Corporate governance review

INTRODUCTION

The directors of Petmin are committed to conducting the business of the Group with integrity and fairness and in accordance with good governance practice and the Code of Corporate Practices and Conduct, as set out in the King III report.

The directors have established mechanisms and policies which are appropriate to the business and risks of the Group and that will ensure the continuous reassessment of the quality of the Group’s corporate governance practices. The directors have reviewed the King III report and where areas of non-compliance have been identified, management implements programmes to address these gaps.

Areas where Petmin does not comply with King III are disclosed and explanations are provided. A statement that confirms Petmin’s application of each of the King III Code’s 75 principles is available on our website at www.petmin.co.za.

COMPOSITION OF THE BOARD

At 30 June 2015, the Petmin Board comprised four executive directors and five non-executive directors (see page 20).

The composition of the Board is designed to procure the necessary professional skills and experience required to judge, objectively, matters of the strategic and business direction of the Group.

As required by King III, Petmin’s Board of Directors re-elected Ian Cockerill as Non-executive Chairman until the 2015 AGM. As the Chairman was previously an Executive Director, Petmin also elected a Lead Independent Director. Mr. Trevor D Petersen has served in this role since 28 November 2013. Mr. Petersen was also re-elected as Chairman of the Audit and Risk Committee. Directors are subject to retirement by rotation and re-election at the Annual General Meeting of the members.

ROLE AND FUNCTION OF THE BOARD OF DIRECTORS

The Board is responsible for the management, direction and ultimate control of the Group. In order to meet this responsibility to shareholders and other stakeholders, the Board is responsible for setting the strategic objectives of the Group, determining investment and performance criteria, and taking ultimate responsibility for the management and ethical behavior of the business of the Group.

The Board meets on a formal basis or via electronic media at least quarterly, with additional meetings convened as the need arises. The Group’s overall daily operations are managed and overseen by the Executive Directors. An approval and authority framework is in place which defines the powers and authority of the Board, its Committees and the Executive Team.

There is a clear division of responsibilities at Board level that ensures a balance of power and authority. No one individual has unfettered powers of decision-making.

TERMS OF REFERENCE FOR THE BOARD OF DIRECTORS

In order to meet its responsibilities to shareholders and other key stakeholders, the Board is responsible for:

Approving the strategic objectives and annual budgets of the Group, against which performance is measured
Ensuring that the Group carries out its risk responsibilities and all material risks of the business are identified and managed
Validating the proposed investment criteria presented by management
Providing guidance for the proper management and ethical behavior of the Group’s businesses
Appointing Board Committee members and reviewing the scope and adequacy of activities of the Board Committees in order to evaluate how effectively the committees discharge their responsibilities in terms of statutory and corporate governance requirements

COMPANY SECRETARY

Mr. J van der Walt of Mondial Consultants Proprietary Limited is the company secretary.

The company secretarial function is conducted on an arm’s length basis with an independent company, Mondial Consultants Pty Ltd. Mondial’s representative, Mr Johan van der Walt, who acts as Petmin’s company secretary, has an arm’s length relationship with Petmin. The Petmin Board is satisfied that Mondial is independent and consults extensively to other clients and the sustainability of its business is not is not reliant on Mr van der Walt’s appointment as Company Secretary.

The table below sets out the attendance of Directors at the Group’s formal Board meetings held during the year. All Directors were actively involved at Board level:

Board meeting attendance for year to end-June 2015-

Director Date of Board meeting
  9 Sept 2014     27 Nov 2014 19 Feb 2015 15 May 2015 22 May 2015 26 June 2015
Ian Cockerill By phone
Lebo Mogotsi
Jan du Preez ✓   
Bradley Doig
Bruce Tanner
Trevor D Petersen By phone
Enrico Greyling
Koosum Kalyan Apologies By phone Apologies
Millard Arnold

The competence, qualifications and experience of the Company Secretary are reviewed annually by the Board and the Board has satisfied itself that the Company Secretary is competent and has the necessary qualifications and experience required to fulfil the role and the responsibilities placed upon a Company Secretary by the Companies Act, the JSE Listings Requirements and King III. The Company Secretary qualified and was admitted as an Attorney of the High Court of South Africa in 1984 and practiced law and intellectual property law at two of Johannesburg’s leading law firms. He has over 32 years’ experience in law, corporate communications, as well as risk and project management.

Before the formation of Mondial in 2008, Mr van der Walt was employed for a period of 20 years by one of the world’s largest resource companies. During this period his main areas of focus were law, corporate governance and risk management. He was the Risk Manager for one of this organisation’s major divisions for a period of 10 years as well as the Company Secretary for the last 12 years of his service with the same group of companies.

SUPPORT TO THE BOARD

In order to facilitate the discharge of the duties and functions by Directors (Non-Executive Directors in particular), the Group will assist directors by arranging:

Visits to and tours of its operations, along with interviews with the responsible Executive Managers
Briefing sessions with individual executive directors or senior managers responsible for particular areas of operation
Consultations with the Company Secretary for specific enquiries
In the event of a director identifying an area of particular concern or conflict in relation to his/ her future conduct as a director, he/she may, after consultation with and through the office of the Chief Executive Officer, and/or the Company Secretary, seek independent professional advice at the expense of the Group

INDEPENDENCE OF THE BOARD

The Board’s independence is maintained by:

Non-Executive Directors not holding service contracts and their remuneration not being tied to the financial performance of the Group
All the Directors having access to the advice and services of the Company Secretary and, with prior agreement of the Chairman, being entitled to seek independent professional advice on the affairs of the Group at the Group’s expense

NON-EXECUTIVE DIRECTORS

The Board has a strong contingent of Non-Executive Directors who bring their diverse experience, insight and independent judgement to bear on issues of strategy, planning, performance, resources and standards of conduct.

For the year ended 30 June 2015 the Non-Executive Directors have no service contracts with the Company and are appointed for specific terms. Recommendation of members for re-appointment is not automatic, but considered individually, based on that person’s contribution. As recommended and defined by King III, the majority of the Non-Executive Directors are independent.

EXECUTIVE DIRECTORS

The four Executive Directors involved with the day-to-day business activities of the Group are responsible for ensuring that the Board’s strategies are followed and its decisions implemented.

LEADERSHIP

The Executive Team at the Petmin corporate office executes strategies approved by the Board and sets the tone for the business. The Executive Team allocates capital and deploys skills and experienced teams to projects and operations. Operational management is decentralised with a high degree of independence and decision making by disciplined, innovative and entrepreneurial teams. The members of the Executive team are all significant shareholders of Petmin.

DIRECTORS’ REMUNERATION

Details of directors’ remuneration are given in the report of the Remuneration Committee.

BOARD MEETINGS

The directors have set a framework for financial reporting, with internal and operating controls to ensure reasonable assurance as to timeous reporting of business information, safeguarding of Group assets, compliance with statutory laws and regulations, recording of Group results and general operation in terms of the Group’s standards of business conduct

The Board is responsible for monitoring the ongoing effectiveness of these controls and operating frameworks. The external auditors have unrestricted access to the Chairman of the Board.

The minutes of Audit and Risk Committee (ARC) meetings are presented at the next meetings of the Board. There is close communication between the ARC and the external auditors. Areas of weakness in control are brought to the attention of all relevant parties and remedial action is taken immediately to ensure no loss or misstatement arises due to the inadequacy of the internal control environment.

HEALTH, SAFETY AND ENVIRONMENT COMMITTEE

Petmin’s Health, Safety and Environment Committee is based at its Somkhele mining operation. This committee comprises the General Manager Mining of Somkhele, senior operational management from Somkhele and various external consultants in the fields of safety, health and environment.

One of the main functions of the committee is to monitor health, safety and environmental performance and reporting in accordance with the applicable legislation and the GRI framework and guidelines. It further reviews, considers and comments on health, safety and environmental strategies, statistics, structures, systems and related policies at the operation. The committee meets on a quarterly basis.

NOMINATIONS COMMITTEE

As the previous membership of the Board Nominations Sub-committee did not comply with King III due to the inclusion of executive directors as members, with effect from 30 June 2014 it was resolved that the only members of the Nominations Committee are the five Non- Executive Directors, three of whom constitute a quorum. Executive directors are requested to attend meetings of the Nominations Committee as and when their input is required by the Sub-committee.

The committee meets as and when required but not less than once per annum.

CODE OF ETHICS

The Group subscribes to certain values and ethical practices that apply throughout the organisation. These values and ethical practices are sustained by the directors’ belief in free and fair dealings in good faith and with respect for the law and regulations.

The board-approved Code of Business Ethics covers areas such as conflict of interest, confidentiality and the protection of proprietary and commercial information, political activities and government relationships, gifts and donations, use of company information systems, fraud, and approval frameworks.

Concerns and violations of the Ethics policies can be reported, in confidence, to the dedicated email address: ethics@petmin.co.za. Incidents reported on this email address are reported to the Audit and Risk Committee. Petmin’s Ethics Policy is available on www.petmin.co.za.

ACCOUNTING AND AUDITING

The Board places strong emphasis on achieving the highest level of financial management, accounting, and reporting to shareholders. The Board is committed to compliance with International Financial Reporting Standards (IFRSs) and its framework concepts and measurement and recognition requirements, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council, and the requirements of the South African Companies Act. It is the directors’ responsibility to prepare financial statements that fairly present:

the financial position as at year-end
profit or loss for the year
cash flows for the year
non-financial information

The external auditors observe the highest level of business and professional ethics and their independence is not impaired in any way. The external auditors were given unrestricted access to all financial records and related data, including minutes of all shareholder and Board meetings. The directors believe that all representations made to the independent auditors during their audit are valid and appropriate.

The Board set principles for using the external auditors for non-audit services.

COMMUNICATION WITH STAKEHOLDERS

The Group maintains that positive relations with all stakeholders is key to creating and sustaining value for all stakeholders. The Company is committed to a policy of timeous and effective communication with shareholders and other stakeholders through shareholders’ meetings, the annual financial report and interim financial report. Matters of both financial and non-financial nature are communicated to shareholders in a timeous and transparent fashion.

SHARE DEALINGS BY DIRECTORS

All dealings by directors are regulated and monitored as required by the listing requirements of the JSE Ltd.

The Group observes closed periods from the end of the interim and year-end periods to the announcement of the interim or year-end results, and any other period when the Company is trading under a cautionary announcement. During these periods, the directors and senior employees of the Company may not deal in the Company’s shares.

Details of directors’ shareholdings are provided in the directors’ report in the Annual Financial Statements.