COMPLIANCE, TRANSPARENCY AND ACCOUNTABILITY

Annual general meeting

Insight

Annual General Meeting

13h00 Wednesday,
21 November 2012
Massmart House
16 Peltier Drive
Sunninghill Ext 6
Sandton

Attendance by all directors at Massmart’s annual general meeting is strongly encouraged while attendance for Board Committee Chairpersons is compulsory.

At the November 2011 Massmart annual general meeting the Chairpersons of the Nomination and Remuneration Committee and the Audit and Risk Committee were in attendance, as were the Board Chairman, CEO, COO and FD. In total, three non-executive directors attended the annual general meeting.

The Company’s transfer secretaries attend every general meeting of shareholders to assist with the recording of shareholders’ attendance and to tally the votes. The Chairman confirms with the meeting that votes will be counted by way of poll, ie all votes are counted, rather than by way of a show of hands.

Share buyback programme

Annually the Group seeks, and obtains, the approval of the shareholders in general meeting to repurchase Massmart shares. This authority – valid until the following year’s annual general meeting and subject to the Listings Requirements of the JSE – allows the Group to purchase its own shares not exceeding 15% of that class of the Company’s issued share capital, at a price not greater than 10% above the preceding five-day weighted average. Shareholders have been asked to renew this authority at the forthcoming November 2012 annual general meeting.

During the year to June 2012, no Massmart shares were purchased on the open market by a Massmart subsidiary. The amount and timing of any future purchases will be determined by the Board and are dependent on the Board’s view on the intrinsic value of Massmart shares, the ruling market price from time to time, the Group’s cash position and future cash requirements, and prevailing market conditions.

The Massmart Employee Share Trust acquires shares from time to time on the JSE open-market to mitigate the dilution caused by the Company issuing new shares when options are exercised by participants. During the 2012 financial year, the Massmart Employee Share Trust purchased 1.2 million shares for R206.7 million which were utilised to meet vesting share options.

Share dealings

No director, executive or employee may deal, directly or indirectly, in Massmart shares where that person may be aware of unpublished price-sensitive information. There are strict closed periods during which all directors, executives and employees are not allowed to deal in Massmart shares.

The periods begin one month prior to the end of each reporting date (these reporting dates being December and June) and end on the public release of the Group results. A closed period also applies from the date when Massmart issues a cautionary announcement.

In addition, all directors, executives and employees, and their associates as defined by the JSE, are not allowed to deal in Massmart shares in the final hour of trading on the JSE. All share dealings by a director, executive or employee must be authorised by the CEO, the COO or the FD. Any dealings by the CEO are authorised by the Chairman, and dealings by the COO and the FD are authorised by the CEO.

Corporate ethics

Massmart Ethics Line

  Total calls
  2012   2011
July 41   35
August 46   50
September 48   31
October 38   46
November 58   52
December 45   48
January 43   31
February 42   45
March 53   60
April 58   49
May 76   45
June 49   40
Total 597   532
Increase 12.2%    

Massmart is committed to achieving the highest standards of ethical behaviour and continued its strong emphasis on promoting awareness of, and compliance with, Massmart’s Code of Ethical Conduct.

Massmart Ethics Line

Massmart has an Ethics Hotline that is independently run by Deloitte Tip-Offs Anonymous. Deloitte Tip-Offs Anonymous has been certified by the External Whistle-blowing Hotline Services Provider Standard E01.1.1. This Hotline can be used by all Massmart employees and suppliers to report any suspected unethical behaviour.

Ethics structure and system

From 1 July 2011 the Massmart Ethics Office adopted Walmart’s ethics system, IntegriLink, to record all calls received. Calls are investigated by the Divisional Ethics Officers and, where necessary, by the MIAS. All calls are monitored by the Massmart Ethics Office, and significant calls by the Walmart Global Ethics Office. The Group Ethics Forum meets twice a year where the call statistics and trends are discussed. The appointment of Ethics Officers in all Divisions, and the formulation and regular meetings of the Group Ethics Forum have ensured the continued focus on the consistent application of ethics practice and training within Massmart.

Call statistics

Breakdown of total calls

%
Ethics 47
HR 53

During the 2012 financial year, 53% of calls received were HR-related matters with 47% of calls being of an ethical nature; 27.1% of calls of an ethical nature that were received and closed during 2012 were substantiated. Total calls for the year under review were 12.2% higher than the previous year (see table alongside).

Ethics awareness

The Massmart Ethics Office continuously distributes ethics awareness communications throughout Massmart:

  • Regular “emailers” providing communication on relevant topics are sent to all employees with access to an email address and for management to display on all notice boards. The following emailers were distributed during 2012: ‘Employee theft’, ‘Whistle-blowing’, ‘Bribery’, ‘Profiteering’ and ‘Conflict of interest’.
  • Ethics posters are situated in all stores and head offices. The posters currently displayed are: ‘Do what is right’ and ‘What does ethics mean?’ which will soon be available in ten languages, and two other posters that explain the Massmart Ethics Line and our values.

Ethics risk survey

This year Massmart contracted the Ethics Institute of South Africa to conduct an Ethics Risk Survey. The survey aims to measure Massmart’s ethics management and to produce an ethics risk profile. The results of the survey will inform the next steps in Massmart’s ethics management programme and prioritise the behavioural and cultural areas on which to focus.

The survey was conducted using manual questionnaires in all Divisions, including all African operations. An outstanding achievement in obtaining 16,080 completed questionnaires will provide a high level of reliability from the data gathered.

Contact the Massmart Ethics Line:
Call0800 20 32 46
SMS32846
Fax0800 00 77 88
Emailmassmart@ethics-line.com
www.walmartethics.com
Outside of SA +27 31 508 6488

The results of the survey will be reported at a Massmart Group level, by Division and for the different Regions in both South Africa and Africa, and will provide information on:

  • staff awareness of Massmart’s ethics interventions;
  • ethical risks;
  • recommendations to mitigate these identified risks; and
  • ethics management opportunities.

Suppliers and service providers

Massmart regularly communicates its ethical standards to suppliers and service providers, and attempts to ensure that they comply with these standards. This is achieved in the following ways, just to mention a few: suppliers and service providers are invited to make use of the Ethics Hotline, Massmart’s formal trading agreements detail ethical practices that suppliers are expected to uphold, and supplier ethical cards are distributed with supplier communications.

Compliance

Monitoring and achieving legal and regulatory compliance across the Group has always been a fundamental tenet of our business model. King III however, requires that the compliance process should be more formal with clear responsibilities and reporting. To this end, the Finance Directors in each Division are the Compliance Officers (and Risk Officers), and have been formally tasked with ensuring that their respective Divisions monitor and comply with all regulations and legislation.

Compliance across the Group is exercised as follows:

  • The environment is monitored, formally and informally, via several sources including specifically-appointed service providers that review all proposed or impending legislation and regulations, as well as non-executive directors, and contacts with Government bodies, supplier bodies and consumer groups.
  • Depending upon where the response to the impending legislation can most efficiently and effectively be addressed, the task would fall to one of the trading forums (Food, Liquor, General Merchandise, Cellular) or functional forums (TIP, Finance) or even the Group Executive Committee. The members of these forums are also tasked with keeping their respective Divisions apprised of intentions to support the role of the Divisional Compliance Officers.
  • Ongoing compliance is monitored and tested through various means including MIAS, External Audit and third-party service providers. Reports from these entities are presented to the Audit and Risk Committee.

The Group Compliance Officer is an in-house legal resource at Massmart Corporate who is a qualified lawyer and reports to the FD.

The impending legislation that may have a potentially material impact on the Group includes:

  • Payment Card Industry Data Security Standard; and
  • Protection of Personal Information Act.