The Board is responsible for determining the Group’s governance and compliance framework and is committed to aligning – as far as is practicable in the context of GPI’s business – its practices and standards of conduct, with the principles embodied in the King Code of Governance for South Africa 2009 (King III).
While implementation thereof is an ongoing process, the Board confirms that the Group has substantially complied with King III in all material respects and has complied with the mandatory corporate governance provisions of the JSE Listings Requirements. A schedule of how the Group has applied the King III principles can be viewed here and an outline of governance developments is provided in the table below.
While the Board’s primary accountability is to shareholders, it also has a duty to consider the interests of employees, customers, suppliers, regulators and the community in which its businesses operate. It achieves this by defining the Group’s governance and compliance framework and holding management accountable for its implementation and for ensuring compliance with the extensive body of legislation applicable to its various operations.
In implementing its mandate, management believes it has adopted sound corporate practices that extend beyond compliance into standards of conduct that reflect GPI’s core values of Excellence, Sustainability, Entrepreneurship, Ethics and Respect.
The table below provides a summary of the Group’s progress towards implementing certain King III principles which it did not fully apply to at the time of the previous reporting period. Information has also been provided on the principles that the Group will focus on applying during the coming year.
|Governance principle||Implementation status|
The board should elect a chairman of the board who is an independent non-executive director
|As has been reported previously the Board, while cognisant of the principle, remains satisfied that Mr Adams’ role as the Executive Chairman is mitigated by his extensive experience and expertise as well as his track record of serving the best interests of the Company and greater community. In line with King III recommendation in such cases, a Lead Independent Director (LID) role is in place which is currently served by Dr Norman Maharaj.|
The board should monitor and evaluate significant IT investments and expenditure
|It was previously reported that this principle had been partially applied and that an IT governance framework would be implemented. This has subsequently been achieved with the adoption of a suite of policies that includes IT frameworks, a groupwide security standard, a compliance check capability and various lower-level IT policies. Building blocks have been put in place for the effective management of information assets and the Group is currently in phase 2 of a 3-phase plan to improve the management of key classes of information.|
Shareholders should approve the company’s remuneration policy
|GPI has elected not to propose the remuneration policy to shareholders for a non-binding advisory vote at the Annual General Meeting (AGM) but has fully disclosed details of the remuneration policy and structure in the Remuneration Report included in this Integrated Annual Report, including the remuneration paid to Executive and Non-executive Directors during the year.|
|Development priorities for 2016|
The board should ensure that the company’s ethics are managed effectively
|With the change in the Group’s strategic focus, engagement sessions will be held with employees to re-emphasise the core values of Excellence, Sustainability, Entrepreneurship, Ethics and Respect. The code of ethics will, in addition, be refreshed and updated to ensure it remains relevant and enforceable within the context of the current operating environment. The format of management’s reports to the Social and Ethics Committee will be reviewed with a view of broadening the scope of monitoring by the Committee.|
The governance of Information Technology
|Management of key classes of information remains a priority and work will continue with regard to completing phases 2 and 3 of the 3-phase plan to improve the management of key classes of information. In addition, high breach controls are being planned to protect high-value information assets and personal information.|
Sustainability reporting and disclosure should be independently assured
|It was previously reported that the Audit and Risk Committee provides assurance as to the reliability of information in the Integrated Annual Report and that consideration would be given to obtaining external assurance for this purpose. GPI follows a combined assurance approach which incorporates internal (management and internal audit) and external (BBBEE scorecard verification, external audit) assurance, but will nevertheless reassess this to determine whether other approaches and levels of external assurance could add further value.|
The Board has a unitary structure with five Non-executive Directors and three Executive Directors at the end of the reporting period. The roles of the Executive Chairman and the Chief Executive Officer are separate and clearly defined, with the overall composition ensuring balance of authority and power, with no individual Director having unrestricted powers of decision-making.
In reviewing Mr Hassen Adams’ role as the Executive Chairman, the Board continues to emphasise the need for succession in relation to this key role. Management has made substantial progress in terms of embedding a BEST TEAM philosophy (discussed in the CEO’s report) in the Group and the Board believes that this will result in a strong talent pool from which to draw in the future.
Dr Norman Maharaj has been appointed as LID for the fifth year, his role being to provide leadership to the Board, Committees, Directors and executives in instances where the Chairman may have a conflict of interest. As the Chairperson of the Remuneration and Nomination Committee, he also manages the performance appraisal of the Chairman.
The Chief Executive Officer’s primary role is to run the business and implement the decisions of the Board by means of written delegations of authority communicated through Board resolutions and standard-approved levels of authority for capital expenditure, contracts and procurement.
Two changes to the Board took place at executive level during the financial year as a result of the resignation of Sukena Petersen as the Group Financial Director on 1 November 2014 and the appointment of Dylan Pienaar as interim Financial Director on the same date. The appointment of Dylan Pienaar as Financial Director became effective on 1 March 2015.
At Non-executive level, Mr Anthony Bedford resigned on 1 February 2015 and Mr Alex Abercrombie retired as Executive Director but remains on the Board as a Non-executive Director. Mr Rasheed Hargey was appointed to the Board on 1 September 2015.
Biographical details of the Directors are included here.
The independence of Non-executive Directors was assessed, as recommended by King lll, by the Remuneration and Nomination Committee and subsequently reported to the Board. The Board has concluded that the Independent Non-executive Directors’ qualifications, experience and personal characteristics, as well as the fact that they have no material contractual relationships with the Group, are such that their judgement is exercised independently and in an unfettered manner.
In terms of GPI’s Memorandum of Incorporation, Non-executive Directors hold office for a period of three years after which at least a third must retire by rotation, with the longest-serving directors retiring first. Retiring directors may offer themselves for re-election, provided they continue to satisfy the eligibility and qualification criteria of the Companies Act, 71 of 2008, as amended (the Companies Act), and add value to the Company. Details of the Directors who will be retiring by rotation are contained in the Notice of AGM attached in this report.
The tenure of executive directors is governed by way of their respective employment contracts, which contain provisions in keeping with best practice in the market. More information is provided in the Remuneration and Nomination Committee report here.
The Board relies on the guidance and advice of the Remuneration and Nomination Committee in terms of appointments to the Board. When vacancies arise, the Committee identifies potential Directors for appointment by considering their skills, experience and qualifications against the Board’s requirements, as well as those laid down in the Companies Act.
The Committee also ensures that the eligibility and disqualification provisions of the Companies Act are taken into account before recommending a candidate for appointment to the Board. The Board as a whole ultimately decides on the appointment of the Director and provides full disclosure of Director appointments to shareholders, which process is undertaken on a formal and transparent basis.
On appointment, a Director receives a formal letter of appointment together with a pack of the relevant statutory information to ensure an understanding of the provisions of the Companies Act and the obligations of Directors. The Director is also provided with information on the Group’s strategy, operational activities, and the products and services offered by the various operating companies. All directors are informed of the closed periods for dealing in the Company’s securities, the procedure they are required to follow before dealing in securities, as well as details pertaining to related-party transactions.
The Board evaluates its own performance, processes and procedures as well as the performance of its Committees. The Chairman performs an annual evaluation of the attendance and performance of Directors and the efficacy of Board Committees. This takes place by way of an informal process judging the collective experience and contribution of the Directors in light of their knowledge of GPI and its operating environment.
A policy on share dealings and insider trading is applied across the Group to all Company Directors, the Company Secretary, Prescribed Officers and certain identified Senior Executives with access to financial results and other price-sensitive information. These individuals may not deal in shares of the Company during closed periods, as defined in the JSE Listings Requirements, or circumstances in which it would be inappropriate to deal in the Company’s shares, such as while operating under a cautionary or while the Company is in the process of price-sensitive negotiations or acquisitions.
Directors and the Company Secretary are obliged to obtain the Executive Chairman’s written clearance (or in his absence, the LID’s) prior to dealing in the Company’s shares and all requests are referred through the Company Secretary for record-keeping purposes and to liaise with the Company’s sponsors to disclose such dealings to shareholders on SENS.
Directors are obliged to avoid situations that may place them in conflict with the interests of the Company or the Group. In addition, interests must be declared before each Board meeting and procedures are in place for Directors to provide the Company Secretary with full disclosure of any related-party transactions to which they or their immediate families may be party.
Procedures are in place, through the Executive Chairman and the Company Secretary, giving the Directors access, at reasonable times, to all relevant Company information and to senior management, to assist them in the discharge of their duties and responsibilities and to enable them to make informed decisions. Directors are expected to strictly observe the provisions of the statutes applicable to the use and confidentiality of information.
A procedure is in place for Directors to consult independent professional advisors, if necessary and within reason, at the Company’s expense, subject to prior notification to the Executive Chairman or the Company Secretary. No such advice was sought during the financial year.
The Company Secretary serves as the central source of advice to the Board on the requirements of the Companies Act and the principles of corporate governance as contained in the JSE Listings Requirements and King III. In addition to the Company Secretary’s statutory and other duties, the Company Secretary provides the Board as a whole, Directors individually, and the committees with guidance as to the manner in which their responsibilities should be discharged in the best interests of the Company. The appointment and removal of the Company Secretary is a matter for the Board as a whole.
The Board reviews (through the Remuneration and Nomination Committee) the qualifications, experience and competence of the Company Secretary and has noted that the Company Secretary performed all formalities and substantive duties timeously and in an appropriate manner.
Furthermore, the Board is satisfied that the Company Secretary has the appropriate knowledge, skills and experience to execute her duties and that an arm’s-length relationship exists between the Company Secretary and the Board.
The Board meets quarterly to discharge its statutory obligations and to ensure adherence with the Company’s strategic focus. Additional meetings are held during the course of the year to attend to other specific business as and when the need arises.
The Board Committees have clear terms of reference that define their powers and duties. These are documented in Committee Charters which are reviewed by each Committee annually and amended with the approval of the Board. The agenda for each quarterly Board meeting includes, as a standing item, Committee reports and Chairpersons of each Committee are expected to provide the Board with a full account of the Committee’s activities during the preceding quarter.
The Board assumes ultimate accountability for the risk management process and the Group’s system of internal control. In collaboration with the Group Audit and Risk Committee, the Board has adopted a Risk Management Framework aimed at achieving the Group’s overall strategic objectives and the creation of long-term value for shareholders. The Framework provides for ongoing risk identification and assessment as well as the development and implementation of internal controls.
The Audit and Risk Committee is responsible for ensuring that the Risk Management Framework is applied across the Group and for ensuring that risk is appropriately managed and mitigated. It is supported in this role by subsidiary company risk committees that have been established at that level. Combined assurance reports are provided to the Audit and Risk Committee by the internal and external auditors and management.
Subsidiary company risk committees comprise directors and senior management of the relevant subsidiary. These committees are responsible for identifying and analysing risks and for developing and implementing risk responses, assigning responsibility for risk management to specific owners and for monitoring the effectiveness of the responses. Risk Committees meet quarterly to review risks and risk mitigation measures, to rerank risks and to consider new risks that may have arisen during the preceding quarter or to anticipate potential risks. The proceedings are documented and reported to the respective Company Boards on a quarterly basis and subsequently to the Group Audit and Risk Committee.
In addition, management of the individual subsidiaries are responsible for implementing and reporting on the efficacy of processes aimed at the promotion of occupational health and safety, environmental responsibilities, asset management, security and fire risk management, as well as insurance strategies.
The internal audit plan makes provision for the effectiveness of risk responses and internal controls to be reviewed at subsidiary company level with findings being reported directly to the Audit and Risk Committee by the internal auditor.
One of the top risks identified in the previous year was the threat of disruption to the various businesses in the Group. Business continuity consultants were accordingly engaged last year to help management of various subsidiaries develop bespoke business continuity programmes aimed at the protection of life, assets and resources and to ensure continued service to stakeholders in the event of a major disaster.
GPI’s approach to risk management and the above methodologies are ultimately supported by GPI’s BEST TEAM philosophy and core values. These collectively enable the Board to maintain a healthy corporate culture, sound reputation and effective corporate governance.
Internal controls are implemented to mitigate risks across the Group and the internal audit function provides support to management and the Board by performing independent assessments on the effectiveness of the controls and provides impartial judgements thereon.
The internal audit function is governed by the internal audit charter, which is approved by the Audit and Risk Committee. The internal auditor reports to the Audit and Risk Committee and has direct access to the Executive Chairman.
The scope of the internal audit function includes the following:
- Performing annual and biannual internal audits as prescribed by provincial gambling legislation;
- Performing internal control adequacy and effectiveness reviews;
- Determining compliance with policies and procedures;
- Adding value by directing the audit scope, interpreting results and enabling improvements to the Group’s governance, risk and control procedures; and
- Communicating findings to senior management and compiling comprehensive evidence-based reports for the Group Audit and Risk Committee and ultimately the Board.
Specialist skills will be outsourced to assist with specialised audits, such as IT and security.
The Group Audit and Risk Committee is required to ensure that a combined assurance model is applied in order to provide a coordinated approach to all assurance activities, with particular reference to ensuring that the combined assurance received is appropriate to address all the significant risks facing the Company.
Management continually provides the Board with the assurance that the Group’s risk management policy is implemented and integrated into the Group’s day-to-day business activities and that internal controls are applied and their efficacy monitored on a regular basis.
The internal audit function, operating under the auspices of the Audit and Risk Committee, provides an independent assessment of the effectiveness of the Company’s system of internal control and risk management.
GPI’s external auditors, Ernst and Young Inc., have historically expressed and will continue to express an opinion on the fair presentation of the Group’s Annual Financial Statements.