporting on the group-wide anti-bribery and anti-corruption programme to the audit committee
• Flowing from the ethical risk assessment in 2021, the ethics committee formulated a statement of strategic ethical intent, and developed an ethics strategy and management plan to address identified development areas approved by the board following the SERC's recommendation
• Exxaro appointed an ethics officer to implement the ethics management plan across the business
• The board approved updates to the conflicts of interest, and gift and benefits policies
• The SERC oversees Exxaro's ethics for business practice and relationships with employees, other stakeholders and the natural environment

Principle

The governing body should ensure that the organisation is and is seen to be a responsible corporate citizen [1.3]

Applicable actions, policies and processes

• Exxaro initiated a process in 2021 to develop a framework that will further guide the organisation in managing human rights
• Exxaro's human rights policy was approved in 2022
• Exxaro expressed continued commitment to supporting the UNGC principles on human rights, labour, environment and anti-corruption
• Exxaro developed an employee communication plan for our Climate Change Response strategy. The plan is being rolled out internally
• The board and executive management's awareness of the latest climate change assessment report released by the Intergovernmental Panel on Climate Change and the board's role in responding to climate change
• The board identified the need for an experienced non-executive director with environmental, sustainability and climate change knowledge, which was finalised on 7 February 2022
• Exxaro's growth strategy includes impact investments to ensure creation of an equitable society
• The board strengthened the SERC's mandate in 2021 by entrenching responsible corporate citizenship as part of the committee's focused activities, in addition to its responsibility for ethics, among others
• Policies and frameworks supporting this principle include, among others, diversity, equity and inclusion framework, climate change response strategy, B-BBEE level 1 target, political donations, stakeholder management, environmental, health and safety, zero harm safety target and emergency response plan

Performance and value creation 2.1 and 2.2

Principle

The governing body should lead the value creation process by appreciating that strategy, risk and opportunity, performance and sustainable development are inseparable elements [2.1]

Applicable actions, policies and processes

• The board adopted an updated strategy process in 2021 to provide for a continuous integrated strategy cycle across Exxaro businesses, supporting Exxaro's purpose
• Before the executive leadership presented the strategy to the board, iterative strategy workshops, following bottom-up process, and board governance sessions were held and inputs integrated into the strategy
• An integrated risk management approach in the strategy review process was applied, including the identification of emerging risks and opportunities
• Exxaro's strategy is refined and approved annually
• A new strategic performance dashboard and strategic-aligned sustainability KPIs was reviewed and approved
• The board receives quarterly reports on KPIs through the strategic performance dashboard
• The ERM framework and risk appetite were reviewed
• Exxaro monitors the impact of external and internal events for their impact on the strategic risk profile

Principle

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 [2.2]

Applicable actions, policies and processes

• The integrated report is based on integrated reporting throughout the year
• The integrated report sets out the strategic objectives, business model, material matters that impact the business and the risks that prevent the organisation from achieving its objectives
• The RBR committee oversees the CMRR report as part of the 2022 integrated report
• The audit committee assesses material matters and reviews financial materiality annually
• The audit committee reviews the integrity of the integrated report
• The board approves the integrated report, ESG report and the financial statements annually
• Policies supporting this principle include, among others, external communication and integrated reporting process

Adequate and effective control 3.1 to 4.5

Principle

The governing body should serve as the focal point and custodian of corporate governance in the organisation [3.1]

Applicable actions, policies and processes

• The board remains accountable for Exxaro's corporate governance
• Exxaro's governance framework reaffirms that the board is the focal point of corporate governance
• The board entrenches good corporate governance throughout Exxaro at all levels of decision making
• The board attends mandatory governance sessions for directors and executive management twice a year
• New directors received formal induction on appointment
• Policies and frameworks supporting this principle include, among others, group governance framework, delegation of authority framework and policy

Principle

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 [3.2]

Applicable actions, policies and processes

• The board adopted a nomination and appointment policy in 2021 to provide a framework and set standards for the nomination and appointment of relevant, fit and proper, suitably skilled and ethical non-executive directors to the board
• The nomination committee ensures that the board's composition comprises the appropriate level of skills, experience, diversity, independence and knowledge - of which the appointments in 2021 and 2022 are testimony
• The nomination committee reviews its terms of reference annually
• An approved skills and experience matrix facilitates directors' appointments
• The board reviews and approves its diversity and inclusion targets annually
• Directors receive formal appointment letters
• Directors declare any outside interests on appointment and before any meetings commence, as well as an annual declaration of interest
• The board appoints the lead independent director
• The CEO and chairperson's duties are divided as per the board charter
• The board reviewed its charter in 2022

Principle

The governing body should consider creating additional governing structures to assist with balancing power and effective discharge of responsibilities without abdicating accountability [3.3]

Applicable actions, policies and processes

• The board reviewed the mandates and delegated powers to its board committees with the most significant changes to the SERC, RBR committee and the investment committee in 2021
• All board committees have formally approved terms of reference that are reviewed annually
• The board assesses its committees' composition annually and made several changes
• Board committees' composition complies with the Companies Act, Exxaro's MoI, King IV and each committee's terms of reference
• Board committees have a majority independent non-executive directors as members, with the audit committee comprising only independent non-executive directors

Principle

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 [3.4]

Applicable actions, policies and processes

• A clear division of power exists between the CEO and chairperson as per the approved board charter
• The board monitors executive leadership's performance
• The executive committees have formal terms of reference that were reviewed in 2022
• The board approves the group delegation of authority and conducted a comprehensive review of the group delegations framework in 2022
• The board appoints the group company secretary
• The board assesses the group company secretary's performance annually
• The board considers changes to executive committees' terms of reference

Principle

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 [3.5]

Applicable actions, policies and processes

• The board conducted an in-depth independent performance assessment through questionnaires and one-on-one interviews at the end of 2022
• Non-executive directors undergo independence assessments annually
• The chairperson oversees a formal implementation plan to address potential improvement areas identified by the assessment and reported to the board

Principle

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 [4.1]

Applicable actions, policies and processes

• The board approves and periodically reviews the ERM framework
• The board links Exxaro's strategy, risks, risk appetite and performance via the strategic performance dashboard
• An updated strategy process was adopted by the board to provide for a continuous cycle in ensuring an integrated iterative process across Exxaro businesses, supporting Exxaro's purpose
• An integrated risk management approach is applied in the strategy review process, including the identification of emerging risks
• The strategic performance dashboard was reviewed with a revised philosophy based on the Sustainable Growth and Impact strategy with new focused KPIs for the board cascading down to management, and reporting on measures that matter and matters out of appetite
• A new reporting format requires management to indicate the risk and compliance analysis of the recommendation to the board

Principle

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 [4.2]

Applicable actions, policies and processes

• The RBR committee monitors information management risks and security posture
• The audit committee oversees technology and information management
• The audit committee delegates IT governance to the information management steering committee
• The information management steering committee has formal terms of reference and its scope includes reviewing the IT strategy that supports the business, and IT risks, audit findings and compliance

Principle

The governing body should govern compliance with laws and ensure consideration of adherence to non-binding rules, codes and standards [4.3]

Applicable actions, policies and processes

• The board formally approved a compliance policy
• The board fully integrates the compliance process with the risk process
• Compliance awareness of high legal risks are conducted annually with the board through two focused governance sessions and reading room material, among others
• Exxaro developed compliance self-assessment questionnaires to enable managers to assess compliance with licence to operate requirements
• The regulatory compliance universe was reviewed and updated with the necessary content to assist management in understanding relevant legislation
• A compliance calendar was developed and all compliance content updated in 2022
• Exxaro closed out the Protection of Personal Information Act 2013 (Act 4 of 2013) implementation project with an internal audit to ensure compliance
• A new reporting format requires management to indicate the risk and compliance analysis of the recommendation to the board

Principle

The governing body should ensure that the organisation remunerates fairly, responsibly and transparently to promote the creation of value in a sustainable manner [4.4]

Applicable actions, policies and processes

• The remuneration committee determines and oversees implementation of the remuneration strategy and policy
• Shareholders vote on the remuneration policy at the AGM
• Formal engagement with shareholders includes an annual governance roadshow
• The remuneration policy dealing with STI and LTI principles was amended in 2021 following shareholder engagements

Principle

The governing body should ensure that assurance results in an effective control environment and integrity of reports for better decision making [4.5]

Applicable actions, policies and processes

• The audit committee approves the internal audit charter and plan annually
• The audit committee approves the external audit plan annually
• Exxaro adopted a formal policy as a framework for engagement of auditors to supply non-audit services
• Exxaro has a risk-based internal and external audit report
• Exxaro's combined assurance forum with formally approved terms of reference ensures coordination of assurance activities
• The audit committee monitors close out of all findings
• Internal audit performance forms part of executive member KPIs
• The board appointed a chief audit officer, independent of management, who chairs the combined assurance forum

Trust, good reputation and legitimacy 5.1

Principle

As part of its decision making in the best interests of the organisation, the governing body should ensure that a stakeholder-inclusive approach is adopted, which takes into account and balances legitimate and reasonable needs, interests and expectations.

Applicable actions, policies and processes

• The board charter confirms its commitment to considering material stakeholders' legitimate interests and expectations
• The board has an approved stakeholder management policy
• Exxaro held virtual stakeholder days in 2022 attended by SERC members and the executive responsible for stakeholder management
• Exxaro follows a KAM approach to stakeholder engagement that addresses inclusivity and responsiveness
• The SERC monitors stakeholder relations and matters
• An adequately resourced executive holistically manages stakeholder affairs
• All operations have an approved stakeholder engagement plan 
• All directors attend the AGM
• A new board and committee reporting format was adopted where management is required to address risk, compliance, strategy and ESG implications