Corporate governance
Introduction
Corporate governance is defined as the system by which Buildmax is directed and controlled. Good corporate governance practice facilitates the achievement of the
group’s business objectives through the actions of the directors and staff.
The group holds itself accountable to shareholders for its performance. The company seeks to enhance the accuracy, completeness and reliability of the information provided in its annual financial and non-financial reporting through the maintenance of adequate internal controls and the performance of independent audits.
Buildmax recognises the following four areas of responsibility:
• To shareholders
To protect shareholders’ investments, provide acceptable financial returns and growth to the shareholders.
• To customers
To win and maintain customers by developing and providing products and services which offer value in terms of price, quality, safety and technology.
• To employees
– To respect the rights of its employees and provide them with safe conditions of work.
– To remunerate its employees on competitive terms.
– To promote the development and best use of human talent and provide equal opportunity employment.
– To further encourage the involvement of employees in the planning and direction of their work, and in the application of these principles within the group.
• To society and the environment
To conduct business as responsible corporate members
of society and to observe the laws of the countries in which we operate.
The following basic business principles are applied in the Buildmax group:
• Economic principles
Sustained profitability is essential in order to uphold our responsibilities to our stakeholders and to stay in business. It is a measure of both the efficiency and the value that customers place on Buildmax’s products and services. Profitability is essential to the allocation of the appropriate corporate resources and to support the continuing investment required by the group. Without profits and a strong financial foundation the group would not be able to fulfill the responsibilities outlined above.
• Business integrity
We insist on honesty, integrity and fairness in all aspects of our business and expect the same in our relationship with our customers and all other business partners. The direct or indirect offer, payment, soliciting and acceptance of bribes in any form are unacceptable practices. Employees should not engage in conflicts of interest between their private financial activities and the conduct of the group’s business. All business transactions on behalf of a Buildmax company must be reflected accurately and fairly in the accounts of the group in accordance with established procedures and subject to audit processes. All areas of concern must be openly discussed and dealt with to avoid unhappiness and perceived inequities.
• Political activities
– of companies
The group act in a socially responsible manner within the laws of the country in pursuit of their legitimate commercial objectives. Buildmax do not make payments to political parties, organisations or their representatives or take part in party politics.
– of employees
Where individuals wish to engage in activities in the community, including standing for election to public office, they will be given the opportunity to do so where this is appropriate in light of local circumstances and on condition that it does not interfere with their daily duties and obligations to the company.
• Health, safety and environment
Consistent with the commitment to contribute to sustainable development, Buildmax have a systematic approach to health, safety and environmental management in order to achieve continuous performance improvement. To this end Buildmax manage these matters as any other critical
business activity, sets targets for improvement and measures, appraises and reports performance.
• Competition
Buildmax support free enterprise. The group seeks to compete aggressively but fairly and ethically and within the framework of applicable competition laws.
Assurance
• External audit
The group’s financial reporting and the internal controls over financial reporting and processes are audited and assessed by an external auditor which is appointed at the annual general meeting. The auditor acts in the interest of all shareholders and reports any significant findings regarding accounting matters and any significant internal control deficiencies via the Audit Committee to the Board.
As part of the group’s commitment to financial, environmental and social responsibility Buildmax presents its first integrated annual report. This report meets application level C of the international GRI G3 guidelines. External assurance has not been obtained. Compliance to the various requirements of the GRI has been disclosed on pages 87 to 90 of this report.
• Internal audit
The group’s internal audit function is independently managed by KPMG. The internal audit function provided independent and objective assurance regarding internal control over financial processes and business ethics during the financial year. To ensure that the function works independently of management its audit plan and budget are approved by the Audit Committee.
• Internal control
Buildmax’s risk management and internal controls in relation to financial processes are designed with the purpose of effectively controlling the risk of material misstatements.
Board of Directors
Role and responsibilities of the Board
A formal Charter sets out the Board’s composition, processes and responsibilities and is subject to regular review in order to reflect the company’s Memorandum of Incorporation and comply with current legislation such as the South African Companies Act, the JSE Listings Requirements and the King III Report. The directors are challenged to balance broader social objectives with the group’s performance by utilising the “triple-bottom-line” governance principles and reporting procedures against the backdrop of an entrepreneurial economy.
The Board of Directors of Buildmax is committed to applying the sound corporate governance principles as set out in the King III Report. This process will be continually monitored to ensure ongoing compliance in this regard.
The performance and affairs of the group remain the responsibility and accountability of the Board of Directors.
It is the Board’s primary role to protect and enhance long-term shareholder value. To fulfil this role, the Board is responsible for the overall financial performance and corporate governance in the group, including amongst its other functions to assist in formulating the group’s strategic direction, setting remuneration policies and approving the appointment of senior management, establishing goals for management and monitoring the achievement of these goals, approving and monitoring capital expenditure, and ensuring the integrity of internal control and management information systems.
Delegating authority in respect of these functions to Board committees or senior management does not in any way absolve the Board of its duties and responsibilities. The Board exercises its leadership with integrity and sound judgement, which is based on principles of fairness, accountability and responsibility. In essence, it subscribes to a policy of actively reviewing the group’s internal systems of control within set risk parameters in accordance with South African and international best practice.
In the process of determining and setting group strategy, the Board and senior management agreed a shared vision of what the group is trying to achieve, as well as an understanding of what is required in order to achieve this ambition. Internally, the strategy has been communicated to various employee groups in each operating entity and externally the strategy is communicated to major shareholders via one-on-one meetings.
There is a clear division between the roles of the Chairman and the CEO.
The Chairman of the Board provides leadership and oversees the effective functioning of the Board. The CEO is responsible for formulating, implementing and maintaining the strategic direction of the group and ensures that the day-to-day affairs of the group are appropriately managed.
The Board’s performance is evaluated through a self-evaluation process. Any significant shortcomings that are identified during this process are actioned by the members of the Board on an ongoing basis.
Although no formal assessment of the directors’ independence was conducted during the year, the Board is satisfied that all independent non-executive directors meet the requirements of independence in terms of the King III Report.
Board processes
The Board meets quarterly with additional meetings as deemed necessary and also communicates regularly between meetings to discuss significant matters. The meetings follow a formal agenda to ensure that all important and material matters are addressed. The directors are briefed timeously and comprehensively in advance of these meetings, and are supplied with sufficient information to enable them to make informed and reasonable decisions in discharging their responsibilities.
The non-executive directors may accept other Board appointments, provided that these do not impact on the members’ ability to discharge their responsibilities to the company and all its stakeholders.
The Board has applied their minds in terms of King III and has adopted the principles and recommendation they deem applicable to Buildmax.
Board composition
At year-end the unitary Board of nine directors consisted of two executive directors and seven non-executive directors, of which three are considered as independent.
During the year, and in line with the requirements of King III, Colin Wood was appointed as independent non-executive Chairman of the Board and Terry Bantock assumed the position of CEO. Subsequent to Mr Wood’s appointment, he resigned from his position as Chairman of the Buildmax
Remco and independent non-executive director, Colin Brayshaw, was appointed as Chairman of the Remco.
The following Board members resigned during and post
year-end:
| Herman Fourie | 2 August 2010 |
| Paul de Klerk | 2 August 2010 |
| Mark Matisonn | 24 November 2010 |
| Raymond Munitz | 24 November 2010 |
| Anil Maharaj | 16 May 2011 |
Malcolm McCulloch and Graeme Montgomery were appointed as non-executive directors on 12 January 2011 and 1 June 2011 respectively.
Table indicating directors’ attendance at Board meetings:
Years of |
11 Mar |
6 April |
3 May |
20 May |
23 Jun |
15 Jul |
22 Sep |
4 Nov |
15 Nov |
|
Executive directors |
||||||||||
TP Bantock |
1,5 |
Yes |
Yes |
Yes |
Yes |
Yes |
Yes |
Yes |
Yes |
Yes |
PJ de Klerk (2) |
2,5 |
Yes |
Yes |
Yes |
Yes |
Yes |
Yes |
N/A |
N/A |
N/A |
CS Els (1) |
1,5 |
N/A |
Yes |
Yes |
Yes |
Yes |
Yes |
Yes |
Yes |
Yes |
HP Fourie (2) |
2,5 |
Yes |
Yes |
Yes |
Yes |
A |
Yes |
N/A |
N/A |
N/A |
|
||||||||||
Non-executive directors |
||||||||||
CJM Wood (Chairman)* |
3,5 |
Yes |
Yes |
Yes |
Yes |
Yes |
Yes |
A |
Yes |
Yes |
CB Brayshaw* |
3,5 |
Yes |
Yes |
Yes |
Yes |
Yes |
Yes |
Yes |
Yes |
Yes |
MD Lamola* |
8 |
Yes |
Yes |
Yes |
Yes |
A |
Yes |
Yes |
Yes |
Yes |
DJ Mack |
3 |
Yes |
Yes |
Yes |
Yes |
Yes |
Yes |
Yes |
Yes |
Yes |
A Maharaj |
3 |
Yes |
Yes |
Yes |
Yes |
Yes |
Yes |
Yes |
Yes |
Yes |
M Matisonn (3) |
2,5 |
Yes |
Yes |
Yes |
Yes |
Yes |
Yes |
Yes |
Yes |
Yes |
R Munitz (3) |
2,5 |
Yes |
Yes |
Yes |
Yes |
Yes |
Yes |
Yes |
Yes |
A |
BT Ngcuka |
3,5 |
Yes |
A |
Yes |
Yes |
Yes |
Yes |
A |
A |
Yes |
Legend:
* Independent
A Apologies
1 Appointed 1 April 2010
2 Resigned 2 August 2010
3 Resigned 24 November 2010
In line with the group’s Memorandum of Incorporation, a third of directors as well as any newly appointed directors should retire by rotation every year. Accordingly, CB Brayshaw,
DJ Mack, BT Ngcuka, MW McCulloch, G Montgomery will retire at the next annual general meeting and, being eligible, all stand for re-election.
At the end of the financial year, three of the nine Board members were historically disadvantaged South Africans.
Conflict of interest
Buildmax’s directors are required to fully disclose their shareholdings, additional directorships and any other potential conflict of personal interest.
Director dealings in company shares
Directors are compelled to report dealings in securities of the company to the Chairman, Company Secretary and sponsor for approval. Dealings by the Chairman are authorised by the Board. The Company Secretary and the sponsor ensure that these dealings are published on SENS. The group has a formal policy restricting share dealings by directors and other officers with access to price-sensitive information. Trade in securities of the company is prohibited during “closed periods” prior to the announcement of interim and annual results or while the company is trading under a cautionary or during any other period considered price-sensitive.
Independent professional advice and access to company information
Each director has the right of access to all relevant company information and to the company’s senior management.
All executive and non-executive directors have access to advice from independent professional advisers at the expense of the company.
Non-executive directors’ (including independent non-executive Chairman ) remuneration
The Board applies principles of good corporate governance relating to non-executive directors’ remuneration and also keeps abreast of changing trends. Governance of directors’ remuneration is undertaken by the Buildmax Remco.
Non-executive directors are appointed to the Buildmax Board based on their ability to contribute, competence, insight and experience appropriate to assisting the group to achieve its objectives.
Non-executive directors receive remuneration for services on the Buildmax Limited Board and Board committees.
Buildmax’s non-executive directors do not receive short-term or long-term cash or share-based incentives recognising that this can create potential conflicts of interest which can impair the independence which non-executive directors are expected to bring to bear in decision-making by the Board.
No arrangement exists for emoluments in respect of loss
of office.
Proposals for remuneration are prepared by management, for consideration by the Buildmax Remco and the Buildmax Board. Consideration is given to the increased responsibility placed on non-executive directors due to burdensome legal and regulatory requirements and the commensurate risk assumed. Benchmarking information of companies of similar size and complexity and the projected inflation rate over the period are factors considered when reviewing the annual remuneration.
Buildmax’s policy on remuneration for non-executive directors is that this should be:
• market-related (having regard to the factors listed above plus the number of meetings attended by non-executive directors of companies of similar size and structure and operating in similar sectors); and
• not linked to share price or Buildmax’s performance.
Buildmax pays for all travel and accommodation expenses incurred by directors to attend Board and committee meetings as well as visits to company sites and businesses.
The annual remuneration payable to the Chairman and non-executive directors are submitted for approval by the company’s shareholders at the annual general meeting.
The table below summarises the remuneration payable to Buildmax Limited’s non-executive directors for the 2011 financial year, which was approved by shareholders at the
annual general meeting held on 24 November 2010. Proposals for the remuneration for the 2012 financial year will be submitted to the Buildmax Remco and Board for approval in due course. Once approved by the company the proposed 2012 remuneration will be submitted for shareholder approval at the company’s upcoming annual general meeting in November 2011.
| Remuneration paid to Buildmax Limited non-executive directors for the 2011 financial year | |
Chairmanship of the Board |
R280 000 |
Chairmanship of the Audit and Risk Committee |
R126 000 |
Chairmanship of the Remuneration Committee |
R70 000 |
Non executive director fees |
R140 000 |
Non executive members of the Audit and Risk Committee |
R63 000 |
Non executive members of the Remuneration Committee |
R35 000 |
Non executive members of the Transformation Committee |
R35 000 |
Director induction and training
Although no formal induction and training programmes exist, the group provides information to the directors about the nature of the business, corporate strategy, business challenges, opportunities and other important issues. Directors also have the opportunity to visit group subsidiaries and meet with the operational management to gain a better understanding of the operations.
Board Committees
Certain of the Board’s functions have been delegated to sub-committees which operate according to charters approved by the Board. These committees do not diminish the accountability of the Board. The members of these committees are elected by the Board.
• Nomination Committee
Although King III recommends that the company should have a Nomination Committee, the Board has not established such a committee as the Board considers that, to date, a separately established committee was not warranted and its functions and responsibilities were adequately and efficiently discharged by the Board.
Appointments to the Board are made in a formal and transparent manner and are a matter for the Board as
a whole.
The Board assesses the experience, knowledge and expertise of potential directors before any appointment is made and adheres to the principle of establishing a Board comprising directors with a blend of skills, experience and attributes appropriate to the company and its subsidiaries. The Board will continue to review the requirement for a Nomination Committee and one will be established if deemed appropriate and necessary by the Board.
• Audit and Risk Management Committee
The Audit Committee fulfils a vital role in effective corporate governance. In the King III Report, the responsibilities of the Audit Committee were extended beyond financial reporting to include sustainability reporting.
In accordance with the most recent legislative requirements the committee comprises only independent non-executive directors, namely Committee Chairman CB Brayshaw, a chartered accountant, MD Lamola, a previous lecturer at Unisa in corporate governance, and CJM Wood, a chartered accountant. The company’s CEO, CFO and other members of Exco, the Company Secretary, auditors and other non-executive directors may attend meetings by invitation.
The committee regularly meets with the group’s external auditors and executive management to review accounting, auditing, financial reporting, risk management and internal control matters.
Each committee member has the right of access to all relevant company information and to the company’s senior management.
The committee also has the opportunity to meet with the group’s external auditors without management, as and when it deems fit.
All committee members have the right to access advice from independent professional advisers at the expense of the company.
As required by its terms of reference the committee met three times during the year to coincide with key dates within the financial reporting and auditing cycle, with attendance at these meetings set out below:
18 May |
15 Nov |
3 May |
|
CB Brayshaw |
Yes |
Yes |
Yes |
MD Lamola |
Yes |
Yes |
Yes |
CJM Wood |
Yes |
Yes |
A |
Legend:
A Apologies
Audit Committee report
The committee has adopted formal terms of reference set out in a Charter that has been approved by the Board.
The Audit Committee report for the 2011 financial year
is presented on page 26.
Internal controls and risk management
The Board is tasked with the responsibility of managing the group’s systems of internal control and risk to sustain a practical and effective internal control environment. While complying with applicable laws and regulations these systems of internal control and frameworks ensure reasonable but not absolute assurance regarding the safeguarding of assets, the maintenance of proper accounting records, the integrity and reliability of financial information and the minimisation of significant fraud, potential liabilities, loss and material misstatement. The system is therefore designed to manage rather than eliminate risk. In addition, it enables the Board to ensure business sustainability under normal and adverse operating conditions, and responsible behaviour towards all stakeholders.
The Board has implemented a reporting structure, as detailed below, to review all aspects of internal control and will continue to develop the process:
Risk profile – Although risk management remains a central function of the group’s operational strategy a separate Risk Management Committee has not been established. The Board is assisted in executing its responsibility by the Audit Committee.
During the period under review the Audit Committee appointed KPMG to assist the group through an independently managed, formal and structured approach in identifying risk, measuring its potential impact against a broad set of assumptions and initiating mitigating activities to reduce the calculated exposures to acceptable levels. These identified risks and their respective mitigating actions have been tabled and presented to the Board. While it is the responsibility of the Board to determine the group’s levels of risk tolerance and assess its effectiveness, management is accountable to the Board for implementing and integrating these processes into the daily operations of the group.
Amongst others, the five most important risks to the group include:
• Availability of bank funding for new and second-hand mining equipment;
• Impact of inclement weather on the group’s operations;
• Dilution in the group BEE shareholding, subsequent to the successful implementation of the rights issue;
• Industrial action by organized labour; and
• Non-compliance to SHECQ legislation.
The Board implemented an “Authorities Framework Policy” to ensure:
• Capital expenditure and revenue commitments above certain limits require prior Board approval;
• All types of financial exposures (including forward exchange contracts and derivatives) are controlled;
• Business transactions are properly authorised and executed; and
• Financial reporting accuracy and compliance with all applicable regulatory frameworks.
Compliance Hotline – During the period under review the group implemented a Compliance Hotline. Concerns of possible business ethical misconduct and financial fraud may be raised anonymously by employees and other stakeholders through the compliance hotline. The compliance hotline is independently managed by a consultant and all complaints are forwarded directly to the CEO for investigation and follow-up. The compliance hotline is manned 24/7 and available in all the official South African languages.
Environmental regulation – Buildmax is committed to achieving a high standard of environmental performance.
The group’s operations in the Open Cast Mining Services
and Quarrying businesses are subject to significant environmental legislation. In the group’s Open Cast Mining services operations the level of compliance with the applicable environmental legislation are guided by the individual customer contracts. The group’s quarries are situated in the Gauteng and Bronkhorstspruit areas. Management has an EMP in place for each exploration and mining right. The Board believes that the group has adequate systems in place for the management of its environmental requirements and is not aware of any breach of those environmental requirements as they apply to the group.
Internal audit – During the period under review the group established a formal internal audit function. The internal audit function has been outsourced to KPMG and reports directly to the CFO and the Audit Committee. The Audit Committee approved the Internal Audit plan and budget
for the 2011 financial year.
IT governance –The Board is responsible for IT governance as an integral part of the group’s corporate governance. With the assistance of the group’s Exco, the existing IT and communication systems and processes are being reviewed and improved to assist the various operating entities in achieving the group’s strategy and objectives. The Board, through the group’s Exco, continues to liaise closely with IT management to ensure a seamless fusion of IT functioning and overall business strategy.
Code of Conduct – Although the group has not yet implemented a formal code, several initiatives have been undertaken by management during the year to ensure that a culture of good corporate governance is instilled in
all employees.
• Remuneration Committee
The Remuneration Committee is appointed by the Board to assist it to discharge its responsibilities in relation to the group’s remuneration policy and to determine the remuneration of non-executive directors, executive directors and senior executives.
The Remuneration Committee comprises independent non-executive directors CB Brayshaw and CJM Wood and is chaired by Mr Brayshaw.
The committee met as indicated below to discharge its responsibilities:
15 Feb |
14 Mar |
|
CB Brayshaw (Committee Chairman ) |
Yes |
Yes |
CJM Wood |
Yes |
Yes |
The main responsibilities of the Remuneration Committee are to:
• develop a remuneration strategy which will attract, retain and motivate talented employees;
• determine on behalf of the Board the overall policy for executive remuneration (including non-executive directors);
• determine the base salary, benefits, performance-related bonuses and any future equity participation schemes for each of the two executive directors and senior management of the group; and
• to approve all directors’ service contracts.
In discharging its responsibilities the committee ensures that a significant proportion of the two executive directors and senior management’s remuneration is directly related to the financial performance of the group.
No director or senior manager is involved in deciding their own remuneration and the committee may, if considered necessary, take independent advice at the expense of the company.
King III recommends disclosure of the remuneration of each individual director as well as the three most highly paid employees in the group. The remuneration paid to directors for the 2011 financial year is detailed on page 44 of this report. The annual remuneration of the group’s key executives (including the Executive Directors) are disclosed in note 42 to the annual financial statements.
The company engaged a firm of independent consultants to undertake a remuneration benchmarking exercise during
the 2012 financial year, in order to assess the current levels of remuneration for its most senior employees.
• Executive Committee
The group’s Exco was formed to ensure cohesive execution of the group’s strategy. The committee is also responsible for the day-to-day management of the different operating entities in the group’s three business units. The committee meets at least once a month under normal circumstances and consists of:
• Terry Bantock (CEO);
• Christie Els (CFO);
• Thandeka Mgoduso (Group Human Resources and Strategic Transformation Director);
• Kobus van Biljon (CEO Mining Services);
• Herman Fourie (CFO and Commercial Director of Mining Services);
• Warren Phillips (Managing Director of Manufacturing);
• Paul de Klerk (Managing Director of Retail Business Unit);
• Stephen Lambert (Technical Director of Mining Services); and
• Geoff Jordaan (Managing Director of Aggregates & Quarries).
Board expertise
The directors of the company’s Board have a range of financial, technical and commercial skills necessary to provide expert guidance to the development of the group’s business strategies and policies and to undertake independent judgement of the company’s performance.
Board communication with shareholders
There are a number of formal mechanisms in place that enables regular communication between the Board and the company’s shareholders. These include, but are not limited to, one-on-one meetings with major shareholders, investor presentations, announcements through the JSE’s Securities Exchange News Services, publication of interim and year-end results, the group’s website, annual reports and the annual general meeting where shareholders can attend and participate in discussions and vote on resolutions or use proxy forms to exercise their votes should they not be able to attend in person.
Company Secretary
The Company Secretary is Probity Business Services (Pty) Limited, an independent company secretarial practice providing services to a number of JSE listed and privately held companies.
The secretary administers and records all meetings and deliberations of the Board and its sub-committees and ensures that the Board charter and the relevant charters of the Board sub-committees are kept up to date and relevant.
The Company Secretary must be available to assist the Chairman and other Board members whenever necessary.
Stakeholder communication
The group is committed to timely, consistent and transparent communication with all stakeholders and an open culture of communication is encouraged. Regular and open engagement with all stakeholders promotes trust between the company and its partners. Recognising and responding appropriately to the concerns of key stakeholders remains fundamental to the success of the Buildmax group.
Through a formal process, facilitated by the CSIR the group identified its key direct and indirect stakeholders.
Stakeholder engagement matrix for the year ended 28 February 2011:
Stakeholder |
Methods of engagement |
Frequency of engagement |
Key topics and concerns raised at engagements |
Employees |
Results presentation |
Six monthly |
Training |
Meetings |
As required |
Career development |
|
As required |
Remuneration |
||
Other ad-hoc presentations |
As required |
||
National and Regional Government, Department of Mineral Resources |
Annual returns and other submissions |
As required |
BBBEE status. Rehabilitation guarantees. Health and Safety. Quarry development. Water management. Operator training. ABET and Learner ship programmes. Mentorship programme. Social Upliftment and Enterprise development. Performance statistics. Action plans are agreed with the DMR and reported on monthly. |
Progress reports |
As required |
||
Major contractors, suppliers, service providers and other business partners |
Meetings |
As required |
Service level agreements, concerns and improvements. |
Customers |
Meetings |
Monthly |
Service levels agreement, product quality, new products lines, production targets and methods, innovations. Rate negotiations and results presentation yearly. |
Site visits |
As required |
||
Local communities |
Involvement in social upliftment programmes. Management is pursuing selected procurement in terms of each operation’s geographical area. |
||
Shareholders and other financiers |
Annual General Meeting |
Annual |
Group strategy, business risks, opportunities, prospects and financial results |
Annual report |
Annual |
||
Annual and interim results announcements |
Bi-annual |
||
Announcements on SENS |
As required |
||
Presentations |
As required |
||
One-on-one meetings |
As required |
||
Website |
As required |
||
Site visits |
As required |
||
Media releases |
As required |
