Online Annual Report 2009
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Board comprises:

  • Two Executive Directors
  • 11 Independent Non-executive Directors
  • One Non-executive Director

 

 

 

 

 

 

 

 

 

 

Further reading

Biographical details of each Board member can be found here and here  
MASSMART AT A GLANCE 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Further reading

Greater detail on each Committee’s terms of reference, activities and meetings held during the financial year are shown here  
MASSMART AT A GLANCE 

Corporate governance

Massmart believes that the first steps towards good corporate governance must include embracing the requirements of the relevant governance framework and corporate best practice. More than this, Massmart believes that sustainable and effective corporate governance is best demonstrated through a consistent pattern of ‘doing the right thing’, through good times and bad.

The primary corporate governance framework in South Africa is the King II Report on Corporate Governance, which forms the backbone to Massmart’s own corporate governance framework. In early 2009, in response to changes to South African corporate legislation and shifts in global corporate practices, a draft King III report was released for comment and the final report was released on 1 September 2009. Elsewhere in this report is a brief commentary on the more critical or relevant issues addressed in King III.

In addition to this corporate governance framework, the Group is committed to complying with all legislation, regulations and best practices relevant to our business, in every country where we conduct business.

For the 2009 financial year, apart from the exception outlined immediately below, the Board confirms that the Group complied with the Code of Corporate Practices and Conduct as set out in the King II Report.

The King II Report states that it is preferable that the chairman of the board be an independent non-executive director. Mark Lamberti was appointed non-executive Chairman on 1 July 2007 and, as he was previously the CEO of Massmart, he cannot be considered independent until June 2010. The Board is of the view that the interest of all Massmart stakeholders remains best served by the retention of the skills and experience of Mark Lamberti in the role of Chairman. To ensure good governance, the chairmanship of each of the four Board committees is held by independent directors, and recognising that Mark Lamberti is not considered independent, Chris Seabrooke, the non-executive Deputy Chairman, maintains his role as the Group’s Lead Independent Director.

The Board

The Board of Massmart is responsible for directing the Group towards the achievement of the Massmart vision and mission. The Board is therefore accountable for the development and execution of the Group’s strategy, operating performance and financial results, as well as being the custodian of the Group’s corporate governance.

The Board is responsible for its own composition, the appointment of the Chairman and the Chief Executive Officer, and the constitution and composition of its committees. The Board has a charter setting out its policies, roles and responsibilities in the execution of its mandate described above. Each Board committee also has a charter, or terms of reference, that is formally signed off by the Board. Annually in November the Committees and Board review, and amend if necessary, the respective charters to ensure their relevance.

The role of all directors is to bring independent judgement and experience to the Board’s deliberations and decisions. The Board comprises two executive directors, 11 independent non-executive directors and one non-executive director.

With effect from 2008, the Remuneration and Nominations Committee prepares and circulates a questionnaire aimed at gauging the independence status of each independent non-executive director. This is completed by each independent non-executive director and returned to the Committee, which then assesses each director’s independence.

The Committee felt that the following aspects were important in assessing a non-executive director’s independence:

  • Whether the director had been employed in an executive capacity in the Group within the last three years;
  • Whether the director had served on the Board for longer than nine years;
  • Whether the director was a representative of a major shareholder; and
  • Whether the proportion of that director’s shareholding in Massmart (if any) or director’s fees represented a material part (10% or more) of their wealth or income.

In addition to the above, the Committee considered whether the director is independent in character and judgement and whether there are circumstances which are likely to affect, or could appear to affect, the director’s judgement. Having considered the responses and circumstances of each non-executive, the Committee believes that, in light of his recent tenure as CEO of Massmart, only Mark Lamberti is not independent. The Committee believes that no other non-executive director, or entities associated with or controlled by him/her, owns shares in Massmart which, relative to his/ her personal wealth or income, are sufficiently material to affect his/her independence.

The Company Secretary, Mr Ilan Zwarenstein CA(SA), assists the Board in fulfilling its functions and is empowered by the Board to perform his duties. The Company Secretary directly or indirectly:

  • Assists the Chairman, CEO and CFO with induction of new directors;
  • Assists the Board with director orientation, development and education;
  • Ensures that the Group complies with all legislation applicable/relevant to Massmart;
  • Monitors the legal and regulatory environment and communicates new legislation and any changes to existing legislation relevant to the Board and the Divisions; and
  • Provides the Board with a central source of guidance and assistance.

All directors retire by rotation every three years and unless requested by the Board to serve a further term, retiring directors are not proposed for re-election by the shareholders. In addition, shareholders must ratify the initial appointment of each director at the first annual general meeting following that director’s appointment.

As a result of the requirement that all directors compulsorily retire after three years, at the 25 November 2009 annual general meeting the following directors retire by rotation but all offer themselves for re-election: Messrs MD Brand, ZL Combi, G Hayward, J Hodkinson and P Maw.

Board process and evaluation

The Board meets four times a year and on an ad hoc basis should a particular issue demand its attention. In addition, the Board meets annually to formally consider and approve the strategies of the Massmart Divisions and Group.

The Board’s authority is devolved sequentially through the Massmart Executive Committee, the Divisional Boards and the Divisional Executive Committees, as formally prescribed by the Massmart Governance Authorities (described in the following paragraph). In addition, the Board has delegated certain specific responsibilities to five Board Committees, described more fully below. These Committees assist the Board and directors in discharging their duties and responsibilities under King II and the governance authorities. Full transparency of the Committees’ deliberations is encouraged and the minutes of all Committee meetings are included in the formal Board papers at the ensuing Board meeting. All directors are welcome to attend any Board Committee and Divisional Board meeting.

The Massmart governance authorities describe the specific levels of authority and required approvals for all major decisions at both Group and Divisional level. It clarifies which executive position, committee or board needs to be consulted prior to taking the decision, which body makes the decision and which bodies should thereafter be informed of the decision.

The Board works to a formal agenda that covers strategy, structure, operating performance, growth initiatives, sustainability, investor relations, risk and governance, and any other key activities of the Group. Formal Board papers are prepared for every discussion item on the meeting’s agenda and are distributed timeously to Board members.

Directors are encouraged to take independent advice, at the Company’s cost, for the proper execution of their duties and responsibilities. During this financial year no director felt it necessary to seek such advice. They also have direct, unfettered access to the Group’s external auditors, professional advisers and to the advice and services of the Company Secretary.

Independent directors have unrestricted access to any executive, manager or employee in the Group.

Annually in November, the Remuneration and Nominations Committee facilitates a comprehensive formal performance evaluation of the CEO, comprising a self-evaluation, an evaluation of the CEO by every non-executive director by way of a questionnaire, and an appraisal of the CEO by each of his direct reports using a different questionnaire.

The Board Chairman provides the summary and feedback of the above to the CEO, and he is encouraged to probe and debate any aspect of the evaluation with the Board.

Each year in September, all Board members complete a detailed Board self-assessment, covering the composition, duties, responsibilities, process and effectiveness of the Board. Similarly, all Board Committee members complete detailed self-assessments covering the same aspects of their committees. The results of these assessments are collated by the Company Secretary and sent in summarised form to the respective Board and Committee chairpersons for a formal written response. The summarised results together with the Chairpersons’ written responses are included in the Board papers at the November meeting.

Finally, annually all Board members formally assess the Chairman’s performance and the Deputy Chairman provides the feedback. These assessments are approached in a constructive manner and provide valuable input that is used to enhance the effectiveness of the Chairman, the CEO, and the Board and its committees.

Board and Committee attendance


Click to enlarge

With effect from May 2009, the composition of the Sustainability and Transformation Committee was reviewed. Detail on this committee’s composition is provided in the Sustainability and Transformation section, here.

While the Strategy and Investment Committee met once formally during the year, when the situation required it there were several ad hoc meetings with some or most of the committee members present.

Board Committees

  Composition Scheduled meetings Further reading Responsibility
Audit
Committee
Nigel Matthews
Chris Seabrooke
Peter Maw
Phumzile Langeni
Three times during the year. More information on
the activities and responsibility of the Audit Committee can be found here.

CORPORATE GOVERNANCE
  • Overseeing the effectiveness of the Group’s internal control systems.
  • Reviewing the scope and effectiveness of the external and internal audit functions.
  • Ensuring that adequate accounting records have been maintained.
  • Ensuring the appropriate accounting policies have been adopted and consistently applied.
  • Reviewing and reporting on compliance with the King II Report.
  • Testing that the Group’s going-concern assertion remains appropriate.
  • Overseeing the quality and integrity of the annual financial statements.
 
Remuneration and Nominations Committee Kuseni Dlamini
Chris Seabrooke
Mark Lamberti
Nigel Matthews
Dawn Mokhobo
Four times during the year. More information on the activities and responsibility of the Remuneration and Nominations Committee can be found here.
 

CORPORATE GOVERNANCE

  • Designing, monitoring and communicating the Group’s remuneration policies.
  • Considering and approving executive remuneration including short- and long-term incentives.
  • The assessment, recruitment and nomination of new non-executive directors
 
Risk Committee Nigel Matthews
Dods Brand
Peter Maw
Guy Hayward
Kevin Vyvyan-Day
Norman Gray
Lulu Gwagwa
Once during the year. More information on the activities and responsibility of the Risk Committee can be found here.
 

CORPORATE GOVERNANCE

  • To oversee the Group’s risk management programme as contemplated in King II.
 
         
Strategy and Investment Committee Mark Lamberti
Chris Seabrooke
Peter Maw
Jim Hodkinson
Grant Pattison
Guy Hayward
Once during the year.  
  • To monitor issues that may materially affect Massmart’s strategy, financial health or shareholder value.
 
         
Sustainability and Transformation Committee Phumzile Langeni
Pearl Maphoshe
Dods Brand
Grant Pattison
Brian Leroni
Three times during the year. A separate Sustainability Report can be found here.
  • To assist the Group to discharge its business sustainability responsibility with respect to the implementation of practices that are consistent with transformation and good corporate citizenship.
 

Executive Committee

Composition Meetings Further reading Responsibility
Grant Pattison (CEO)
Guy Hayward (CFO)
Pearl Maphoshe
(Group Human Capital Executive)
Jay Currie (Retail Director Masscash)
Brian Leroni (Group Corporate Affairs Executive)
Robin Wright (Masscash CEO)
Llewellyn Walters (Massbuild CEO)
Kevin Vyvyan-Day (Masswarehouse CEO)
Jan Potgieter (Massdiscounters CEO)
Joe Owens
(Managing Director of the New Formats Division)
Llewellyn Steeneveldt
(Group Commercial Executive)
Monthly Biographical details of each Executive Committee member can be found here.
 

MASSMART AT A GLANCE

  • Deliberates and takes decisions or makes recommendations on all matters affecting Group strategy and operations, including risk management, and executive and senior management succession.
 

Strategy and Investment Committee

The Strategy and Investment Committee comprises the CEO, the CFO, and Messrs Mark Lamberti (Chairman), Chris Seabrooke, Peter Maw and Jim Hodkinson, but other experts, internal or external, may be invited as appropriate.

The role of the Committee, formed in August 2008, is to debate issues that may materially affect Massmart’s strategy, financial health or shareholder value, and, where appropriate or required, to make firm recommendations on these issues to the Board. These issues may include: major acquisitions or disposals; major commitments and investments; material new share issues; possible significant changes or threats to the Group gearing levels; and new debt structure or related-risk exposures.

The Committee meets on an as-required basis initiated by either a potential transaction greater than R400 million or when a material issue requires debate.

Sustainability and Transformation Committee

The Sustainability Committee comprises Mmes Phumzile Langeni (Chairperson) and Pearl Maphoshe (Group Human Capital Executive), and Messrs Dods Brand, Grant Pattison and Brian Leroni (Group Corporate Affairs Executive).

The Committee was restructured during the year in line with best practice and good governance principles. Key changes included reducing the size of the Committee, rotating the chairperson and creating a portfolio for an independent external sustainability expert. The search for and appointment of, a suitably qualified external candidate is currently in process.

The role of the Committee is to assist the Group to discharge its business sustainability responsibility with respect to the implementation of practices that are consistent with good corporate citizenship. The Committee met three times with the objective of reviewing Massmart’s Socially Responsible Investment Index, broad-based black economic empowerment, and sustainability reporting performance.

Performance in each of these areas is measured with reference to the JSE Limited’s Socially Responsible Investment Index criteria, Department of Trade and Industry’s (DTI) Broad-based Black Economic Empowerment (BBBEE) scorecard and Global Reporting Initiative III guidelines.

The Committee is satisfied with Massmart’s sustainability performance. We were particularly encouraged that the Group exceeded its interim BBBEE target by achieving level 5 contributor status 12 months earlier than planned. The Committee was however deeply concerned by a customer fatality in the Masscash Division’s Nqutu store and have been assured by management that safety protocols relating to the incident have been reviewed.

A separate Sustainability Report can be found here.

Executive Committee

The Massmart Executive Committee is the most senior executive decision-making body in the Group. The Committee is chaired by the Chief Executive Officer (Grant Pattison) and comprises the Chief Financial Officer (Guy Hayward), Group Human Capital Executive (Pearl Maphoshe), Retail Director Masscash (Jay Currie), Group Corporate Affairs Executive (Brian Leroni), the four divisional Managing Directors (Robin Wright, Llewellyn Walters, Kevin Vyvyan-Day, and Jan Potgieter), the Managing Director of the New Formats Division (Joe Owens) and the Group Commercial Executive (Llewellyn Steeneveldt).

The Committee deliberates, takes decisions or makes recommendations on all matters of strategy and operations. Within the parameters described by the Board-approved Massmart governance authorities, the decisions or recommendations are sometimes referred to the Board or its relevant Committee for final approval, while in other cases the power to take decisions is delegated to Divisional Boards or Executive Committees.

The Executive Committee has specific responsibility, inter alia, for:

  • Monitoring and measuring the structures, trends and performance of markets and competition;
  • Strategic planning;
  • Defining, configuring, financing and structuring the Group’s portfolio of assets;
  • Shaping and approving the competitive strategies, operating plans and budgets of the Divisions and functional departments;
  • Measuring, monitoring and taking proactive corrective action on Divisional performance;
  • Ensuring adequate risk management, controls and governance throughout the Group; and
  • Shaping and approving succession plans and senior executive management appointments.

In many respects, the relationship between the Massmart Board and the Executive Committee is analogous to the Supervisory Board and Management Board relationship found in the European governance model.