CORPORATE GOVERNANCE
The King Reports on Code of Practices and Conduct echo principles deeply embedded in the fabric of the group from which VenFin originated. The group is principle-driven and guided by the philosophy of its founder, Dr Anton Rupert. The group was led by example from inception and no formal codes of conduct were required.
VenFin inherited, with pride, this sound corporate governance system – a model for doing business ethically – which does not need to be enforced but stems from internal conviction.
One of the cornerstones of our business model is the belief that a company has three levels of responsibility: shareholders, staff and the community. The group’s shareholders are served by sound business practices and a continued quest for excellence which ensure that profitable investments are being made. The group’s staff and the community are served and supported as set out in the sustainability report.
Therefore, it comes naturally to VenFin to endorse, and to comply with the principles of the King Reports as it corresponds to the way in which business has been conducted in the group for more than 50 years.
In setting the parameters for this report, guidance was taken from the Global Reporting Initiative (GRI) Boundary Protocol. Disclosure is limited to those entities that could generate significant impact to the Company’s sustainability performance and where it exercises control over the financial and operating policies of such entities, save where those entities disclose the relevant information in their own publicised annual reports.
CORPORATE STRUCTURE
The Company is an investment holding company.Investments of the Company mainly comprise both listed and unlisted investments which are not controlled by VenFin but are, due to significant influence and board representation, mostly associates.
The Company manages its investments actively and provides strategic input through board, audit and other committee representation. The Company is a medium to long-term investor which forces strategic alliances on a partnership basis, while endeavouring to add value.
The Company’s associates endorse the Code of Corporate Practices and Conduct. The Company continues to encourage full compliance within the investee portfolio, where possible, and disclosure where not.
In accordance with the recommendations of King II, the Board adopted a formal charter, as set out below.
BOARD CHARTER
A charter, read and endorsed by all directors of VenFin, has been implemented to:- identify, define and record the responsibilities, functions and composition of the Board; and to
- serve as a reference to new directors.
The Board, having reflected on the following, is satisfied that for the reporting year, it executed the required actions contained in the charter satisfactorily.
COMPOSITION OF THE BOARD
VenFin has a fully functional Board, comprising executive and non-executive directors, which leads and controls the group. Currently there are five directors of whom one is independent. In this charter, executive directors are collectively referred to as executive management.It is a function of the Board to ensure that its size and the collective skills and experience of members are suitable to carry out its responsibilities. Circumspection is exercised by the Board in the selection and the orientation of directors.
The roles of the chairman and the chief executive officer are separated. The chairman is a non-executive director but is not independent.
All directors of VenFin have access to the advice of the company secretary and any relevant outside people when required.
Board members are listed here.
ROLE AND RESPONSIBILITIES
The Board provides strategic direction by proposing, discussing, questioning, evaluating, and approving plans and strategies. In directing the group, the Board exercises leadership, integrity and judgement, to achieve continuing prosperity for the group.After approving operational and investment plans and strategies, the Board empowers executive management to implement these and to provide timely, accurate and relevant feedback on progress made.
However, the Board remains accountable for the overall success of the approved strategies, based on values, objectives and stakeholder requirements, and for the process and policy which ensures the integrity of risk management and internal controls. The Board is the focal point of the group’s corporate governance and is also responsible for ensuring that it complies with all relevant laws, regulations and codes of best business practices.
The Board monitors the operational and investment performance of the group, including relevant financial and non-financial aspects. It also ensures that procedures and practices are in place to protect the Company’s assets and reputation.
VenFin’s Board established the following subcommittees to assist it in discharging its duties and responsibilities:
- The Remuneration and Nomination Committee, consisting of two directors,
advises the Board on remuneration and terms of employment of all directors
and members of senior management and is responsible for succession planning.
The committee is also responsible for the nomination of directors. Additionally,
it participates annually in evaluating the performance of directors. Directors
do not have long-term contracts or exceptional benefits associated with the
termination of services. The chairman of the Board is chairman of this committee.
The chief executive officer attends meetings only by invitation. The committee
has a formal mandate and its effectiveness is appraised by the Board accordingly.
- The Audit and Risk Committee, consisting of three directors, reviews
the adequacy and effectiveness of the following: financial reporting; the
system of internal control; the management of financial, investment, technological
and operating risks; risk funding; the internal and external audit processes;
the Company’s procedures for monitoring compliance with laws and regulations;
its own code of business conduct; and procedures implemented to safeguard
the Company’s assets. The deputy chairman of the Board is the chairman
of this committee.
This committee also reviews the level of disclosure in the annual report and the appropriateness of policies adopted by management.
The committee has a formal mandate and its effectiveness is evaluated by the Board accordingly.
- The Management Committee, consisting of two directors and six senior
managers, meets regularly between Board meetings to deal with issues delegated
by the Board.
- The Investment Committee, consisting of four directors, is responsible for the evaluation and approval of investments according to the formal mandate given by the Board.
The appointment and orientation of new directors are also the responsibility of the Board. Non-executive directors are selected for their broader knowledge and experience and are expected to contribute effectively to decision-making and the formulation of strategies and policy.
The Board identifies goals, provides direction, determines the feasibility of proposed strategies and monitors investments. Executive directors contribute their detailed insight into day-to-day operations and are generally responsible for operational decisions and their implementation.
The Board reviews and assesses annually the mix of skills and experience offered by its members to ensure that it is adequately equipped to achieve the Company’s objectives and to create value for shareholders over the long term.
MEETINGS AND QUORUM
The articles of association requires three directors to form a quorum for Board meetings. A majority of members, preferably with significant representation of the non-executive directors, is required to attend all committee meetings.The VenFin Board meets at least four times a year. The Audit and Risk Committee meets at least three times a year, and the Remuneration and Nomination Committee at least once a year.
ATTENDANCE AT MEETINGS
| Audit and Risk | Remuneration and | Investment | ||
| Board | Committee | Nomination Committee | Committee | |
| Meetings held | 5 | 4 | 1 | 6 |
| Directors | ||||
| J P Rupert | 4 | 1 | ||
| J Malherbe | 5 | 4 | 6 | |
| J J Durand | 5 | 4 | 6 | |
| G T Ferreira | 5 | 1 | 6 | |
| N J Williams | 5 | 4 | 6 |
MATERIALITY AND APPROVAL FRAMEWORK
Issues of material or strategic nature which might impact on the reputation
of the Company, are referred to the Board. All other issues, as mandated by
the Board, are dealt with at executive management level.
The minutes of all the committee meetings are circulated to the members of the Board. Issues that require the Board’s attention or a Board resolution are highlighted and included as agenda items for the next Board meeting.
REMUNERATION PRINCIPLES
The Company’s policy regarding the remuneration of all directors and senior management aims at:- attracting and retaining directors and senior management of high calibre;
- providing directors and senior management with remuneration that is fair and just;
- ensuring that no discrimination occurs;
- recognising and encouraging exceptional and value-added performance; and
- ensuring that short-term personal gain does not conflict with long-term sustainability.
In line with these objectives, the Remuneration and Nomination Committee annually reviews and evaluates the performance of the executive directors and determines the annual salary adjustments for each. For this purpose it refers to salary surveys compiled by independent organisations and other market information.
DUTIES OF THE DIRECTORS
According to the Companies Act, which does not differentiate between executive and non-executive directors, the Company directors:- prepare the annual financial statements that should represent fairly the Company’s state of affairs and its profit or loss position for the period under review;
- select suitable accounting policies and apply them consistently;
- state whether applicable accounting standards have been followed; and
- endeavour to make judgements, valuations and estimates that are reasonable and prudent.
- set and maintain appropriate value systems;
- apply due care and skill in harnessing entrepreneurial flair in maximising sustainable returns;
- keep proper accounting records;
- take steps to safeguard the assets of the Company;
- set the group’s risk appetite;
- implement effective risk management processes and internal controls, and monitor their efficiency;
- ensure compliance with all relevant laws;
- disclose potential conflicts of interest; and
- disclose information truthfully and transparently.
The Board formulates the Company’s communication policy and ensures that spokespeople adhere to it. This responsibility includes transparent, balanced and truthful communication to shareholders and relevant stakeholders.
Having considered the above, the directors are of the opinion that the Board and the subcommittees have discharged all their responsibilities for the period being reported on.
CONFLICTS OF INTEREST
Mechanisms have been put in place to recognise, respond to and manage any potential conflicts of interest. Directors sign, at least once a year, a declaration stating that they are not aware of any conflicts of interest that may exist due to their interest in or association with any other company.In addition, directors disclose their interest in contracts that are significant to the Company’s business. Any potential conflict of interest is disclosed as soon as it arises.
All information acquired by directors in the performance of their duties, which is not disclosed publicly, is treated as confidential. Directors may not use, or appear to use, such information for personal advantage or for the advantage of third parties.
Directors of the Company are required to comply with gifts and donation policies and the prescriptions of the VenFin Code of Conduct on inside information transactions and disclosure of transactions.
COMPANY SECRETARY AND PROFESIONAL ADVICE
Directors are entitled to seek, at the Company’s expense, independent professional advice concerning the affairs of the group. They have unlimited access to the services of the company secretary, who is responsible to the Board to ensure that proper corporate governance principles are adhered to. Board orientation or training is done when appropriate.GOING CONCERN
At least once a year the Board considers the going concern status of the group with reference to the following:- Net available resources and the liquidity thereof
- The group’s Residual Risk Profile
- World economic events
- The following year’s strategic/business plan, budgets and cash flow models
- The group’s current financial position
SERVICE COMPANY
During the previous financial year, M&I Management Services (Proprietary) Limited has rendered management and support services to VenFin.During the current financial year a subsidiary of Remgro Limited, M&I Group Services Limited (M&I), has acquired the business of M&I Management Services (Pty) Limited. An agreement has been negotiated with M&I to provide certain support and administrative services to VenFin at a fee determined annually. Any further reference to M&I refers to M&I Group Services Limited for the period 1 October 2006 to 30 June 2007.
The fees for the past year are disclosed in note 7 to the annual financial statements.
RISK MANAGEMENT AND INTERNAL CONTROL
In determining strategic objectives, the Board of Directors has ensured its understanding of all the risks associated with the Company’s investment portfolio with a view to maximising sustainable profits and growth.These risks are measured continuously against the risk appetite defined by the Board.
The risk management process is fundamentally based on the skill and calibre of individuals employed, their motivation and drive and the value systems they adhere to. In addition, the investment portfolio serves to spread investment risk.
The categories of risk identified can be broadly classified as follows:
- Performance risk, including strategic risk, opportunity risk, reputational
risk, liquidity risk, and also risks relating to corporate governance, social
and environmental responsibility and stakeholder relations.
- Investment risk inherent to existing investments. The Board has
delegated the responsibility for investment risk management to the Management
Committee.
These risks are furthermore managed at VenFin by ensuring that future investments are subject to rigorous due-diligence reviews. These reviews include, inter alia, verification of intellectual property rights, management com petency, business plans, market analyses, contractual rights and obligations, product feasibility, cash flow and liquidity requirements. Consideration is also given to ensure that the investment is optimally structured, using appropriate investment instruments.
Performance of operational management, measured against budgets and other measurement criteria, is regularly appraised for timely corrective action, when deemed appropriate.
- Operational risk which includes operational effectiveness and efficiency,
safeguarding of assets, compliance with relevant laws and regulations, reliability
and integrity of reporting, effective operational risk management, human resource
risk, technology risks, business continuity and risk funding.
Operational risks are managed mainly by means of internal control. This is a process designed to provide reasonable assurance regarding the achievement of organisational objectives and to reduce the possibility of loss or misstatement to within accepted levels. The effectiveness of risk management is measured by the level of reduction of the Company’s cost of risk.
Management structures have been established to focus on certain key risk activities, including safety, health, environment, security, tax and risk funding.
- Treasury risk. VenFin uses the treasury services of M&I and
V&R Management Services AG to manage interest rates, liquidity, compliance
and currency risks globally.
A treasury committee, in terms of a mandate from the Board, constituted of nominated executive directors and senior management, is responsible for determining policy and procedures as well as clearly defined levels of responsibility. Regular feedback is given to the Board.
The Board has documented and implemented a comprehensive risk management system, which incorporates continuous risk identification, assessment, evaluation, and internal control embedment.
The Board influences the control environment by setting ethical values and organisational culture while ensuring that management styles, delegated authorities, business plans and management competency are appropriate, effective and efficient.
The Board also monitors the effectiveness of governance structures implemented by the boards of those entities it invests in.
Risk funding is focused strategically on a self-insurance methodology aimed at reducing the group’s cost of risk, save for those risks which cannot be cost beneficially controlled or have potential catastrophic exposures.
INTERNAL AUDIT
The Company has an internal audit function, which has been outsourced to M&I’s Risk Management and Internal Audit department. It is an effective independent appraisal function and employs a risk-based audit approach, compliant with the Institute of Internal Auditors’ (IIA) definition of internal auditing and documented in a charter approved by the Board. The head of this department has direct access to the chairman of the Audit and Risk Committee as well as to the chairman of the Board.EXTERNAL AUDIT
The Company’s external auditors attend all Audit and Risk Committee meetings and have direct access to the chairman of the Audit and Risk Committee. Their audit coverage is adequately integrated with the Internal Audit functions without their scope being restricted.Other services provided by the auditing firm mainly relate to tax matters and are effected by a department independent of the audit partners. Independence is further assured by terms of appointment.