Corporate governance report

RMI Holdings has an “owner-manager” culture which has been inculcated at every business in which it invested. Thus, while the RMI Holdings board is responsible for the maintenance of sound corporate governance, it believes that its implementation is best managed at an investee company level. Consequently, Discovery, MMI, OUTsurance and RMBSI have their own governance structures, including boards of directors, executive teams, audit, risk, capital, compliance and remuneration committees that monitor operations and deal with governance and transformation related issues.

Effective corporate governance forms part of RMI Holdings’ investment assessment criteria which is further monitored by non-executive board representation on investee company boards.

RMI Holdings subscribes to a set of values which seek to foster integrity, innovation, individual empowerment and personal accountability. It reinforces these values through various board committees with clearly defined responsibilities:

Corporate governance

In South Africa, principles and guidelines for corporate governance are set by:
• the King III Report Code of Corporate Practices and Conduct (“King III”); and
• effective from 1 May 2011, the new Companies Act, 71 of 2008, as amended (“Companies Act”).

RMI Holdings and all of its subsidiaries and associates endorse King III. RMI Holdings is listed on the JSE and also complies with the JSE Listings Requirements.

Approach to integrated reporting

This is RMI Holdings’ second annual integrated report as required in terms of King III. Currently limited guidance is available on integrated reporting, especially given the focused and specialised nature of RMI Holdings’ business model as an investment holding company. The approach to integrated reporting will evolve as the investor community moves towards the formalisation of a framework for integrated reporting. An appropriate framework is expected by late 2013.

RMI Holdings does not believe integrated reporting had a significant influence on how the business was run, but it led to a more cohesive approach to reporting by connecting the information provided in the financial statements, corporate governance report, sustainability report and other management commentary.

We are mindful of the fact that significant elements of the disclosure have already been made by our subsidiaries and associates and rather than replicating the information, we have chosen to refer stakeholders to the annual reports of our investee companies.

King III

The JSE Listings Requirements require all JSE-listed companies to provide a narrative on how it has applied the new recommendations contained in King III. Below is the King III gap analysis. RMI Holdings has complied with the King III principles for the full financial year ended 30 June 2012, unless otherwise indicated.

  Principle     Description     Status     Explanation if not compliant  
  Ethical leadership and corporate citizenship        
1.1   The board should provide effective leadership on an ethical    
   foundation.        
1.2   The board should ensure that the company is and is seen to   
   be a responsible corporate citizen.        
1.3   The board should ensure that the company’s ethics are     
   managed effectively.        
  Board and directors        
2.1   The board should act as a focal point for and custodian of    
   corporate governance.        
2.2   The board should appreciate that strategy, risk, performance    
   and sustainability are inseparable.        
2.3   The board should provide effective leadership based on an    
   ethical foundation.        
2.4   The board should ensure that the company is and is seen to    
   be a responsible corporate citizen.        
2.5   The board should ensure that the company’s ethics are    
   managed effectively.        
2.6   The board should ensure that the company has an effective     
   and independent audit committee.        
2.7   The board should be responsible for the governance of risk.    
2.8   The board should be responsible for technology governance.   
2.9   The board should ensure that the company complies with      
   applicable laws and considers adherence for non-binding        
   rules, codes and standards.        
2.1   The board should ensure that there is an effective risk-based     
   internal audit.        
2.11   The board should appreciate that stakeholders’ perceptions     
   affect the company’s reputation.        
2.12   The board should ensure the integrity of the     
   company’s integrated report.        
2.15   The board should consider business rescue proceedings or      
   other turnaround mechanisms as soon as the company is         
   financially distressed as defined in the Act.         
2.16   The board should elect a chairman of the board who is an   X The chairman is a non-executive director but is not
   independent, non-executive director. The CEO of the company    independent. A lead independent, non-executive director
   should not also fulfil the role of chairman of the board.     was appointed.  
2.17   The board should appoint the chief executive officer and         
   establish a framework for the delegation of authority.          
2.18   The board should comprise a balance of power, with a   X   From 1 July 2011 to 26 April 2012, half of the non-executive
   majority of non-executive directors. The majority   directors were independent. From 27 April 2012, the majority
   non-executive directors should be independent.    of the non-executive directors were independent.
         RMI Holdings believes that all board members are suitably
         qualified and that the composition of the board is in the best
         stakeholders without prejudice to them.  
2.19   Directors should be appointed through a formal process.      
2.20   The induction of and ongoing training and development of      
   directors should be conducted through formal processes.        
2.21   The board should be assisted by a competent, suitably qualified   
   and experienced company secretary.        
2.22   The evaluation of the board, its committees and the individual      
   directors should be performed every year.        
2.23   The board should delegate certain functions to well-structured   
   committees but without abdicating its own responsibilities.          
2.24   A governance framework should be agreed between the   
   group and its subsidiary boards.        
2.25 Companies should remunerate directors and executives  
   fairly and responsibly.     
2.26 Companies should disclose the remuneration of each X The individual directors remuneration is disclosed, but not
   individual director and certain senior executives.    the salaries of the three highest earners who are not.
         directors. The remuneration packages of the joint CEOs of
         OUTsurance have been disclosed as they are viewed as
         prescribed officers of the RMI group. RMI Holdings decided
         that this disclosure is sufficient and appropriately
         demonstrates alignment between remuneration and
      shareholders’ return.
2.27   Shareholders should approve the company’s remuneration   
   policy.        
  Audit committee        
3.1   The board should ensure that the company has an effective      
   and independent non-executive audit committee.        
3.2   Audit committee members should be suitably skilled,     
   experienced and independent, non-executive directors.        
3.3   The audit committee should be chaired by an ndependent,   
   inon-executive director.        
3.4   The audit committee should oversee integrated reporting.     
3.5   The audit committee should ensure that a combined assurance   
   model is applied to provide a coordinated approach to all      
   assurance activities.        
3.6   The audit committee should satisfy itself of the expertise,      
   resources and experience of the company’s finance function.      
3.7   The audit committee should oversee the internal audit function.   
3.8   The audit committee should be an integral component of   
   the risk management process.        
3.9   The audit committee is responsible for recommending the     
   appointment of the external auditor and overseeing the        
   external audit process.        
3.10 The audit committee should report to the board and  
  shareholders on how it has discharged its duties.    
  The governance of risk
4.1 The board should be responsible for the governance of risk.  
4.2   The board should determine the levels of risk tolerance.       
4.3   The risk or audit committee should assist the board in     
   carrying out its risk responsibilities.        
4.4   The board should delegate to management the responsibility     
   to design, implement and monitor the risk management plan.        
4.5   The board should ensure that risk assessments are     
   performed on a continual basis.        
4.6   The board should ensure that frameworks and methodologies     
   are implemented to increase the probability of anticipating       
   unpredictable risks.        
4.7   The board should ensure that management considers      
   and implements appropriate risk responses.        
4.8   The board should ensure continual risk monitoring by   
   management.        
4.9   The board should receive assurance regarding the     
   effectiveness of the risk management process.        
4.10   The board should ensure that there are processes in place       
   enabling complete, timely, relevant, accurate and accessible        
   risk disclosure to stakeholders.        
  The governance of information technology        
5.1   The board should be responsible for information technology     
   governance.        
5.2   IT should be aligned with the performance and sustainability      
   objectives of the company.        
5.3   The board should delegate to management the responsibility     
   for the implementation of an IT governance framework.          
5.4   The board should monitor and evaluate significant IT     
   investments and expenditure.        
5.5   IT should form an integral part of the company’s risk       
   management.        
5.6   The board should ensure that information assets are      
   managed effectively.        
5.7 An audit and risk committee should assist the board in  
  carrying out its IT responsibilities.    
  Compliance with laws, rules, codes and standards
6.1 The board should ensure that the company complies with  
  applicable laws and considers adherence to non-binding    
  rules, codes and standards.    
6.2   The board and each individual director should have a working    
   understanding of the effect of the applicable laws,rules,        
   codes and standards on the company and its business.        
6.3   Compliance risk should form an integral part of the     
   company’s risk management process.        
6.4   The board should delegate to management the     
   implementation of an effective compliance framework and        
   processes.        
  Internal audit        
7.1   The board should ensure that there is an effective risk-based     
   internal audit function.        
7.2   Internal audit should follow a risk-based approach in its plan.       
7.3   Internal audit should provide a written assessment of     
   the effectiveness of the company’s system of internal        
   control and risk management.        
7.4   The audit committee should be responsible for overseeing     
   internal audit.        
7.5   Internal audit should be strategically positioned to achieve    
   its objectives.        
  Governing stakeholder relationships        
8.1   The board should appreciate that stakeholders’ perceptions     
   affect a company’s reputation.        
8.2   The board should delegate to management to proactively     
   deal with stakeholder relationships.        
8.3   The board should strive to achieve the appropriate balance     
   between its various stakeholder groupings, in the best        
   interests of the company.        
8.4   Companies should ensure the equitable treatment of     
   shareholders.        
8.5   Transparent and effective communication with stakeholders     
   is essential for building and maintaining their trust and        
   confidence.        
8.6 The board should ensure that disputes are resolved as  
  effectively, efficiently and expeditiously as possible.    
  Integrated reporting and disclosure
9.1 The board should ensure the integrity of the company’s  
  integrated report.    
9.2   Sustainability reporting and disclosures should be integrated    
   with the company’s financial reporting.        
9.3   Sustainability reporting and disclosure should be     
   independently assured.        

 

Year under review

Disclosure on corporate governance in this report is limited to RMI Holdings. Discovery, MMI, OUTsurance and RMBSI disclose relevant information on corporate governance in their own annual integrated reports.

The Companies Act places certain duties on directors and determines that they should apply the necessary care and skill in fulfilling their duties. To ensure that this is achieved, the board applies best practice principles, as contained in King III, where appropriate.

The following are the notable aspects of RMI Holdings’ corporate governance:

The board of directors


ROLES AND RESPONSIBILITIES

The board’s paramount responsibility is the positive performance of RMI Holdings in creating value for its shareholders. In so doing, it takes into account the legitimate interests and expectations of stakeholders, which include the present and potential future investors in RMI Holdings.

In terms of its formal charter, the board’s responsibilities include the appointment of the chief executive officer and the approval of corporate strategy, risk management and corporate governance. The board reviews and approves the business plans and monitors the financial performance of the group and implementation of the strategies. The board is the guardian of the values and ethics of the company and its investee companies and seeks to ensure that the company is, and is seen to be, a responsible corporate citizen. The board is also responsible for formulating the company’s communication policy and ensuring that spokespersons of the company adhere to it. This responsibility includes clear, transparent, balanced and truthful communication to shareholders and relevant stakeholders.

The board has a fiduciary duty to act in good faith, with due care and diligence and in the best interests of the group and its stakeholders. It is the primary body responsible for the corporate governance values of the group. While control is delegated to the management committee in the day-to-day management of the group, the board retains full and effective control over the group. A formal board charter, as recommended by King III, has been adopted. The charter includes a code of ethics to which all directors subscribe. The code deals with duties of care and skill, as well as those of good faith, including honesty, integrity and the need to always act in the best interest of the company. Procedures exist in terms of which unethical business practices can be brought to the attention of the board by directors or employees.

Board members have full and unrestricted access to management and all group information and property. They are entitled, at the cost of the group, to seek independent professional advice in the fulfilment of their duties. Directors may meet separately with management without the attendance of executive directors.

After evaluating their performance in terms of their respective charters, the directors are of the opinion that the board and the subcommittees have discharged all their responsibilities.

COMPOSITION OF THE BOARD

RMI Holdings has a unitary board with a non-executive director as chairperson. The chairperson is not independent in terms of the definition stated below. The board believes that the chairman’s specialist knowledge of the financial services industry makes it appropriate for him to hold this position.

The roles of chairperson and chief executive officer are separate and the composition of the board ensures a balance of authority precluding any one director from exercising unfettered powers of decision making. The directors are individuals of a high calibre with diverse backgrounds and expertise, facilitating independent judgment and broad deliberations in the decision making process. The board each year evaluates its composition to ensure an appropriate mix of skills and experience.

The board comprises 10 members, nine of whom are non-executive directors. Five of the non-executive directors are also independent directors in terms of the definition stated below. Mr Goss was appointed as lead independent non-executive director. The independence of the directors classified as “independent” was evaluated by weighing all relevant factors, including length of service which may impair independence.

New directors are subject to a ‘fit and proper’ test. An informal orientation programme is available to incoming directors. No director has an automatic right to a position on the board. All directors are required to be elected by shareholders at an annual general meeting. In a general meeting, the company may appoint any person to be a director, subject to the provisions of the memorandum of incorporation.

All the current directors of RMI Holdings were appointed on 8 December 2010, except for Mr TV Mokgatlha who was appointed to the board effective 25 May 2011.

The names of the directors, their age, qualifications and other details appear here.

The boards of the group’s major investments and its operating divisions are similarly constituted with the necessary mix of skills, experience and diversity. There is also an appropriate mix between executive and non-executive appointments.

TERM OF OFFICE

Non-executive directors retire by rotation every three years and are eligible for re-election. Re-appointment of nonexecutive directors is not automatic. The retirement age of the directors is set at 70.

The chief executive officer has an employment contract that can, subject to fair labour practices, be terminated upon one month’s notice.

DEFINITION OF INDEPENDENCE

An independent, non-executive director is a non-executive director who:

• is not a representative of a shareholder who has the ability to control or significantly influence management of the board;
• does not have a direct or indirect interest in the company which exceeds 5% of the shares in issue;
• does not have a direct or indirect interest which is material to his/her personal wealth;
• has not been employed or is not immediate family of an individual who was employed by the company or the group of which it currently forms part in any
  executive capacity for the preceding three financial years;
• is not a professional adviser to the company or the group;
• does not receive remuneration contingent upon the performance of the company;
• does not participate in a share incentive scheme/option scheme of the company; and
• is free from any business or other relationship which could be seen by an objective outsider to interfere materially with the individual’s capacity to act in an
  independent manner.

DIRECTORS’ INTERESTS

It is not a requirement of the company’s memorandum of incorporation or the board charter that directors own shares in the company. Directors’ interests in the ordinary shares of the company are disclosed here.


BOARD PROCEEDINGS

The board meets once every quarter. Should an important matter arise between scheduled meetings, additional meetings may be convened.

Before each board meeting, an information pack, which provides background information on the performance of the group for the year to date and any other matters for discussion at the meeting, is distributed to each board member. At its meetings, the board considers both financial and non-financial qualitative information that might have an impact on the stakeholders of the group.

Details of the board meetings held during the year ended 30 June 2012, as well as the attendance at the board meetings and annual general meeting by individual members, are disclosed in the section “Directorate” here.

BOARD COMMITTEES

The board has established five subcommittees to assist the directors in their duties and responsibilities:

• a directors’ affairs and governance committee (including nominations committee);
• a remuneration committee;
• a management committee;
• an audit and risk committee; and
• a social and ethics committee.

Each committee has a formal charter and report to the board at regular intervals. The charters, which set out the objectives, authority, composition and responsibilities of each committee, have been approved by the board. All the committees are free to take independent outside professional advice, as and when required, at the expense of the group.

COMPANY SECRETARY

The company secretary of RMI Holdings is Schalk Human, a chartered accountant (South Africa). He was appointed by the board effective 19 October 2011. All directors have unlimited access to the services of the company secretary, who is responsible to the board for ensuring that proper corporate governance principles are adhered to.


Directors’ affairs and governance committee (including nominations committee)


ROLES AND RESPONSIBILITIES

The committee’s primary objectives are to assist the board in discharging its responsibilities relative to:
• its determination and evaluation of the adequacy, efficiency and appropriateness of the corporate governance structures in the company;
• board and board committee structures;
• the maintenance of a board directorship continuity programme;
• the self-assessment of the effectiveness of the board as a whole and the contribution of each director; and
• ensuring that succession plans are in place for the key posts in the greater group.


GOVERNANCE EFFECTIVENESS

During the year under review the board conducted evaluations to measure its effectiveness and that of its members. The evaluations conducted in respect of the year under review found no material concerns in respect of the board and board committee performance. The directors are aware of the need to convey to the chairman any concerns that they might have in respect of the performance and conduct of their peers.

The performance of the chief executive officer is also formally evaluated at least once per year.

ETHICS

Upon joining the group, all directors are obliged to sign a code of ethics. RMI Holdings’ code of ethics addresses duties of care and skill, good faith, honesty and integrity, whistle blowing, processes for dealing with conflicts of interest and the need to always act in the best interests of the group.

The soliciting or acceptance of payments other than declared remuneration, gifts and entertainment as consideration to act or fail to act in a certain way are disallowed. The group does not make political donations.

No issues of improper or unethical behaviour on the part of any of the directors were drawn to the attention of the committee during the year.

CONFLICTS

Mechanisms are in place to recognise, respond to and manage any potential conflicts of interest. Directors sign a declaration stating that they are not aware of any undeclared conflicts of interest that may exist due to their interest in, or association with, any other company. In addition, directors disclose interests in contracts that are of significance to the group’s business and do not participate in the voting process of these matters.

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.

All directors of the company are required to comply with the RMI Holdings code of conduct and the requirements of the JSE regarding inside information, transactions and disclosure of transactions.

DEALINGS IN SECURITIES

In accordance with the JSE Listings Requirements, the company has adopted a code of conduct to avoid insider trading. During the closed periods (as defined), directors and designated employees are prohibited from dealing in the company’s securities. Outside closed periods directors and designated employees may only deal in the company’s securities with the authorisation of the chairman. The closed periods lasts from the end of a financial reporting period until the publication of financial results for that period. Additional closed periods may be declared from time to time if circumstances warrant it.


NOMINATION, SELECTION AND APPOINTMENT OF DIRECTORS

The company has a formal and transparent policy regarding the appointment of directors to the board. The committee makes recommendations to the board on the appointment of new executive and non-executive directors. The board in turn proposes approved candidates to the shareholders for appointment at a general meeting.

The committee will first consider a proposed director’s CV and do the necessary interviews and reference checks to establish the integrity and skills of the person and to ensure that the person has not been disqualified from being a director. The committee will ensure that all statutory requirements for the appointment are complied with and that the new director is properly briefed on his/her roles and responsibilities, time commitment, committee service and involvement outside board meetings.

COMMITTEE PROCEEDINGS

The committee meets at least twice annually with additional meetings when required at the request of the board or any committee member or as often as it deems necessary to achieve its objectives as set out in the terms of reference. Comprehensive minutes of meetings are kept.

The committee may invite any of the directors, professional advisors or officers whose input may be required to the meetings.

The chairperson may excuse from the meeting or from any item on the agenda any of the attendees at a meeting who may be considered to have a conflict of interest, or for confidentiality reasons.

COMPOSITION OF THE COMMITTEE

The committee comprises all of the non-executive directors. The committee is chaired by the lead independent, non-executive director.


Remuneration committee


ROLES AND RESPONSIBILITIES

The roles and responsibilities of the remuneration committee include:
• assist the board in exercising its responsibility of ensuring that fair reward practices are implemented in RMI Holdings;
• make recommendations to the board in respect of the remuneration (total guaranteed salary, variable pay and share incentives) of the chief executive officer,
  who is the sole executive director employed by the company;
• approve the remuneration (total guaranteed salary, variable pay and share incentives) of the executive management of RMI Holdings;
• consider non-executive directors’ fees and make recommendations to the board for approval by the shareholders; and
• provide a channel of communication between the board and management on remuneration matters.

The committee is mandated to:
• debate and approve the principles applied in determining the mix between guaranteed and variable components of remuneration, including participation to
  share incentive schemes;
• debate and approve the annual salary adjustment;
• debate and approve the benchmarking process followed in determining the remuneration packages of the chief executive officer and executive management,
  including the performance criteria used;
• review standard conditions of service, including leave entitlement, pension and provident fund benefits and membership to medical aid schemes;
• review and approve the terms and conditions of the executive director’s service agreement;
• ensure that appropriate disclosure is provided in the annual integrated report in line with King III, with explanations where the principles have not been
  applied; and
• delegate in writing any of its functions and the power to implement its decisions.

EXECUTIVE REMUNERATION

The committee seeks to align executive remuneration with stakeholder interests through appropriate refinements to fixed, variable and long-term remuneration arrangements relative to company performance and industry specific remuneration practices. The strategy is accordingly tailored towards:
• creating recognisable alignment between rewards and the risk exposure of shareholders and other stakeholders;
• incentivising the delivery of consistent performance in line with strategic goals and risk tolerances and rewarding success appropriately;
• delivering compensation that is affordable and reasonable in terms of the value created for shareholders; and
• encouraging behaviour consistent with the group’s business philosophy and corporate culture.

To align remuneration with shareholder returns, the group’s remuneration policy specifically addresses the following factors:
• individual performance measured against both financial and non-financial performance criteria, individual behaviour and competitive performance;
• incentives which diminish or disappear in the event of poor group performance;
• no multi-year guaranteed incentives, substantial severance arrangements or remuneration linked to revenue generation by formula;
• significant deferral of variable remuneration into RMI Holdings shares for a period of two years; and
• transparency to enable stakeholders to make reasonable assessments of reward practices and underlying governance processes.

In conducting the annual remuneration review, the committee also gave consideration to the outcomes of remuneration reviews in other group companies and had reference to independent advice on both general and specific remuneration practices.

The committee considered the expanded remuneration disclosure requirements enacted and recommended during the year. It holds the view that the neither of the other two company employees are “prescribed officers” in the context of the Companies Act and that no meaningful benefit would be derived by other stakeholders in specific disclosure of their remuneration. However, the remuneration packages of the joint CEOs of OUTsurance, Howard Aron and Willem Roos, have been disclosed as they are viewed as prescribed officers in the RMI Holdings group.

Remuneration and fees paid to both executive and non-executive directors are approved at the annual general meeting of shareholders.

Details of directors’ remuneration for the year under review can be found here.

COMMITTEE PROCEEDINGS

The committee meets at least once annually or at the request of the chairperson.


COMPOSITION OF THE COMMITTEE

The committee comprises three members, all of whom are non-executive. The committee is chaired by the lead independent, non-executive director. The names of the members of the committee are disclosed in the section “Directorate” here.

 

Management committee

ROLES AND RESPONSIBILITIES

This committee is responsible for implementing the strategies approved by the board and for managing the affairs of the group.

The committee is also responsible for:
• the development, implementation and monitoring of strategies and policies of the group;
• the optimisation of the group capital base and its financial resources;
• the timeous and transparent communication with all stakeholders;
• ensuring best practices in terms of corporate governance across the group;
• managing the group image and reputational issues; and
• optimising overall group profitability through synchronising the strategies of the operating units of the group and leveraging off group strength.

COMMITTEE PROCEEDINGS

The committee meets at least once a quarter or at the request of the chairperson.


COMPOSITION OF THE COMMITTEE

The committee comprises four members, three of whom are non-executive. The committee is chaired by the chairperson of the board.

The names of the members of the committee are disclosed in the section “Directorate” here.

Audit and risk committee

ROLES AND RESPONSIBILITIES

The committee’s objectives are to assist the board of directors in fulfilling its fiduciary duties with regard to:
• the safeguarding of the group’s assets;
• the financial reporting process;
• the system of internal control;
• the management of financial and non-financial risks;
• the audit process and approval of non-audit services;
• the group’s process for monitoring compliance with the laws and regulations applicable to it;
• the group’s compliance with the corporate governance practices;
• review of the annual integrated report;
• the business conduct of the group and its officials;
• the appointment of the external auditors and the evaluation of their services and independence.


FINANCE FUNCTION

The committee has considered and satisfied itself of the appropriateness of the expertise and adequacy of resources of the finance function and experience of the senior members of management responsible for the financial function. It has also considered and satisfied itself of the appropriateness of the expertise and experience of the financial director.


EFFECTIVENESS OF COMPANY’S INTERNAL FINANCIAL CONTROLS

The committee reports to the board that it is of the opinion that based on enquiries made and the reports from the internal and external auditors, the risk management processes and systems of internal control of the company and its investments were effective for the year under review. No material weaknesses in financial control of the company and its subsidiaries were reported for the year under review.


AUDITOR INDEPENDENCE

PricewaterhouseCoopers Inc. was appointed as auditor of the company until the next annual general meeting, with Mr Tom Winterboer as the individual registered auditor undertaking the company’s audit for the year under review.

RMI Holdings believes that the auditors have observed the highest level of business and professional ethics. The committee is satisfied that the auditors have at all times acted with unimpaired independence. Details of fees paid to the external auditors are disclosed in note 27 of the group annual financial statements. No non-audit services were provided during the current financial year.

The independent auditor attends all audit and risk committee meetings and the annual general meeting of shareholders. The partner responsible for the audit is required to rotate every five years. The committee meets with the auditors independently of senior management.

COMPANIES ACT

As required in terms of the Companies Act, the committee is satisfied that it complied with and performed its functions and that the company’s external auditors are independent of the company.


KING III

During the year under review the committee updated its charter to ensure that any new obligations in terms of King III are met.


COMMITTEE PROCEEDINGS

The committee meets at least twice a year or at the request of the chairperson, any member of the committee, the board or the auditors. Comprehensive minutes of meetings are kept.

Details of committee meetings held during the year ended 30 June 2012, as well as the attendance by individual members are disclosed in the section “Directorate” here.

The chief executive officer/financial director attends the meetings. The committee invites, at its discretion, the appropriate representatives of the external auditors, other professional advisors, officers or members of staff whose input may be required.

Board members have the right of attendance.

The chairperson may excuse from the meeting or from any item on the agenda any of the attendees at a meeting who may be considered to have a conflict of interest.

COMPOSITION OF THE COMMITTEE

The committee comprises a minimum of three members and consists only of independent, non-executive directors. The chairperson is an independent, non-executive director and attends the annual general meeting.


Social and ethics committee


ROLES AND RESPONSIBILITIES

This committee is a statutory requirement as per the new Companies Act. The committee’s objectives are to monitor:

• the social and economic development, including the 10 principles as set out in the United Nations Global Compact principles, the Organisation for Economic
  Co-operation and Development recommendations regarding corruption, the Employment Equity Act and the Broad-Based Black Economic Empowerment Act;
• good corporate citizenship, including promotion of equality, prevention of unfair discrimination, reduction of corruption, contribution to the development of
  communities and record of sponsorship, donations and charitable giving;
• the environment, health and public safety, including the impact of the company’s activities;
• consumer relationships, including the company’s advertising, public relations and compliance with consumer protection laws; and
• labour and employment including the standing in terms of the International Labour Organisation Protocol on decent work and working conditions, the
  company’s employment relationships and its contribution toward the educational development of its employees.


COMMITTEE PROCEEDINGS

The committee meets at least twice a year or at the request of the chairperson, any member of the committee or the board. Comprehensive minutes of meetings are kept.


REPORT FROM THE CHAIRPERSON OF THE SOCIAL AND ETHICS COMMITTEE

The social and ethics committee confirms that all investee companies of RMI Holdings have established their own social and ethics committees. These investee company committees report on all significant matters that need to be brought to the attention of RMI Holdings’ social and ethics committee as and when they arise. The chairperson of the social and ethics committee attends the annual general meeting to answer any questions that shareholders might have.


COMPOSITION OF THE COMMITTEE

The committee comprises a minimum of three members and consists only of independent, non-executive directors. The chairperson is an independent, non-executive director.


Risk management and internal control

RMI Holdings recognises that managing risk and compliance is an integral part of generating sustainable shareholder value and enhancing stakeholder interests.

The board and the boards of investee companies are accountable for establishing, maintaining and monitoring the effectiveness of the processes of risk management and systems of internal control applied throughout the group and in any joint ventures and associations to which the group or any subsidiary is a party.

The group’s risk management and control framework covers the following key aspects:
• identifying key performance indicators;
• identifying significant business risks, both financial and other;
• maintaining proper accounting records;
• ensuring the reliability of financial information used within the business for decision making or for publication;
• ensuring compliance with applicable laws, regulations and codes of conduct;
• ensuring that the group is not unnecessarily exposed to avoidable financial risks such as the risks associated with fraud, potential liability and loss, including
  the safeguarding of assets;
• managing potential conflicts of interest of management, board members and shareholders, including misuse of corporate assets and abuse in related party
  transactions;
• ensuring the effectiveness and efficiency of operations;
• monitoring the progress of group companies in complying with the Financial Sector Charter;
• ensuring that the group and any projects in which it is involved are subject to sound environmental practices; and
• ensuring that the appropriate balance is struck between entrepreneurial endeavour and sound business practice.

Overall effectiveness of the control environment

As with most systems of internal control, the effectiveness of internal control systems in the group is subject to inherent limitations, including:
• the possibility of human error and/or poor decision making;
• the deliberate circumventing of controls by employees or others;
• management overriding controls; and
• the occurrence of unforeseeable circumstances.

Controls systems are therefore designed to manage, rather than eliminate, the risk of failure. Accordingly, it is recognised that a sound system of internal control can provide only reasonable and not absolute assurance against risks impacting the achievement of business objectives or any misstatement or loss.

Management reports regularly to the respective group boards on the effectiveness of the group’s risk and compliance management and control framework. The effectiveness of this framework is subject to continuous review.

Integrated assurance

The board does not only rely on the adequacy of the internal control embedment process but considers reports on the effectiveness of risk management activities. The audit and risk committee ensures that the assurance functions of management as well as internal and external audit are sufficiently integrated.

The various assurance providers to the board comprise the following:
• the management committee and senior management consider the company’s risk strategy and policy along with the effectiveness and efficiency thereof; and
• the audit and risk committee considers the adequacy of risk management strategies, systems of internal control, risk profiles, legal compliance, internal and
  external audit reports and also reviews the independence of the auditors, the extent and nature of their engagements, scope of work and findings. This
  committee also reviews the level of disclosure in the annual financial statements and the appropriateness of accounting policies adopted by management, the
  ethics register and other loss incidents reported. The board reviews the performance of the audit and risk committee against its charter.

INTERNAL AUDIT

RMI Holdings outsources its internal audit function to the FirstRand group internal audit division. Internal audit is an effective independent appraisal function and employs a risk-based audit approach. The head of internal audit has direct access to the chairperson of the audit and risk committee, as well as to the chairperson of the group.


EXTERNAL AUDIT

The company’s external auditor attends all audit and risk committee meetings and has direct access to the chairperson of the audit and risk committee and the chairperson of the group. The external audit scope of work is adequately integrated with the internal audit function without the scope being restricted.

The directors are of the opinion that, based on enquiries made and the reports from the internal and external auditors, the risk management processes and systems of internal control of the company and its subsidiaries were effective for the year under review. The audit and risk committee has satisfied itself that there are effective audit committees functioning at the company’s associates.

 

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