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Corporate governance report |
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Sibani Mngomezulu Group executive: Governance and Corporate Affairs |
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The group subscribes to high ethical standards and principles of outstanding corporate governance. This has been a defining feature of the business since the company’s foundation in 1902. |
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The company’s corporate governance system is a cornerstone of the company’s primary objective to create value for all its stakeholders. |
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Regulatory compliance |
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Barloworld is incorporated in South Africa under the provisions of the Companies Act, 1973, as amended (Companies Act). The company is listed on the JSE Limited, and applies the principles contained in the Code of Corporate Practices and Conduct recommended by the King II Report on Corporate Governance for South Africa. The board of directors (the board) is of the opinion that the company complies with the Listings Requirements of the JSE Limited.
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The company maintains a secondary listing on the London Stock Exchange and the Namibia Stock Exchange. In the 2007 financial year it was reported that the board had approved delisting from the Swiss Stock Exchange, Frankfurt Stock Exchange and Euronext Brussels. The listings on the Swiss and Frankfurt stock exchanges were terminated during March and April 2008 respectively. The listing on Euronext Brussels was terminated in December 2007 and the International Depository Receipt holders were given a year to convert to scrip or receive cash; the year expires in December 2008. |
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Barloworld is not registered with the Securities and Exchange Commission in the United States and has unsponsored American Depository Receipts. Accordingly, the Sarbanes-Oxley Act of 2002 does not apply to the company. |
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The board places strong emphasis on achieving the highest standards of financial management, accounting and reporting. |
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The financial statements are prepared in accordance with International Financial Reporting Standards. Regarding non-financial aspects, the company has adopted the Global Reporting Initiative’s (GRI) Sustainability Reporting guidelines on economic, environmental and social performance. |
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The company’s corporate governance systems are designed to exceed minimum compliance levels and continue to evolve to meet the expectations of stakeholders. |
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Award winning reporting |
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Our 2007 annual report was ranked winner in the Top 40 category of the SA Annual Reports Awards sponsored by the JSE Limited and the SA Institute of Chartered Secretaries and Administrators and ranked second for the second consecutive year in the Ernst & Young Excellence in Corporate Reporting award. |
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In the year under review: |
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- The board was downsized to effectively meet the requirements of the restructured group;
- The board committees have been strengthened with additional appointments;
- An additional independent non-executive director was appointed; and
- An executive responsible for stakeholder engagement and the group’s transformation initiatives was appointed.
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Board and directors |
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Board structure and responsibilities |
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The company has a unitary board with nine non-executive directors and five executive directors. Eight of the non-executive directors are independent. The board provides strategic direction and implements policies designed to enhance value for all stakeholders and ensure a sustainable business. |
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Board composition |
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The company is led and controlled by the board of directors. Considerable thought is given to board balance and composition and collectively the board believes that the current mix of knowledge, skill and experience meets the requirements to lead the company effectively. The Barloworld board comprises a majority of independent non-executive directors. The non-executive directors contribute international, local and operational experience. |
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Appointments to the board |
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To ensure a rigorous and transparent procedure any new appointment of a director is considered by the board as a whole, on the recommendation of the nomination committee. The selection process involves consideration of the existing balance of skills and experience and a continuous process of assessing the needs of the company. |
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Non-executive directors are required to devote sufficient time to the company’s affairs. While there is no formal limitation on the number of other appointments directors can hold, approval from the chairman must be obtained prior to acceptance of additional commitments that may affect the time that they can devote to the company. Non-executive directors are required to advise the board of any subsequent changes to or additional commitments from time to time as approved by the chairman. |
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Executive directors may accept appointments to the board of other companies and barring exceptional circumstances, the appointment is limited to one. |
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The board and the board committees |
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Empower-
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Risk and |
ment and
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Year
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General
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Nomi-
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Remun-
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sustain-
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trans-
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appointed
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Age
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Audit
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purposes
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nation
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eration
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ability
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formation
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Non-executive directors |
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| DB Ntsebeza |
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| (Chairman) |
1999 |
58 |
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Chairman |
Chairman |
Member |
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Member |
| SAM Baqwa |
2005 |
57 |
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Member |
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Member |
| AGK Hamilton |
2007 |
63 |
Chairman |
Member |
Member |
Member |
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| MJ Levett |
1985 |
69 |
Member |
Member |
Member |
Member |
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Member |
| SS Mkhabela |
2006 |
52 |
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Member |
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Member |
| SS Ntsaluba |
2008 |
48 |
Member |
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| TH Nyasulu |
2007 |
54 |
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| SB Pfeiffer |
2001 |
61 |
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Member |
Member |
Chairman |
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| G Rodriguez de Castro |
2004 |
66 |
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Executive directors |
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| CB Thomson |
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| (Chief executive officer) |
2003 |
42 |
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Member |
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Member |
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| PJ Blackbeard |
2004 |
51 |
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Member |
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| M Laubscher |
2005 |
48 |
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Member |
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| OI Shongwe |
2007 |
46 |
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Member |
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| PM Surgey |
1995 |
53 |
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Member |
Chairman |
| DG Wilson |
2006 |
51 |
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Chairman |
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A summary of their biographical details is shown in the Board of directors click here to view. |
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Mr Sango Ntsaluba was appointed to the board on 28 July 2008 as an independent non-executive director. Mr Ntsaluba is also a member of the audit committee. |
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Independence of non-executive directors |
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The board considers eight of the nine current non-executive directors to be independent in terms of the King II definition and the guidelines outlined in the JSE Listings Requirements. The board decided in October 2008, following a review by the nomination committee, that it was no longer appropriate to classify Ms Hixonia Nyasulu as independent in view of the participation of Ayavuna Women’s Investments (a consortium led by Ms Nyasulu), as a strategic partner on the company’s recently concluded black ownership initiative, that resulted in approximately 10% of the company’s equity being subscribed for and issued to black partners. |
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Messrs Selby Baqwa and Dumisa Ntsebeza and Ms Bongi Mkhabela are participants on the black ownership initiative as beneficiaries of a trust to which Barloworld has made a capital contribution. The nomination committee considered the independence of the abovementioned directors taking into account a number of factors including level of participation on the black ownership initiative, King II requirements and the opinion of advisors. The committee found that the independence of the abovementioned three directors could not be said to have been impaired and accordingly recommended to the board that they continue to be classified as independent. The directors concerned and the board considered the matter and agreed that Messrs Baqwa and Ntsebeza, and Ms Mkhabela remain independent. |
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The board believes that as long as non-executive directors remain independent of management and are of the right calibre and integrity, they can perform the required function of looking after the company’s interests. |
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Mr Steve Pfeiffer is considered as independent notwithstanding the fact that he is a partner of a law firm in the United States that provides advice to the company from time to time. After due consideration, the board has concluded that the extent of the services provided by Mr Pfeiffer to the company is not material. Mr Pfeiffer’s law firm has confirmed that fees received from the company for services rendered are not material. Upon evaluation of all relevant factors, the board considers Mr Pfeiffer to be independent. |
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The nomination committee reviews regularly the independent status of all non-executive directors. |
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Retirement of directors |
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Executive directors, in accordance with the articles of association of the company, retire from the board at 63 years of age whilst non-executive directors by convention retire at the annual general meeting immediately following the director’s 70th birthday. |
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Mr André Lamprecht retired from the board following the unbundling of the Coatings division in December 2007. Mr Brandon Diamond retired from the board at the end of December 2007 and Messrs Trevor Munday and Robert Tomkinson retired in January 2008. Mr Mike Levett has indicated that he intends to retire following the annual general meeting in January 2009. |
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Mr Peter Surgey retired from the board on 30 September 2008 after having led the restructuring of the Corporate Office and implementation of Barloworld Limited black ownership initiative. |
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In terms of the company’s articles of association, at every annual general meeting, at least one-third of the directors retire from the board. According to the Companies Act, a director appointed by the board to fill a vacant seat must retire from that office at the next annual general meeting. Directors retiring in this manner may offer themselves for re-election, subject to recommendation by the nomination committee. |
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Chairman and chief executive officer |
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No individual has unfettered powers of decision-making. Responsibility for running the board and executive responsibility for conduct of the business are differentiated. Accordingly, the roles of the chairman of the board and of the chief executive officer are separate. |
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The chairman is responsible for leadership of the board, ensuring its effectiveness on all aspects of its role and setting its agenda. The chairman is also responsible for ensuring that the directors receive accurate, timely and clear information. The chairman also ensures effective communication with shareholders and facilitates the effective contribution of non-executive directors in particular and ensures constructive relations between executive and non-executive directors. |
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The chief executive provides leadership to the executive team in running the business and co-ordinates proposals developed by the executive committee for consideration by the board. |
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Board charter |
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The general powers of the directors are set out in the company’s articles of association. They have further unspecified powers and authority in respect of matters which may be exercised and dealt with by the company, which are not expressly reserved to the members of the company in general meeting. The main responsibilities of the board as set out in the board charter are as follows: |
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- Approval of the strategic plan and the annual business plan, the setting of objectives and the review of key risks and performance areas;
- Monitoring the implementation of board plans and strategies against a background of economic, environmental and social issues relevant to the company and international political and economic conditions, as well as the mitigation of risks by management;
- Appointment of the chief executive officer and maintenance of a succession plan;
- Appointment of directors, subject to election by the members in general meeting; and
- Determination of overall policies and processes to ensure the integrity of the company’s management of risk and internal control.
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The charter expresses the board’s philosophy regarding customer satisfaction, quality and safety of products and services; optimising the use of assets and maximising employees’ productivity; respect for human dignity and observance of fundamental human rights; national and international corporate citizenship, including sound relationships with regulatory authorities. |
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Whilst retaining overall accountability and subject to matters reserved to itself, the board has delegated to the chief executive officer and other executive directors authority to run the day-to-day affairs of the company. |
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Strategy |
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The board, on the advice and recommendation of the executive committee, is responsible to the shareholders and other stakeholders for setting the strategic direction of the company. The strategic actions that were announced in January 2007 have been successfully completed on schedule. |
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Senior management of the divisions are periodically given the opportunity to present their business unit’s strategy to the board where a significant transaction will be proposed. Annually, the board considers a forward looking strategic plan presented by the heads of the divisions. The strategic plan is debated by the executive committee before being consolidated and presented to the board following a review of each division’s internal strategic plans. |
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Board meetings |
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Board meetings are convened by formal notice incorporating a detailed agenda together with relevant written proposals and reports. Information is distributed in a timely manner prior to board meetings, to facilitate adequate preparation for thorough discussion at these meetings. A number of decisions were taken between board meetings by written resolution in accordance with the company’s articles of association. |
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Where directors are travelling in countries other than where a meeting is held and are not able to attend in person, video and tele-conferencing facilities allow them to participate in the debate and conclusions reached or resolutions taken. |
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