Governance/ Governance structures

Governance structures

The Company’s governance framework is defined as “freedom supported by a framework” and the overall intention of this framework is to ensure that there is continual performance improvement by Group businesses while ensuring that at the same time all governance and regulatory obligations are met. There is an ongoing process of confirming that the framework that supports the governance of the Group remains relevant, efficient and clear and aligns the expectations of the Board, management and the general stakeholder community.

The decision-making role of the Board is exercised through the formulation of fundamental policy and strategic goals in conjunction with management, whereas the oversight role concerns the review of management’s decisions, the adequacy of systems and controls and the implementation of policies.

THE BOARD OF DIRECTORS

STRUCTURE AND COMPOSITION OF THE BOARD

AECI has a unitary Board structure, led by an Independent Non-executive Chairman, seven other Independent Non-executive Directors and two Executive Directors. The Board charter, as well as the terms of reference of the Nominations Committee, detail the procedure for appointments to the Board. Such appointments are formal and transparent and a matter for the Board as a whole.

During 2018 the Board supplemented its numbers through the appointments of Philisiwe Sibiya and Jonathan Molapo. These appointments were undertaken to ensure a seamless Board succession process, thereby safeguarding the Board's ability to discharge its fiduciary duties. Additional appointments will continue to be evaluated to reinforce capacity and capability, in the interest of the Company and its stakeholders.

The appointment process in 2018 considered issues of diversity, race and gender as the Board, through its Nominations Committee, is mindful of best practice and requirements in this regard. The right balance of skills, expertise, experience and diversity underpins the Board's ability to execute its functions to maximum effect.

ROTATION, TENURE AND SUCCESSION

In terms of the Board charter, the Company undertakes to submit for retirement those Board members who are more than 70 years of age (in the context of the Company's needs and in agreement with the impacted Directors).

Generally, Non-executive Directors may serve for up to nine years, subject to retirement and re-election by rotation as set out in the Company's MOI. Extensions of this period may be granted, provided the Nominations Committee remains satisfied that the Director's independence has not been compromised. The independence assessment is part of the Board and Committee evaluation and is conducted on a case-by-case basis, with all Board members participating in the review process.

The outcomes of the 2018 assessment confirmed that all Directors were considered independent, courageous and prepared to raise issues that are not always easily resolved. This evaluation included those Directors who are due for retirement by rotation at the forthcoming AGM. Their fellow Directors had no hesitation in recommending them for re-election.

Individualised assessments for Directors who have served beyond the nine-year mark will continue in future.

The performance of the Chairman of the Board is also assessed by fellow Directors. The outcome of this assessment informs the decision on the continuation of the chairmanship.

The Board is mindful of ensuring that there is a robust succession plan in place and, through the Nominations Committee, has initiated the identification of talent for appointment to its ranks in due course. Appropriate mix of skills and experience in areas of direct relevance to the operations of the Company, diversity of race and gender, the latter in line with the Company's Gender Diversity Policy as well as, capacity and capability at Directorate level will remain imperatives when formulating and implementing succession plans. The Company's Race Diversity Policy is being finalised for ratification by the Nominations Committee at its meeting in May 2019.

TERMS OF EMPLOYMENT OF DIRECTORS

Executive Directors are employees of the Company and have standard terms and conditions of employment. Their notice periods are six months. They do not receive any special remuneration or other benefits for their additional duties as Directors. The Board, through its Nominations Committee, has had detailed discussions with the two Executive Directors regarding succession planning for all key roles, including their own. The Board is satisfied that the potential risk associated with the continuity of leadership at this level has been mitigated adequately.

The Board, on the recommendation of the Remuneration Committee, determines the remuneration of Executive Directors, Executives and other Senior Managers as underpinned by the remuneration philosophy of the Company.

None of the Non-executive Directors are Company employees. Non-executive Directors' remuneration is arrived at after an annual benchmarking exercise performed by the Executive Directors and the approval by shareholders of the proposed fees, on the Board's recommendation.

DIRECTORS’ MANAGEMENT OF CONFLICT OF INTERESTS

AECI has a Conflict of Interests Policy (embedded in the Group's Code of Ethics and Business Conduct) which provides guidance and procedures for Directors on managing and dealing with potential conflict of interests situations. The same Policy applies to all Group employees. The Group Company Secretary is charged with maintaining a comprehensive register of Directors' declarations of interests and this is submitted for updating by the Directors before each Board meeting. All Directors duly completed and updated this register in 2018 and no conflicts of interests were reported or recorded.

INDUCTION AND ONGOING DEVELOPMENT OF DIRECTORS

The Directors have expertise and experience in diverse industries including banking, chemicals, mining, technical, accounting and strategic matters.

As is the case with all Directorate appointments, the incumbents who joined the Board in 2018 underwent a Group-specific induction programme. This includes one-on-one meetings with Executives, Senior Managers and the Managing Directors of subsidiaries. The two new Directors, accompanied by the Chairman of the Board, also undertook visits to key operational sites to learn more about the business. Other Non-executive Directors also have an open invitation to participate in these visits which they find valuable in terms of deepening their insights into the underlying businesses and as a good platform to engage with related management teams.

With regard to formal training, the Group Company Secretary is charged with sourcing and organising relevant training for Board members, based largely on the specific needs of each Director. In the year under review no formal training was requested but the Group Company Secretary continued to provide Directors with articles and other material on key trends and topical industry issues.

BOARD COMMITTEES AND MEETINGS

COMMITTEE SUMMARISED DUTIES AND RESPONSIBILITIES
Audit Committee
  • monitor the adequacy of financial controls and reporting;
  • review audit plans and adherence to these by assurance providers;
  • ascertain the reliability of the internal and external audit processes;
  • ensure that financial reporting complies with IFRS, the Companies Act and the JSE Listings Requirements; and
  • nominate the external auditor.

Both the internal and external auditors have unrestricted access to the Chairman of the Committee and it is standard operating procedure for them to meet privately with the Committee. The Chief Executive, the Chief Financial Officer and the external and internal auditors attend meetings of the Committee by invitation. The Chairman of the Board has a standing invitation for attendance.

Owing to the geographic diversification and complexity of the Group, two Financial Review and Risk Committees ("FRRCs") have been established - one for Mining Solutions (formerly the AEL FRRC), and the other for Water & Process, Plant & Animal Health, Food & Beverage, and Chemicals (Integrated Chemicals). Both these FRRCs are chaired by Non-executive Directors and they assist the Committee in its work relating to these segments.

Risk Committee
  • oversee the overall management of risk, operational resilience and business continuity;
  • monitor Company decisions to ensure alignment with the risk appetite;
  • ensure that proper controls and mitigations are in place to prevent risk;
  • oversee IT governance and related risks; and
  • oversee compliance management processes.

In 2018 this Committee comprised five Non-executive Directors and all the Executive Committee members, including the two Executive Directors.

Social and Ethics Committee

Monitor the Company's compliance with section 72(8) of the Companies Act, read together with regulation 43. Focus is on the following:

  • recommendations on corruption of the Organisation for Economic Co-operation;
  • Employment Equity Act, No. 55 of 1998, in South Africa;
  • Broad-Based Black Economic Empowerment Act, No. 53 of 2003;
  • labour and employment principles in line with global best practice; and
  • safety, health and environmental issues and performance.
Nominations Committee
  • consider suitable nominations for appointment to the Board and Executive succession planning, and make appropriate recommendations based on qualifications, experience, race and gender;
  • oversee the appointment of Board members to serve on various Committees; and
  • oversee the assessment of the Board and its Committees to ensure continual governance improvement.

This Committee is comprised solely of Non-executive Directors and chaired by the Chairman of the Board.

Remuneration Committee
  • establish the Group's remuneration philosophy;
  • determine the remuneration framework for Executives and Senior Managers; and
  • consider, review and approve Group policy on Executive remuneration and communicate this and the implementation thereof to stakeholders in the Company's integrated report.

This Committee is comprised solely of Non-executive Directors.

Investment
  • assist and advise the Executive management on acquisition opportunities or significant projects that fall outside the ordinary course of business;
  • make recommendations to the Board regarding material transactions or acquisition opportunities available to the Company; and
  • monitor progress, performance and the impact of material transactions/acquisitions and report on these to the Board.

This Committee comprises four Non-executive Directors and both Executive Directors. It is chaired by the Chairman of the Board. It was formalised as a standing committee at the end of 2018.

Executive Committee

The Board has delegated the day-to-day running of the Company to the Chief Executive who works with an Executive Committee to assist him in this task. The Executive Committee is the highest executive decision-making structure in the Group. Central to its role is the formulation and implementation of the Group's strategy and policy direction, and ensuring that all business activities are aligned in this respect and that the business strategy is implemented accordingly.