Annual general meeting

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

At the November 2012 Massmart annual general meeting the Chairperson of the Nomination Committee and the Chairperson of the Remuneration Committee and the Audit and Risk Committee were in attendance, as were the Board Chairman, CEO, COO and FD. In total, four 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, i.e. 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 5% of that class of the Company's issued share capital, at a price not greater than 10% above the preceding five-day volume-weighted average. Shareholders have been asked to renew this authority at the forthcoming May 2013 annual general meeting.

During 26 weeks ended 23 December 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 26 weeks ended 23 December 2012, the Massmart Employee Share Trust purchased 0.7 million shares for R124.5 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director, executive or employee may deal, directly or indirectly, in Massmart shares where that person may be aware of unpublished price-sensitive information.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 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 which was updated in 2012, to bring it in line with the Walmart code.

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 by used by all Massmart employees and suppliers to report any suspected unethical behaviour.

Ethics structure and system
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 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.

Massmart Ethics Line

  Total calls
  2012   2011
July 61   41
August 64   46
September 55   48
October 59   38
November 57   58
December 33   32
Total 329   263
Increase 25.1%    

Breakdown of total calls

Contact the Massmart Ethics Line:
Call0800 20 32 46
Fax0800 00 77 88
Outside of SA +27 31 508 6488

Call statistics
During the 26 weeks ended 23 December 2012, 40% of calls received were HR-related matters with 60% of calls being of an ethical nature. Of the 329 calls received, 266 calls were closed during this period.  Total calls for the period under review were 25.1% higher than the previous period (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 “Conflict of Interest” emailer was distributed during the 26 weeks ended 23 December 2012.
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
In the year ending 24 June 2012, 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 and opportunity 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.

The survey reflected that much has already been achieved in promoting ethical standards in Massmart, revealing a high level of awareness that

  • Massmart has a Code of Ethical Conduct;
  • misconduct will have consequences;
  • ethics is actively promoted;
  • a company who is committed to ethics is more successful in all aspects; and
  • customers must be treated with respect.

There is furthermore an excellent understanding of the three basic beliefs (respecting the individual, servicing the customer and striving for excellence) and its relevance to employees’ day to day work.

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 as well as with the requirements of the US Foreign Corrupt Practices Act. 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.

Legal/Regulatory Compliance

Monitoring and managing legal and regulatory risks across the Group has always been a fundamental tenet of our business model.  King III requires that an effective compliance framework should include, among other features, formalized control processes with clear responsibilities and reporting channels. To ensure compliance with King III in an increasingly regulated market, the Group has sharpened its focus in this area by expanding and realigning certain functional legal and regulatory areas, including the following:

  • The Board has appointed a Group General Counsel and Legal Executive with Group-wide scope;
  • Management has created a Governance, Compliance and Ethics Sub-Committee of its Executive Committee to focus on governance, regulatory compliance and ethics matters;
  • The Group has realigned certain reporting lines within both the regulatory and legal areas.  These re-aligned functional areas now report to the Group General Counsel but advise the Divisions on a Group-wide basis; and
  • Management is in the process of appointing a Group Regulatory Compliance Officer to ensure appropriate risk-based policies, processes and procedures are practised throughout the Group.

These expanded and realigned resources have dual objectives of (i) providing legal/regulatory subject matter expertise to the Divisions and (ii) ensuring that each division assesses and manages those legal/regulatory risks that the Group identifies.  With support from the Group, the Finance Directors in each Division will continue to ensure that legal/regulatory risks are appropriately assessed and managed.  Compliance across the Group is exercised as follows:

  • The environment is monitored, formally and informally, via several sources including key subject matter experts within the Group legal/regulatory function, external service providers that review all proposed or impending legislation and regulations, as well as non-executive Directors, and contacts within Government bodies, supplier bodies and consumer groups;
  • Depending upon where the response to the pending 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; and
  • On-going 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 and the newly constituted Governance, Compliance and Ethics Committee.

Currently, the General Counsel who is a qualified attorney and sits on the Executive Committee, manages both legal affairs and regulatory compliance matters.  As mentioned above, the Group is in the process of appointing a Chief Regulatory Compliance Officer.  Once the appointment is made, the General Counsel will relinquish the regulatory compliance portfolio.

Pending legislation or recently enacted laws that may have a potentially material impact on the Group include:

  • Payment Card Industry Data Security Standard;
  • Protection of Personal Information Act; and
  • Various regulations relating to food safety and product safety, most significantly the Consumer Protection Act.

Extraterritorial laws now relevant to Massmart via our subsidiary association with Walmart that may have a material impact on the Group include:

  • The U.S. Foreign Corrupt Practices Act; and
  • Sarbanes Oxley.