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Corporate GovernanceINTRODUCTION The group continues to develop its governance policies and procedures in line with an integrated governance, risk and compliance framework. The board regards corporate governance as fundamentally important to the success of the company's business and is unreservedly committed to applying the principles of good corporate governance in the management of the company. The board is the focal point of the governance system and is ultimately accountable and responsible for the performance and affairs of the company. The board exercises leadership, integrity and sound judgement in directing the company to enable it to achieve its objectives and goals. Governance approach and compliance Blue Label Telecoms is committed to the governance principles of the Code of Corporate Conduct set out in the King Report on Corporate Governance - 2002 (King II). Standards of disclosure have increased significantly and internal governance structures have been reviewed and improved to reflect the principles of King II. This has occurred at both board and subsidiary level. The directors believe that Blue Label Telecoms has complied with all material aspects of King II during the year under review. In applying the governance principles of King II the company follows a principle-based approach rather than a rules-based approach. Accordingly this governance review is based on the "comply or explain" principle. Board structure and board committees Board composition Blue Label Telecoms is headed by a unitary board that leads and controls the company. The board comprised 13 directors: four executive directors and nine non-executive directors, five of whom are independent. The board composition provides a balance of power to ensure that no one individual has undue influence and that the interests of shareholders are protected. The balance between executive, non-executive and independent nonexecutive directors in the board composition allows for appropriate and efficient decision-making. There is a clear division of responsibilities between the executive responsibility for the running of the company's business and the leadership of the board. The chairman of Blue Label Telecoms is an independent non-executive director. It was with deep sadness that Blue Label Telecoms announced the passing of Mr Sidney Ellerine on Friday, 17 July 2009. Mr Ellerine provided significant leadership and direction to the board and to executive management and always conducted himself with the utmost integrity and highest regard for the interests of the company. All directors are subject to retirement by rotation every three years. At the first annual general meeting of the company all directors were required to retire by rotation. The shareholders resolved at the annual general meeting held on 12 November 2008 that all the directors be reappointed. The articles of association require that one third of the directors retire by rotation each year but are eligible for re-election by the shareholders. The detailed categorisation of the directors as well as a brief curriculum vitae of each director appear on pages 16 to 18 of this report. Board responsibilities and charter The board's primary responsibilities include determining the company's purpose and values and giving strategic direction to the company. This involves, but is not limited to, identifying key risk areas and key performance indicators of the company's business, monitoring the performance of the company against agreed objectives including transformation goals, advising on significant financial matters and reviewing the performance of executive management against defined objectives and, where applicable, industry standards. A board charter has been adopted by the board, the salient points of which are set out below. The charter aims to:
Key features of the charter include:
Board procedure and related matters The board retains full and effective control over the
organisation and monitors executive management's
implementation of approved plans and strategies.
The board meets quarterly and additional board
meetings are convened as circumstances dictate.
All directors are entitled to liaise with the company secretary in regard to items on the agendas for board meetings. Management ensures that all relevant information and facts are provided to board members timeously to enable them to make informed decisions. Board agenda and meeting structures have been adapted to focus on performance monitoring, strategy, risk management and internal controls, governance and related matters. This ensures constructive discussion and efficient decision-making. The number of meetings held during the year under review and the attendance of the directors are detailed below: Attendance at meetings
Legend: ( ¹ Special board meetings held on the 13th and 28th of October Directors and director appointments The non-executive directors bring leadership, judgement and insight to the board. They are individuals of high calibre and integrity and provide a depth of wisdom based on knowledge and experience on a wide range of issues. Non-executive directors have access to management and may meet separately with management without the attendance of executive directors. The directors are empowered to obtain independent professional advice, at the group's expense, should they deem it necessary to do so. The board, with the support of the Remuneration
and Nomination Committee, ensures that it
collectively contains the skills, experience, diversity in
demographics and mix of personalities appropriate
for the strategic direction of the company and
necessary to secure its sound performance.
Directors are selected and appointed by the board
based on the recommendation of the Remuneration
and Nomination Committee. The non-executive
directors have no fixed term of appointment and
no service contracts with the group. To avoid conflicts of interest, board members must disclose their interests in material contracts involving the group, their shareholdings in Blue Label Telecoms, as well as any other directorships. Board members are required to make appropriate disclosures when participation in deliberations or decision-making processes could in any way be affected by vested interests and, if the circumstances require, must recuse themselves from participation. Board performance assessment The first evaluation exercise comprising a board
self-evaluation and director peer review was
completed in 2009. This self-evaluation focused,as the first evaluation exercise, on the board as a
whole and how the board discharges its duties and
responsibilities. The chairman performs an annual review of individual non-executive directors. The purpose of the director peer review is to evaluate individual director performances and the performance of fellow directors on the board. The outcome of the aforementioned process is discussed individually between the respective non-executive directors and the chairman. The chairman presents his findings to the Remuneration and Nomination Committee to make the appropriate recommendations to the board. The board as a whole considers the recommendations of the Remuneration and Nomination Committee. Board committees The board has established a number of board-appointed committees to assist them in discharging their duties and responsibilities. The responsibilities delegated to each board committee are formally documented in board-approved terms of reference. There is transparency and full disclosure from board committees to the board via the subcommittee chairman's report to the board on recent committee activities as well as inclusion of the committee minutes in the board pack. Board committees are empowered to take independent professional advice as and when deemed necessary. The board recognises that it is ultimately accountable and responsible for the performance and affairs of the group and that the appointment of board committees and delegation of authority to these committees, in no way absolves the board and its directors of the obligation to carry out their duties and responsibilities. The membership and principal functions of the committees are set out below. The board is of the view that the committees effectively discharged their responsibilities as contained in their respective terms of reference. Audit, Risk and Compliance Committee (ARCC) The functions of the Audit and Risk Management Committee were increased by the board during the period under review to include compliance management. In this regard the committee name was changed to the ARCC . Members: JS Mthimunye (Chairman), GD Harlow, LM Tyalimpi Composition and meeting procedures: All the
members of the ARCC are independent nonexecutive
directors as defined in the Corporate
Laws Amendment Act, 2006 (CLAA). Mandatory
attendees of the ARCC include the joint chief
executive officers, chief financial officer, chief
financial officer of TPC, the major subsidiary of
Blue Label Telecoms, the senior audit partner from
PricewaterhouseCoopers Inc. and the head of the
outsourced internal audit function from KPMG
Services (Proprietary) Limited. The ARCC meets quarterly and at every meeting the external and internal auditors have an opportunity to have separate private discussions with the ARCC . The internal and external auditors have unrestricted access to the chairman of the ARCC . Committee agendas are planned in accordance with the yearly meeting plan to ensure that the committee considers all relevant matters pertaining to internal controls, internal audit, external audit, financial policies and reporting, risk management and compliance. Mandate: The committee is specifically mandated to perform the functions required under section 270A(1) of the CLAA and the recommendations of the King Report on Corporate Governance for South Africa, on behalf of the group. In this regard the committee supported the formation of an Internal Risk and Compliance Committee to assist it in discharging its duties and responsibilities with regard to the subsidiary companies by collating and recording the information that the committee requires to perform its duties. Role and functions: The ARCC assists the board in discharging its duties relating to the safeguarding of assets, the operation of adequate systems and internal controls, the preparation of accurate financial reporting in compliance with all applicable legal requirements and accounting standards, the responsibility and authority of the risk management function within the group as well as monitoring the group's compliance with its legal and regulatory obligations. Responsibilities of the ARCC set out in its terms of reference include:
The audit committee confirms that it has carried out its functions in terms of the CLAA by:
The non-audit services rendered by the external auditors during the 12-month period ended 31 May 2009 consist of tax advisory services, tax compliance services, due diligence work and accounting advisory services. The fees applicable to the aforementioned services amounted to R4,4 million in total. Prohibited non-audit related services include:
In accordance with paragraph 3.84(h) of the JSE Limited Listings Requirements, the committee considered the appropriateness of the expertise and experience of the financial director of the company. The ARCC was satisfied that David Rivkind, chief financial officer of Blue Label Telecoms, possesses the appropriate expertise and experience to meet his responsibilities in that position. Attendance at meetings
Legend: ( The internal and external auditors, in their respective capacities, attended and reported at all meetings of the ARCC . Remuneration and Nomination Committee (RNC) Members: NN Lazarus SC (Chairman), GD Harlow,RJ Huntley, S Ellerine Composition and meeting procedures: All members of the RNC are non-executive directors. The joint chief executive officers and chief financial officer attend meetings by invitation, but do not participate in discussions and decisions regarding their own remuneration and benefits. The chairman, at his discretion, may invite other executives or employees to attend and to be heard at meetings of the committee. Meetings are held at least twice a year. The quorum for an RNC meeting is two members present throughout the meeting. Mandate: To assist the board in fulfilling its responsibilities in respect of maintaining an appropriate remuneration strategy, ensuring the directors and senior executives are fairly rewarded, providing for succession planning, assessing the effectiveness of the composition of the board and evaluating the board and individual directors' performance. Role and functions: Some of the responsibilities of the RNC is to:
Attendance at meetings
Legend: ( Investment Committee (IC) Members: GD Harlow (Chairman), NN Lazarus SC, HC Theledi, JS Mthimunye, S Ellerine, BM Levy, MS Levy, MV Pamensky, DB Rivkind, DA Suntup and D Hilewitz Composition and meeting procedures: The IC
comprises an equal number of executive and nonexecutive
directors. Mandate: To review, consider and approve proposed acquisitions and investments of Blue Label Telecoms and its subsidiaries in accordance with the limits of authority as defined by the board. Role and functions: The responsibilities of the IC include:
Attendance at meetings
Legend: ( Transformation Committee (TC) Members: RJ Huntley (Chairman), S Ellerine, LMTyalimpi, BM Levy, DB Rivkind (alternate to BM Levy) Composition and meeting procedure: The committee comprises at least three members with a majority being non-executive directors. The quorum for a TC meeting is two members of the committee present throughout the meeting. Meetings are held at least two times per year. The chairman, at her discretion, may invite other executives or employees to attend and to be heard at meetings of the committee. The group human resource and transformation manager is a mandatory attendee of the TC meetings. Mandate: To develop framework policies and guidelines for the management of transformation issues including affirmative procurement, enterprise development, employment equity, human resource development, social development matters and ensuring their progressive implementation throughout Blue Label Telecoms and its subsidiaries. Role and functions: The responsibilities of the TC include:
Attendance at meetings
Legend: ( Executive Committee (Exco) and the Strategy Implementation Committee Members: MS Levy (Chairman), BM Levy, MV Pamensky, DB Rivkind Composition and meeting procedure: Exco meetings take place on a weekly basis. The chief financial officer of TPC, a major subsidiary of Blue Label Telecoms and the group legal adviser, attend Exco meetings by invitation. Mandate: Exco is responsible for managing and monitoring the business affairs of the company in line with board-approved plans, budgets, delegations and limits of authority, prioritising the allocation of capital and other resources and establishing best management and operating practices. Exco is also mandated, empowered and held accountable for implementing the strategies, business plans and policies determined by the board. In assisting Exco with the implementation of strategies, business plans and policies throughout the group, a Strategic Implementation Committee (SIC) was established. The SIC meets monthly and comprises 15 members, which include the Exco members, the chief information officer, the chief technology officer, senior managers of the group responsible for the four organisational segments, as well as the heads of product development and commercial product offerings. The role and function of the SIC include:
Company secretary All directors have access to the advice of the group company secretary and may liaise with the group company secretary on agenda items for board meetings. The company secretary provides guidance to the board as a whole and to individual directors with regard to their responsibilities and plays a pivotal role in ensuring compliance with procedures and applicable statutes and regulations. Responsibilities of the group company secretary, include inter alia:
The group company secretary is furthermore responsible for the functions specified in section 268(G) of the Companies Act No 61 of 1973, as amended (the Act). All meetings of shareholders, directors, and board subcommittees are properly recorded as per the requirements of section 242 of the Act. The removal of the group company secretary is a board decision. Risk management The board has committed Blue Label Telecoms to a process of risk management that is aligned to the principles of King II. The features of this process are outlined in the Blue Label Telecoms Enterprise Wide Risk Management Policy Framework (risk framework). The risk framework is applicable to the entire Blue Label Telecoms group. This enterprise wide approach adopted by the company, means that every risk in the group will be identified, assessed and monitored in a structured and systematic process of risk review and management. Management is accountable to the board for designing, implementing and monitoring the process of risk management and integrating it into the day-to-day activities of Blue Label Telecoms. In this regard, management established an Internal Risk and Compliance Committee (IRC ) to identify, evaluate and measure group-wide risks and compliance in all functional areas and to implement and maintain adequate internal controls. The IRC is chaired by the chief financial officer of Blue Label Telecoms and reports directly to the ARCC at the quarterly meetings. The members of the IRC comprise the senior managers of the group responsible for the four organisational segments as well as the heads of product development and commercial product offerings, the group legal adviser, group company secretary and group human resource and transformation manager. The head of external audit and the head of the outsourced internal audit function also attend the IRC meetings. The IRC has conducted group-wide risk assessments to identify and prioritise major risks in accordance with the impact and likelihood of these risks. In line with the group's risk framework the potential impact of the risks are quantified on a five point scale comprising catastrophic, critical, serious, significant and minor/insignificant. Risks are then further quantified in terms of the probability of occurrence in accordance with probability factors, namely; almost certain, likely, possible, unlikely and rare. Internal controls to mitigate the identified risks are evaluated to establish the appropriateness and adequacy of the existing controls to ensure that they perform the required risk mitigation. Management decides on the acceptance of the identified risk or exposure and, if considered high, an action plan and timeframe are put in place to reduce the level of risk to a more acceptable level. Internal audit and control The Blue Label Telecoms internal audit function is an integral part of the group, and functions under the internal audit charter approved by the board. Internal audit is responsible to both the board and management, providing them with reasonable assurance regarding the effectiveness of the group's governance and risk management processes as well as systems of internal control. The Blue Label Telecoms internal audit function is outsourced to KPMG Services (Proprietary) Limited (KPMG). The activities of the internal audit function as detailed in the approved internal audit charter, include but are not restricted to:
During the period under review, KPMG Internal Audit, Risk and Control Services (IARC S), performed an internal audit over the corporate governance and human resource and payroll processes of Blue Label Telecoms. Both of these risk-based audits were assigned an overall "acceptable rating", meaning that a good control framework is in place, but improvements are needed in certain key control activities. The majority of the key findings were, subsequent to the review, discussed at the ARCC and the RNC respectively as appropriate, and were addressed. The ARCC is satisfied that internal audit has met its responsibilities for the year with respect to its terms of reference. Share dealings Blue Label Telecoms and TPC, its major subsidiary, have adopted an "Insider Trading and Dealings in Securities" policy. This policy requires all relevant directors who wish to deal in Blue Label Telecoms shares to obtain prior written clearance from the chairman of the Remuneration and Nomination Committee and either the chief financial officer or group company secretary. The same restriction applies to the group company secretary. In his own case, the chairman of the Remuneration and Nomination Committee must obtain clearance to deal in Blue Label Telecoms shares from the chairman of the board and the chief financial officer of Blue Label Telecoms. The group operates “closed periods” as defined in the JSE Limited Listings Requirements. These periods are communicated to directors, officers and employees in the group via the policy document and special electronic notices announcing the commencement or termination of closed periods. During these closed periods, the group’s directors and their associates, officers and employees may not deal in Blue Label Telecoms shares. Additional closed periods may be enforced, when required, in terms of corporate activities. There was no requirement for additional closed periods during the period under review. Code of business conduct The code of business conduct (code), guides how the group interacts with its respective stakeholders in support of the group's values. The fundamental principles that underpin the group's values include integrity, respect, accountability, competitiveness and innovation.
Going concern The board has considered and recorded the facts and assumptions on which it relies to conclude that the business will continue as a going concern in the ensuing financial year. The directors are of the opinion that the business will be a going concern in the year ahead and their statement in this regard is also contained in the statement on the responsibility of the directors for the consolidated financial statements on page 95 of this report.
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