Investors

Investors / Governance

Compliance with King IV on corporate governance


AR Resized Banner

During 2017, the company was compliant in all material respects with the requirements of the Companies Act No. 71 of 2008, the Companies Act Regulations and the Listings Requirements of the JSE Limited.

The checklist below is a broad summary of how the principles of King IV have been applied. The full governance report is contained in the annual integrated report of the company. The report covers the following corporate governance outcomes:

  • Ethical culture
  • Good performance
  • Effective control
  • Legitimacy

Governance outcome: Ethical culture

Ethical leadership

The governing body should lead ethically and effectively. The chairman of the Board is tasked to monitor the actions and performance of the members of the Board as part of his duties and to hold them to the highest ethical standards. The directors on the Board also hold one another accountable for decision-making and for acting in a way that displays the ethical characteristics of integrity, competence, responsibility, accountability, fairness and transparency. On appointment, individual directors are contractually placed under the obligation to comply with the ethical standards of the Board.

The social and ethics committee of the Board, annually review the Group’s code of ethics and all directors declare their personal interests annually. In addition, interests which may be apparent at the commencement of meetings are declared at the onset of these meetings.

The Board and its committees continually demonstrate ethical and effective leadership and promote the group’s values, culture and business behaviours.

Organisation values, ethics and culture

The governing body should govern the ethics of the organisation in a way that supports the establishment of an ethical culture. As stated above, PPC has a group code of ethics which incorporates a Business Ethics and Standard of Conduct which is applicable to employees in the group.

The Board has mandated the social, ethics and transformation committee to oversee the establishment and monitoring of the code of ethics and to promote high ethical behaviour. The Board is supported by the group company secretary, who acts as the formal custodian of the group’s code of ethics.

The Group’s philosophy is underpinned by the belief in the following values and principles:

  • We always do the right thing
  • We hold each other accountable and always act with integrity.
  • Excellence in all we do
  • We strive for excellence in all we do.
  • Our people, our strength
  • We value all our people and recognise that each one of us is essential to our success.
  • Passion
  • We inspire each other with our positive attitude and energy as we strive to be the best.
  • Customer focused
  • Our customers are at the heart of all we do and we exceed their expectations every time.

Responsible corporate citizenship

The governing body should ensure that the organisation is and is seen to be a responsible corporate citizen. The Board has delegated to the social, ethics and transformation committee, the responsibility for monitoring and reporting of social, ethical, transformational and sustainability practices that are consistent with good corporate citizenship.

It is a PPC imperative to deliver on the South African transformation agenda and to fulfil its legal and moral obligations as a good corporate citizen. It should be noted that the social, ethics and transformation committee has approved the recently announced BEE transaction of PPC which would enhance the BEE equity shareholding levels to the required levels.

The Group’s Integrated Report, supplemented by its web-based sustainability reporting, details the Group’s progress against its priorities and sustainability framework, within the context of global change, material sustainability challenges, governance, ethics and human rights, safety, developing and retaining a skilled and diverse workforce, responding to the changing regulatory context, addressing climate change and promoting water stewardship, highlighting planned future focus.

Governance outcome: Good performance

Strategy, implementation and performance

The governing body should appreciate that the organisation’s core purpose, its risks and opportunities, strategy, business model, performance and sustainable development are all inseparable elements of the value creation process. The Board informs and approves the group corporate strategy which is aligned with the purpose of the Company, the value drivers of its business and the legitimate expectations of its stakeholders and aimed at ensuring sustainability; and which takes into account the top risks facing the Group.

The Board also oversees and monitors, with the support of its committees, the implementation and execution by management of the policies and priorities. As part of this, the Board ensures that a stakeholder-inclusive approach is adopted, which takes into account and balances stakeholders’ legitimate and reasonable needs, interests and expectations.

The risks, opportunities and other significant matters connected to the triple context in which the group operates are considered.

Effective risk and opportunity management is supported by effective governance structures, robust policy frameworks and a risk-focused culture. Strong governance structures and policy frameworks foster the embedding of risk considerations in business processes and ensure that consistent standards exist across the group.

The Board retains ultimate responsibility for providing strategic direction, setting risk appetite and ensuring that risks are adequately identified, measured, monitored, managed and reported on.

Reports and disclosure

The governing body should ensure that reports issued by the organisation enable stakeholders to make informed assessments of the organisation’s performance and its short-, medium- and long-term prospects. We refer to the Group’s annual integrated report that presents material information in an integrated manner, and provides users with a holistic, clear, concise and understandable presentation of the group's performance in terms of sustainable value creation in the economic, social and environmental context within which it operates.

The Board, through the Audit Committee, ensures that the necessary controls are in place to verify and safeguard the integrity of the integrated report and any other disclosures. The Board is satisfied that the group complies with all required disclosures.

Reporting frameworks and materiality are approved by the Audit Committee to ensure compliance with legal requirements and relevance to stakeholders.

The Audit Committee oversees the integrated reporting process and reviews the audited financial statements.

Governance outcome: Ethical culture

Ethical leadership

The governing body should lead ethically and effectively. The chairman of the Board is tasked to monitor the actions and performance of the members of the Board as part of his duties and to hold them to the highest ethical standards. The directors on the Board also hold one another accountable for decision-making and for acting in a way that displays the ethical characteristics of integrity, competence, responsibility, accountability, fairness and transparency. On appointment, individual directors are contractually placed under the obligation to comply with the ethical standards of the Board.

The social and ethics committee of the Board, annually review the Group’s code of ethics and all directors declare their personal interests annually. In addition, interests which may be apparent at the commencement of meetings are declared at the onset of these meetings.

The Board and its committees continually demonstrate ethical and effective leadership and promote the group’s values, culture and business behaviours.

Governance outcome: Effective control

Role of the governing body

The governing body should serve as the focal point and custodian of corporate governance in the organisation. The Board implements the highest standards of corporate governance at all operations. Governance structures and processes are formally reviewed annually and continuously adapted to accommodate internal developments, and reflect national and international best practice.

The Board as well as any director or committee may obtain independent, external professional advice at the company’s expense concerning matters within the scope of their duties and the directors may request documentation from and set up meetings with management as and when required in accordance with protocols approved by the Board.

The Board considers corporate governance to be a priority and endeavours to go beyond compliance, where appropriate. The Board's role and responsibilities are articulated in the Board charter which is reviewed annually. The Board is the focal point and custodian of corporate governance, both in terms of how its role and responsibilities are documented and the way it executes its duties and responsibilities.

Composition of the Board

The Board, with the assistance of the nomination committee, considers, on an annual basis, its composition in terms of balance of skills, experience, diversity, independence and knowledge, and whether this enables it to effectively discharge its role and responsibilities.

The capacity of each director is categorised as defined in the JSE listings requirements, also taking into consideration King IV and other factors as outlined in the Board charter. The Board comprises a majority of independent non-executive directors. A rigorous review of the independence and performance of independent non-executive directors serving more than 9 years is undertaken by the Board with the support of the Nomination and Governance Committee.

The Board is satisfied that there is a balance of skills, experience, diversity, independence and knowledge needed to discharge its role and responsibilities. The Board has taken steps to strengthen its succession plan to also include an immediate and interim succession plan in the event of an unforeseen event.

The policy on the promotion of gender diversity is included in the nominations committee charter which states:

  • The PPC Board recognises the benefits of having a gender diverse Board, and sees increasing diversity at Board level as a competitive advantage. Gender diversity will be considered in determining the optimum composition of the Board and when possible should be balanced appropriately. All Board appointments are made on merit, in the context of the skills, experience, independence and knowledge which the Board as a whole requires to be effective.
  • The nominations committee will discuss and agree annual objectives for achieving gender diversity on the Board and recommend them to the Board for adoption.

The nomination committee is also responsible for the policy on director appointments and this policy is reviewed annually.

The nomination committee also considers the annual retirement of directors by rotation and a brief CV for each director standing for election or re-election at the AGM accompanies the notice of the AGM.

Governance structures

The governing body should ensure that its arrangements for delegation within its own structures promote independent judgement, and assist with balance of power and the effective discharge of its duties. Committees have been established to assist the Board in discharging its responsibilities. The Committees of the Board comprise the Audit Committee, the Nomination Committee, the Remuneration Committee, the Social, Ethics and Transformation Committee, the Risk and Compliance Committee and the Investment Committee.

The Committees are appropriately constituted and members are appointed by the Board, with the exception of the Audit Committee whose members are annually nominated by the Board and elected by shareholder.

All directors, whether classified as executive, non-executive or independent non-executive, act with independence of mind, in the best interest of the group.

The roles of the chairman, lead independent director and chief executive officer are set out in the Board charter, demonstrating a clear balance of power and authority at Board level, to ensure that no one director has unfettered powers of decision-making.

In discharging its duties, the Board is empowered to delegate to management. As such, the Board is supported by senior management, together with various Board committees and other governance forums and structures.

The audit committee has satisfied itself with the performance and independence of the external auditors. The chief financial officer is the head of the finance function and she has senior managers reporting to her.

The audit committee has assessed the performance of the chief audit executive and the arrangements of internal audit, and is satisfied that the internal audit function is independent and appropriately resourced.

An assessment of the effectiveness of the chief financial officer function is performed annually by the audit committee and reported on in the annual integrated report.

Evaluations of performance of the Board

The Board should ensure that the evaluation of its own performance and that of its committees, its chair and its individual members, support continued improvement in its performance and effectiveness. During the year, the Nomination committee measured the Board’s performance and effectiveness, and that of the individual members, the chairman and the company secretary. The Chairman of the Board, through the Committee and assisted by the Company Secretary, leads the evaluation process. The performance of the Board, its Committees and the directors are disclosed in the integrated report.

The Board, with the support of the Nomination Committee determines the number of external directorships and other positions a director may hold, taking into consideration the relative size and complexity of the other organization.

Annually the Nomination Committee considers other commitments of directors and whether the director has sufficient time to fulfil the responsibilities as a director to ensure they can still execute their job effectively and is free from conflicts that cannot be managed satisfactorily. Should the Committee be of the view that a director is over-committed or has an unmanageable conflict, the Chairman will meet with that director to discuss the resolution of the matter to the satisfaction of the Committee.

The role and responsibilities of the Board, its Committees, the Chairman and the directors are outlined in the Board charter and committee terms of reference which is available on the Company’s website.

Delegation to management

The governing body should ensure that the appointment of, and delegation to, management contribute to role clarity and the effective exercise of authority and responsibilities. Delegation of authority resolutions were passed by the Board and reviewed regularly.

In addition, the Board charter indicates matters reserved for the Board and those delegated to management.

The Board is satisfied that the group is appropriately resourced and that its delegation to management contributes to an effective arrangement by which authority and responsibilities are exercised.

The Board appoints the group chief executive officer and he do not have any work commitments outside of the group and its related companies. A succession plan for the chief executive is in place. The Board evaluates the performance of the CEOs annually against agreed performance measures and targets and no issues or concerns have been identified.

The CEO appoints the members of the Executive committee of the group in consultation with the Board of directors.

The company secretary is appointed on a full-time basis with the requisite knowledge, experience and stature. The company secretary’s performance is assessed annually and no issues or concerns have been identified. The Board is satisfied that the company secretary and the functions that he oversees are performing well.

The company secretary signs off on disclosure of membership of Board structures, number of meetings of each and attendance at each meeting as well as the overall content of the committee information and reporting in the public domain.

Risk and opportunity governance

The governing body should govern risk and opportunity in a way that supports the organisation in defining core purpose and to set and achieve strategic objectives. The group believes that effective risk management is supported by effective governance structures, robust policy frameworks and a risk-focused culture.

Strong governance structures and policy frameworks foster the embedding of risk considerations in business processes and ensure that consistent standards exist across the group. In line with the group’s corporate governance framework, the Board retains ultimate responsibility by providing strategic direction, setting risk appetite and ensuring that risks are adequately identified, measured, monitored, managed and reported on.

The group’s risk management framework describes the group’s approach to risk and opportunity management. Effective risk management requires multiple points of control or safeguards that should consistently be applied at various levels throughout the organisation.

The primary Board committee overseeing risk matters across the group is the Risk and Compliance committee. The committee delegates to management to continuously identify, assess, mitigate and manage risks and opportunities within the existing and ever-changing risk profile of the group’s operating environment. Mitigating controls are formulated to address the risks and the Board is kept up-to-date on progress on the risk management plan.

Technology and information governance

The governing body should govern technology and information in a way that supports the organisation setting and achieving its strategic objectives. The Board is aware of the importance of technology and information as it is interrelated to the strategy, performance and sustainability.

The Audit committee is responsible to oversee information and technology governance in accordance with King IV, and ensures the effectiveness and efficiency of the group’s information systems as required by the group.

The Audit committee is assisted by the IT governance committee which includes an external IT specialist to advise on governing technology and information in a way that supports the group setting and achieving its strategic objectives.

Compliance governance

The governing body should govern compliance with applicable laws and adopted, non-binding rules, codes and standards in a way that supports the organisation being ethical and a good corporate citizen. Compliance with laws and regulations applicable to its operations is critical to the group as non-compliance may have potentially serious consequences.

Compliance policy requires all Group companies and their directors and employees to comply with all applicable laws. Legal compliance systems and processes are in place and are continuously improved to mitigate the risk of non-compliance with the laws in the various jurisdictions in which the group does business and also to ensure appropriate responses to changes and developments in the regulatory environment.

The Risk and Compliance committee’s mandate is to ensure full compliance with all statutes and regulations. To achieve this, the committee oversees the implementation of appropriate structures, policies, processes and procedures to identify regulatory and supervisory risks.

Specific areas of law have been identified as key Group legal compliance risk areas and specialist compliance units have been established to ensure compliance for each of these areas. These units include the Tax compliance unit, Environmental compliance unit, Health and safety Unit, Cement Quality unit etc.

Remuneration governance

The governing body should ensure that the organisation remunerates fairly, responsibly and transparently so as to promote the achievement of strategic objectives and positive outcomes in the short-, medium and long-term. PPC endeavours to remunerate fairly, responsibly and transparently to promote the creation of value in a sustainable manner. The remuneration report and policy is set out in the integrated report.

A non-binding advisory vote on the remuneration policy is tabled at the annual general meeting and has been duly approved by shareholders in prior years. A non-binding advisory vote on the remuneration implementation report is included in the notice of annual general meeting for shareholder approval.

The Board will continue to encourage regular dialogue with shareholders, to create and maintain a mutual understanding of what performance and value creation for the group constitutes for the purpose of evaluating the remuneration policy.

The Remuneration Committee is tasked by the Board to independently approve and oversee the implementation of the shareholder supported remuneration policy that will encourage the achievement of the company’s strategy and grow stakeholder value sustainably.

Assurance

The governing body should ensure that assurance services and functions enable an effective control environment, and that these support the integrity of information for internal decision-making and of the organisation’s external reports. Formal enterprise-wide governance structures for enhancing the practice of combined assurance at group and subsidiary levels are overseen by the audit committee. The assurance providers in this model include GIA, senior management and external auditors.

The combined outcome of independent oversight, validation and audit tasks performed by the assurance providers ensure a high standard across methodological, operational and process components of the group’s risk and capital management processes.

The Risk team is implementing a new combined assurance approach that will assist in addressing control over the key risks facing the Group. The risks and their mitigating controls are identified and controlled by management, within a risk framework determined by the Risk and compliance committee, and the process is monitored under the direction of internal audit. The traditional three lines of defence have also been expanded as recommended in King IV where appropriate.

The Board is satisfied that assurance results in an adequate and effective control environment, and integrity of reports for better decision-making. The audit committee report is contained in the annual integrated report.

Governance outcome: Legitimacy

Stakeholders

In the execution of its governance role and responsibilities, the governing body should adopt a stakeholder-inclusive approach that balances the needs, interests and expectations of material stakeholders in the best interests of the organisation over time. During the year the social and ethics committee has approved a comprehensive stakeholder management framework.

The Board, through the Social Ethics and Transformation Committee, considers issues around stakeholder perceptions. The Committee has oversight of stakeholder engagement and management. Through regular reporting by management to the Committee and the Chairman of that Committee to the Board, the Board is equipped with the necessary information to enable it to take the legitimate interests and expectations of stakeholders into account in its decision-making.

The company has identified its stakeholder groups through a broad process of internal evaluation. These include:

  • government and regulators;
  • shareholders and analysts;
  • employees;
  • customers;
  • suppliers; and
  • communities and civil society

The group endeavours to balance its stakeholder’s legitimate and reasonable needs, interests and expectations.

Relationship within a group of companies

The Board is the custodian of corporate governance across the group and sets the direction for how the relationship and exercise of power for the group will be approached and conducted.

Group policies are developed and implemented at group and subsidiary levels. In cases where polices are required to address specific needs of business units and their stakeholders, these are developed and applied at business unit level with appropriate group oversight via the group exco.

The delegation of authority resolution is signed by the Board and reviewed regularly.

The group’s risk governance framework is set out in the group’s business performance and risk management framework.

DRC Video Smlad 

SENS