In line with the Companies Act, AECI’s corporate governance and processes are led by the Board supported by six sub-Committees:
THE BOARD OF DIRECTORS
Structure and composition of the Board
AECI has a unitary Board structure led by an Independent Non-executive Chairman, nine other Independent Non-executive Directors and two Executive Directors. The Board Charter as well as the terms of reference of the Nominations Committee detail the procedures for appointments to the Board. Such appointments are formal and transparent and a matter for the Board as a whole. Non-executive Directors are appointed on the basis of their skills and expertise appropriate to the strategic direction of the Company. Diversity, race and gender are also taken into account when appointments are made and the Board, through its Nominations Committee, ensures that it has the right balance of skills, expertise and experience.
Summarised biographical details of the Directors are provided via this link. The Board operates in terms of a Board charter which was revised in 2014. A copy of this and of the terms of reference of all Board Committees can be found via the website link www.aeci.co.za/gov_policy.php. The role of the Board is to exercise leadership, integrity and sound judgement in the business and to provide strategic direction to the Company, with a keen understanding of key risks, and to continually monitor performance against set objectives.
In October 2015 Tak Hiemstra resigned as a Non-executive Director of the Board. Graham Dempster was appointed in the same capacity with effect from 31 January 2016. Khotso Mokhele was also appointed as a Non-executive Director, with effect from 1 March 2016. These appointments were made after a rigorous search for individuals with the appropriate skills, talent and diversity.
Rotation, tenure and succession
Non-executive Directors may generally serve for up to nine years, subject to retirement and re-election by rotation as set out in the Company’s MOI. Extensions of this period may be granted, provided the Nominations Committee remains satisfied that the Director’s independence has not been compromised. In terms of the MOI Executive Directors are also subject to retirement and re-election by rotation. One-third of the Executive and Non-executive Directors must retire by rotation at each AGM.
In 2014 the Board conducted an independence review of its longest-serving Non-executive Directors. Although the Board was satisfied with the outcome, which confirmed that these Directors remain Independent in thought and conduct, it was agreed that this process should be used as an opportunity to develop a succession plan for Board members going forward. Accordingly, such a plan was deliberated in 2015.
Terms of employment of Directors
Executive Directors are employees of the Company and have standard terms and conditions of employment. They do not receive any special remuneration or other benefits for their additional duties as Directors. The Board, through its Nominations Committee, has engaged with the two Executive Directors to review their employment contracts and to change their notice periods from one month to six months. The Board views this as a risk mitigation measure to avoid any potential leadership vacuum at management level.
The Board, on the recommendation of the Remuneration Committee, determines the remuneration of Executive Directors, Executive Committee members and other Senior Managers as underpinned by the remuneration philosophy of the Company. None of the Non-executive Directors are Company employees. Non-executive Directors’ remuneration is arrived at after an annual benchmarking exercise performed by the Executive Directors and the approval by shareholders of the proposed fees, on the Board’s recommendation.
Directors’ management of conflict of interests
AECI has a Conflict of Interests policy (embedded in the Group’s Code of Ethics and Business Conduct) which provides guidance and procedures for Directors on managing and dealing with potential conflict of interests situations. The same policy applies to all Group employees. The Group Company Secretary is charged with maintaining a comprehensive register of Directors’ declarations of interests and this is submitted for updating by the Directors before each Board meeting. In 2015 all Directors duly completed and updated this register.
No conflict of interests or recusals from Board discussions and deliberations were noted in relation to any proposed transaction other than for matters pertaining to the de-risking of the Company’s post-retirement obligations. The Chairman and the two Executive Directors, as related parties, continued to recuse themselves from any decision-making in this regard and this project was driven by an ad hoc Committee of non-conflicted Non-executive Directors, with leadership and support from the full Board. This was recorded in the Board minutes, which are available for inspection by the Company’s external auditors.
Induction and ongoing development of Directors
The Company’s Directors have expertise and experience in diverse industries including banking, chemicals, mining, technical, accounting and strategic matters. Upon appointment, all new Directors undergo a Group-specific induction programme which includes a number of one-on-one meetings with Senior Managers and the Managing Directors of subsidiaries. The Company intends continuing with the practice of inducting the newly-appointed Board members in 2016. As always, this will be done with the specific intent of developing these Directors’ full appreciation and understanding of the complex nature of the Group’s businesses.
As in the past, the Board was invited to participate in visits to Group businesses. See the Chairman’s letter to stakeholders in this regard.
With regard to formal training the Group Company Secretary is charged with sourcing and organising relevant training for Board members, based largely on the specific needs of each Director.
Board and Committee performance evaluation
The Board agreed to focus on implementing the corrective actions outlined in the 2014 Board evaluation process as well as the outcome of the Directors’ independence evaluation. It is anticipated that implementation of these corrective actions will result in a stronger, more cohesive and effective Board well able to meet the ever-growing challenges posed by the macro environment. The Board focused on improvements suggested by the evaluation in the areas of Board and management succession planning as well as the pace of transformation in the Group. The Board was satisfied with progress made in the year.
Board relationships with staff and external advisors
To the extent that they may require such access to make informed decisions, Board members have unrestricted access to the Company’s records, information, documents and property. They also have unrestricted access to Senior Managers, the internal auditors and the external auditors to consult on any aspect of the Company’s operations. Furthermore Board members may collectively or individually, at the expense of the Company, consult external professional advisors on any matter of concern to themselves or the Company after having advised the Chief Executive or Chairman.
The Board met five times in the year, including a session to discuss the development of Company strategy. Meeting dates for the Board and its Committees, and details of attendance, are available via the link www.aeci.co.za/pdf/2015_board_meetings.pdf. As is customary, the Chief Executive and the Chief Financial Officer kept the Board up-to-date on specific and urgent matters that could not be deferred until the next formal Board meeting.
It has become Board practice for the Non-executive Directors to meet before the start of Board meetings, without the Executive Directors being present, so as to raise matters of interest or concern. The Chairman of the Board is charged with the responsibility of conveying any related discussions to the Executive Directors, as warranted.
The Chairman of the Board, assisted by the Chief Executive and the Group Company Secretary, is responsible for setting the agenda for each Board meeting. The full Board has the opportunity to provide input. Board meetings are scheduled well in advance and the Group Company Secretary ensures that all Directors are provided with the information required timeously to enable them to prepare for meetings and formulate their views on matters.
The Board has established a number of Committees to assist it in fulfilling its duties and objectives. In addition, ad hoc Committees are established from time to time if circumstances so warrant to assist the Board with specific material issues or projects.
The restructuring of AECI’s defined-benefit pension funds to a defined-contribution fund is a case in point. The Board formed a sub-Committee of two Independent Non-executive Directors to consider and guide this process, which commenced in 2013.
The role and responsibility of each Committee is set out in its formalised and Board-approved terms of reference. Reviews of the terms for the Audit, Nominations and Remuneration Committees were finalised and approved by the Board in 2014. The review of the terms of reference for the Risk and Social and Ethics Committees was deferred to 2016.
Board Committees usually meet before each Board meeting and the Chairmen table at the Board meeting a report of their Committees’ proceedings. The minutes of each Committee meeting are also included in the full Board information pack.
All Committees are satisfied that in 2015 they carried out their responsibilities in compliance with their mandate and terms of reference.
The Audit Committee in 2015 was comprised of four Independent Non-executive Directors. Tak Hiemstra also served on the Committee until his resignation from the Board in October. Graham Dempster was appointed as an additional member in February 2016. The Committee’s statutory duties are set out in the Companies Act.
Both the internal and external auditors have unrestricted access to the Chairman of the Committee and it is standard operating procedure for them to meet privately with the Committee.
The Chairman of the Board, the Chief Executive, the Chief Financial Officer and the external and internal auditors attend meetings of the Committee by invitation.
A summary of the Audit Committee’s work in 2015 is published in its Report to stakeholders. Members of the Committee are:
RMW Dunne (Chairman)
Mr Dunne has been a member of the Committee since 2007 (and Chairman since 2014), Mr Nyhonyha since 2006, Mr Morgan since 2010, Mr Gomwe was appointed on 1 June 2015 and Mr Dempster was appointed on 22 February 2016.
The Risk Committee is comprised of four Independent Non-executive Directors and four Executive Committee members, including the two Executive Directors. The Committee met three times in the year.
The Risk Committee’s mandate includes reviewing and assessing risk and compliance management processes. The management of safety, health and environmental matters is part of this.
In 2015 the Committee continued to review the Group’s risk registers and oversaw the embedding of Business Continuity Management to enable a coordinated crisis management plan. Initiatives to implement better IT governance processes were a key focus in the year. The Committee also conducted a peer review of its compliance and risk management processes and practices. Members of the Committee are:
AJ Morgan (Chairman)
MA Dytor † *
KM Kathan † *
EE Ludick *
MVK Matshitse *
Mr Morgan has served as a member and Chairman of the Committee since 2010, Messrs Dytor, Kathan and Ludick and Adv Ramashia have been members since 2010, Ms Mda since 2011 and Ms Matshitse since 2012.
Social and Ethics Committee
The Social and Ethics Committee is comprised of three Independent Non-executive Directors, the Chief Executive, the Human Capital Executive and the Group Technical and Safety, Health and Environment Manager. The Chief Financial Officer attends by invitation.
In 2015 the Committee continued to focus on ensuring that AECI has robust management processes for issues pertaining to workplace transformation, Employment Equity, safety, health, the environment, and ethics-related matters. The Committee met four times in the year. Members of the Committee are:
Z Fuphe (Chairman)
GJ Cundill ∞
Ms Fuphe has been a member of the Committee since 2008 (and Chairman since 2013), Mr Morgan and Adv Ramashia have been members since 2010, Mr Cundill and Ms Matshitse since 2012 and Mr Dytor since 2013.
The Remuneration Committee is comprised of four Independent Non-executive Directors and its mandate is inter alia to ensure that the Company’s remuneration policy and practices are aligned with Group strategy and that remuneration is dependent on the achievement of performance indicators. The Committee also ensures that human capital polices are in line with best practice and are adhered to.
The Chief Executive and the Chief Financial Officer attend by invitation, when necessary, to discuss the remuneration of Executive Committee members and Senior Managers and to contribute to other discussions as warranted. No attendee participates in any discussion relating to his/her own remuneration. The Committee met six times in 2015.
A key issue that the Committee continued to engage in was the conversion of the Group’s pension funds from defined-benefit to a defined-contribution scheme, and all related decision-making was led by the specially convened sub-Committee led by the Chairman of the Remuneration Committee. The Committee also focused on approving Executive Committee members’ KPIs, the assessment of Executive Committee members’ and Senior Managers’ performance against their KPIs, and a review of short-term incentives for individuals at these levels. Members of the Committee are:
RMW Dunne (Chairman)
Mr Dunne has been a member of the Committee since 2007 (and Chairman since 2009), Mr Engelbrecht since 2009, Mr Nyhonyha since 2012 and Adv Ramashia was appointed on 1 June 2015.
The Nominations Committee is comprised of four Independent Non-executive Directors and is chaired by the Chairman of the Board. The Committee’s mandate includes reviewing the composition of the Board as well as the performance of the Board, its Committees and individual Directors, the appointment and reappointment of Executive Directors, and succession planning, particularly for the Chairman and the Chief Executive. The Committee met four times in 2015.
The Committee identified new Independent Non-executive Directors for appointment. Accordingly Graham Dempster and Khotso Mokhele were appointed, both after the year-end. Members
of the Committee are:
S Engelbrecht (Chairman)
Mr Engelbrecht has been a member of the Committee since 2009 (and Chairman since 2012), Mr Dunne since 2007, Mr Nyhonyha since 2012 and Adv Ramashia was appointed on 1 June 2015.
The Board has delegated the day-to-day running of the Company to the Chief Executive who works with an Executive Committee to assist him in this task. The Executive Committee is the highest executive decision-making structure in the Group and central to its role is the formulation and implementation of the Group’s strategy and policy direction, and ensuring that all business activities are aligned in this respect.
Group businesses operate in a decentralised framework, defined internally as “freedom supported by a framework”. The framework is established for the Group by the parent company and addresses policies, standards and processes in the areas of legal compliance and governance, financial control and risk management, strategic direction and remit, and safety, health and the environment. Within this framework, businesses pursue their individual INNOVATIVE product and service offerings. Most Group businesses have their own Boards and management structures and decision-making is in line with the provisions of the Group’s Delegation of Authority which was reviewed and approved in 2014.
Group Company Secretary
The Group Company Secretary oversees the portfolio of secretariat, legal services, risk and compliance management, and attends all Board and Committee meetings as secretary.
The Board as a whole and individual Directors have access to the Group Company Secretary who provides guidance on how they should discharge their duties and responsibilities in the best interests of the Company. In 2015 the Group Company Secretary oversaw the ongoing education and training of the Company’s Directors through the inclusion of topical papers, articles and opinions in their information packs and continued to assist the Board and its Committees in preparing annual plans, agendas, minutes, and terms of reference as warranted.
In line with the JSE Listings Requirements the Board, through its Nominations Committee, undertook the annual performance appraisal of the Group Company Secretary. The assessment reviewed the performance of the incumbent, taking into account the quality of support received and guidance provided to the Board and management during the year. All parties were satisfied with the quality of support received as well as the competency and experience demonstrated by the incumbent. An abridged biography of the Group Company Secretary is available via this link.
The Group Company Secretary is not a Director of the Company or any of its subsidiaries and, accordingly, maintains an arm’s length relationship with the Board and its Directors.