Corporate Governance

Massmart believes that the first steps towards good corporate governance must include embracing the requirements of the relevant governance and regulatory frameworks,as well as 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 regardless of the circumstances. The primary South African corporate governance framework is King III on Corporate Governance (King III), which forms the backbone to Massmart’s own corporate governance framework; in addition Massmart applies high ethical standards which are considered essential for any governance framework in which to operate. 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 2012 financial year, apart from the exceptions outlined below, the Board confirms that the Group complied with the Code of Corporate Practices and Conduct as set out in King III.

Exceptions to King III

  • King III states that the chairman of the board should be an independent non-executive director. Mr Mark Lamberti was appointed non-executive Chairman in July 2007 and, as he was previously the Chief Executive Officer (CEO) of Massmart, he could not be considered independent until June 2010. The Board is therefore satisfied that Mr Mark Lamberti should now be considered an independent director. Recognising however that some may differ with this view, Mr Chris Seabrooke, the non-executive Deputy Chairman, maintains his role as the Group’s Lead Independent Director. In addition, to ensure good governance, and as recommended by King III, the chairmanship of each of the three Board Committees is held by independent directors.
  • Following the Walmart transaction, the reconstituted Board does not have a majority of independent non-executive directors as required by King III. In mitigation, the majority of the non-executive directors are independent, as are the Chairman and Deputy Chairman.
  • King III requires that the salaries of the three most highly-paid employees who are not executive directors should be disclosed. Due to their specialised retail skills, the highly competitive South African retail environment and the employees’ value to Massmart, the Board does not wish to disclose this information for each of the individuals but has instead disclosed the total salaries of the three employees concerned here.
  • The Board does not believe that directors should earn attendance fees in addition to a base fee. Many directors add significant value to the Group outside of the formal Board and Committee meetings, sometimes greater value than they might do within the confines of a formal meeting.
  • The Board does not ask the shareholders for non-binding approval for the Group’s remuneration policies. The rationale and basis for the Group’s executive remuneration policy is carefully considered by the Nomination and Remuneration Committee and is documented in the Integrated Annual Reports. Shareholders with concerns at this policy should contact the Chairmen of either the Board or the Nomination and Remuneration Committee.
  • The head of the Group’s Internal Audit function, the Chief Audit Executive (CAE), does not report to the Audit and Risk Committee. Instead, the CAE reports administratively to the CEO but functionally to the Audit and Risk Committee. The Committee believes that the CEO respects and encourages the independence of the CAE and his department, and that the CAE, in turn, is able to maintain his independence despite his administrative reporting-line to the CEO.
  • The Board does not have a formal dispute resolution process as it believes that the existing processes within the Group operate satisfactorily and do not require a more formal and separate mechanism.
  • Contrary to the recommendations in King III, the Board is unable to remove directors without shareholder approval, except where a director retires by rotation or retires as required by the Memorandum of Incorporation. The Board believes that all directors, but particularly non-executive directors, represent the Company’s shareholders and so it should be the shareholder body that finally approves a director’s appointment or dismissal from the Board.
  • King III recommends that the Company’s sustainability report be audited by an independent external professional. Massmart’s sustainability report has not been audited but verification of the key sustainability metrics here have been obtained through agreed upon procedures performed by Massmart Internal Audit Services. A copy of the agreed upon procedures report is available at the registered office of the Company.