OUR APPROACH TO GOVERNANCE
The Phumelela Board recognises the principles of good governance and is committed to ensuring that the Group adheres to the highest standards of good corporate governance in the conduct of its business.
The Phumelela Board recognises the principles of good governance and is committed to ensuring that the Group adheres to the highest standards of good corporate governance in the conduct of its business, as well as compliance with the Listings Requirements of the JSE Limited (“the JSE”) and all other applicable laws. Our Board is responsible for creating and delivering sustainable shareholder value.
Integrated reporting not only allows us to apply the recommendations in the King Report, but also to use reporting to inform strategy within the business, to provide stakeholders with a meaningful account of the Company’s performance and to build a reputation of transparency and trust within the investment community. Our Code of Ethics outlines behaviours which govern our way of working across the business.
ENGAGEMENT WITH STAKEHOLDERS
Phumelela has identified a range of internal and external stakeholders with which it engages regularly. The stakeholders are identified as those parties who have a material interest in or are affected by Phumelela. The Company has assessed its involvement with them or their potential impact on our business, at a corporate office and operational level. The issues raised by the stakeholders partly inform the selection of the Company’s material issues.
We view stakeholder engagement as a necessary tool to ensure transparency and accountability with those entities and individuals that are impacted by or interested in our activities, products and services.
COMPLIANCE WITH KING IV CODE OF CORPORATE PRACTICES AND CONDUCT
Phumelela’s directors endorse the Code of Corporate Practices and Conduct ("the Code") as set out in the King Report on Corporate Governance ("King IV") and the Board took the necessary steps to ensure its recommendations were applied. The Board analysed the recommendations contained in the Code and noted where it already applies the Code and where there are opportunities to implement changes that will improve governance standards within Phumelela in the future.
To identify the material issues to our business we review the:
• results of our business risk assessment process;
• Code of Corporate Practices and Conduct set out in the King IV report;
• Phumelela Code of Ethics;
• topics and challenges reported by our peers or raised by industry associations; and
• external initiatives and best practice guidelines.
Phumelela’s Board structure and Board committees were established to divide the responsibilities needed for effective governance of the issues material to the Company. To ensure a balance of power and authority there is a clear division of responsibilities among the Company’s directors.
One-third of the non-executive directors retire annually by rotation.
The Board meets on a quarterly basis in line with the financial and strategic processes of the Group. The Board also annually reviews the Group’s ability to continue trading as a going concern in the foreseeable future.
The Group aims to ensure business-specific risks are adequately and timeously identified and mitigated, whether they are operational and strategic risks, emerging risks, or risks posed by the external environment. For detail on the material issues and related risks facing the Group and how that informs the Group’s strategy, please refer to page 27 to 31 of this 2019 integrated annual report.
THE PHUMELELA BOARD
The Board is constituted in terms of Phumelela’s Memorandum of Incorporation. The responsibility for the success of the Company lies with the Board. The Board is expected to act in the best interest of the Company including its stakeholders and give strategic direction, identify risks, monitor performance against budgets and industry standards, as well as apply good corporate governance. Through this style of leadership, the Company should achieve sustainable growth.
The Board approves the Group budget and monitors overall performance against objectives appropriate to the current stage of the business, providing input and determining strategic focus. The Board appoints the Group Chief Executive and with the assistance of the Nominations Committee ensures that succession is planned.
In the interests of transparency, the Board ensures that stakeholders and investors are provided with timeous, accurate and relevant information. The Board is satisfied that it fulfilled all its duties and obligations in the financial year.
The Phumelela Board Charter outlines the manner in which business is to be conducted by the Board.
The Charter provides a concise overview of the delineation of the roles, functions, responsibilities and powers of the Board, as well as the committees of the Board.
Annual assessment of independence
The Board, assisted by the Nominations Committee, reviewed the independence status of all the non-executive directors and all directors maintained their independence. We seek to promote independent judgement and diverse mind-sets and views. All directors must exercise their judgement independently, irrespective of their status. Independent non-executive directors are assessed annually in accordance with King IV recommendations.
King IV recommends that any term beyond nine years, or an independent non-executive director, should be subject to a particularly rigorous review by the Board, of not only the performance of the director, but also the factors that may impair his independence at that time. The Nominations Committee took into account the guiding principles outlined in the King Report to determine the independence of directors.
Although the majority of directors have served over 9 years, the Board concluded that directors’ independence of character and judgement were not in any way affected or impaired by their length of service and that their service was of considerable benefit to the Company. The longer serving non-executive directors vigorously exercise their duty to act in the best interests of all stakeholders of the Group. All our non-executive directors are strong-minded individuals of integrity, who are successful and experienced professionals in their respective fields with continuing strong contributions.
Membership and diversity
The procedures for appointing directors to the Board are formal and transparent.
The Board recognises and embraces the benefits of diversity (which includes, but not limited to age, race and gender) at Board level, to enhance the quality of deliberations and of directors’ perspectives. Having a diverse Board and workplace is and remains important to the Group.
Directors are chosen for their corporate leadership skills, experience and expertise. The Board voluntarily set a target of at least 20% of Board membership to comprise women. The Nominations Committee assists the Board in this regard. The Board continues to seek candidates based on merit against objective criteria and with due regard to the benefits of diversity on the Board.
The Board is committed to proactively monitoring the Group’s performance in meeting the requirements outlined in the policy.
Appointment of directors
Directors are appointed through a formal process. The remuneration and nominations committee is responsible for identifying suitable candidates as independent non-executive directors to be proposed to the Board and, on its recommendation to shareholders for approval. This committee is also responsible for overseeing that diversity at Board level is maintained.
The Board has staggered rotation of directors to retain knowledge, skills and experience and to maintain continuity, while introducing new expertise and perspectives. Directors serving over nine years are subject to a rigorous review by the Board annually. Length of service is reviewed as part of succession planning.
Induction and training
On appointment, new directors undergo an induction programme to facilitate their understanding of the business environment. This programme is facilitated by the Company Secretary and includes, inter alia, information and guidance on:
• group structure and business objectives;
• financial performance;
• managing conflicts of interests and upholding ethical standards in line with the Company’s code of ethics;
• familiarisation through site visits and consultation with senior management; and
• corporate policies and procedures, and information on directors’ roles and responsibilities in terms of legislation, regulatory requirements and best practice.
The Board’s non-executive directors are individuals of high calibre whose appointments at the highest level in major business and public organisations enable them to bring independent judgement to the Board. Their experience enables them to evaluate strategy, performance, resources, transformation, diversity and employment equity, standards of conduct, as well as to act in the Group’s best interests as a balance to the executive directors.
The non-executive directors have no fixed terms of appointment and no employment contracts with Phumelela.
The composition of the Board is regularly reviewed, and the appointment of non-executive directors is determined after taking into account those attributes and qualifications that are required to supplement the Board’s skills base and ensure that the composition of the Board has a balance of authority and minimises the possibility of conflicts of interest.
Phumelela executives attend the meetings by invitation giving non-executive directors the opportunity to interact directly with them to obtain first-hand information on operational matters.
All new Board members are required to sign the Company’s Code of Ethics, are brought up to date on important issues, and are apprised of the business challenges and strategies being implemented.
The Company Secretary operates on an arm’s length basis from the Board and is not a director of the Board. All directors have access to the advice and services of the Company Secretary.
The appointment and removal of the Company Secretary is approved by the Board. The Company Secretary advises the Board on the appropriate procedures for the management of meetings and implementation of governance procedures, and is further responsible for providing the Board collectively, and each director individually, with guidance on the discharge of their responsibilities in terms of the legislative and regulatory requirements applicable to the Company. All directors have unrestricted access to the Company Secretary.
The Company Secretary acts as a secretary to all Board-appointed committees. During the year under review the Board declared itself satisfied with the competence, qualifications and experience of the Company Secretary.
Phumelela does not tolerate any fraudulent or illegal activities in relation to the running of the Company and this is covered in the Code of Ethics. Employees are encouraged to make use of the confidential ethics line to report any incidents. All incidents of ethics, fraud and robbery are reported to the Social and Ethics Committee, which interacts with management in implementing action whenever corrective action is required.
The National Horseracing Authority provides a competent and efficient racehorse and jockey control and monitoring service for the sport of horseracing which ensures that the sport maintains a high standard of ethics.
CODE OF ETHICS
Phumelela aims to maintain the highest ethical standards and ensures that our business practices are conducted in a manner which is honest and fair and that they are, in all reasonable circumstances, above reproach. All employees including directors are encouraged to comply with both the written word and the spirit of the Code.
The Phumelela Code of Ethics sets out Phumelela’s policies regarding:
• fair dealing and integrity in the conduct of its business;
• compliance with laws and regulations;
• conflicts of interest;
• outside activities, employment and directorships;
• relationships with clients and suppliers;
• gifts, hospitality and favours;
• personal investments;
• environmental responsibility;
• health and safety;
• political support;
• Phumelela assets and records;
• dealing with people and organisations outside Phumelela;
• privacy and confidentiality;
• fraud; and
• contravention of the Code of Ethics.
INTEREST OF DIRECTORS IN CONTRACTS
No conflicts of interest exist regarding directors’ interests in contracts. Directors are required to disclose any potential conflicts at the relevant Board meeting.
The Board is responsible for the oversight of IT governance within the Group. The Board has delegated the Group’s IT responsibilities to the Audit and Risk Committee. The focus during the year included improving internal efficiencies and refining IT infrastructure and security. Emphasis is placed on information security, system integration, automation and simplification of processes. The CIO forum has been established to ensure ICT strategy alignment and governance implementation.