Corporate Governance - 2010 Review
Introduction
As corporate governance and sustainability are essential for DigiCore’s stakeholders, the
board of directors aspires to conduct the group’s business with responsibility, accountability,
fairness and transparency and strive to be a good corporate citizen.
The directors agree with the spirit and principles of corporate governance set out in the King
Committee Report on Corporate Governance in South Africa (2002) (King II), and believe the
group complies substantially with the guidelines of that report. The board is committed to
applying appropriate corporate governance policies and practices in each company in the
group. The group maintains a listing on the JSE Limited which mandates certain disclosure
requirements on corporate governance and DigiCore complies in all material aspects to the
regulations and codes of the exchange.
Improvements during the past year and plans for the year ahead
The board has formalized its processes and procedures into a board charter, which was
completed and implemented in the first half of the financial year.
For the ensuing financial year, DigiCore will continue to evaluate areas where governance at
a corporate and subsidiary level can be strengthened. The implication of the new Companies
Act, No 71 of 2008 in South Africa and King III will also be analysed and appropriate steps
taken.
The board has tasked Adv. Vusi Khuzwayo to review the transformation committee and
currently a committee charter has been tabled and accepted by the board. The committee will
comprise non-executive and executive directors, as well as subsidiary directors and
management.
Board of directors
The board is the focal point for ensuring the application of sound corporate governance
principles to achieve the vision and mission established throughout the group.
Composition of the board
The group has a unitary board structure which comprises six executive and five independent
non-executive directors, which ensures a balance of power and authority. There were a few
changes to the board composition over the last year, details of which can be found in the
table on page 22 and in the Directors’ report.
Operation of the board
The board collectively determines the major policies and strategic direction of the group and
retains full and effective control of the group. The implementation of these strategies is
delegated to the executive committee, which oversees part of the day-to-day running of the
group, and is monitored by the board. The board has also delegated some duties to subcommittees that report to the board regularly. Non-executive directors ensure the group’s
interests are served by bringing impartial views that are separate from management.
The functions of the chairperson and chief executive officer are separate, with segregated
duties. The chairperson is an independent non-executive director. He provides guidance to
the board as a whole and ensures the board is efficient, focused and operates as a unit. He
acts as facilitator at board meetings to ensure a flow of opinions and leads discussions to
optimal outcomes in the interests of good governance. The appraisal of the chief executive
officer’s performance has been delegated to the remuneration committee.
The company secretary is responsible for guiding the board on discharging its responsibilities
in terms of the legislative and regulatory requirements of the relevant jurisdictions. The
directors have unlimited access to the advice and services of the company secretary. The
company secretary plays an active role in the company’s corporate governance and business
ethics processes, and ensures that, in accordance with pertinent laws, the proceeding and
affairs of the board, the company itself and, where appropriate, shareholders are properly
administered. The directors may also seek professional advice with any related cost borne by
the company.
Board appointments and evaluation
The nomination of new directors is discussed between non-executive directors and the CEO
before the candidate is put forward to the board. A résumé is circulated to the board to
consider the suitability, skills, knowledge and experience of the nominee and the board, as a
whole, appoints the director. The nominee is formally appointed
at a board meeting by the full board which is minuted. Newly appointed directors must resign
and stand for election at the first annual general meeting following their appointment. Nonexecutive directors do not hold service contracts with the company. New directors are
inducted in an orientation programme to understand the group’s operations and the business
environment in which it operates. Training on fiduciary duties and responsibilities is left up to
the individual director, but any changes in legislation or regulations are brought to each
director’s attention. Directors are encouraged to become members of professional bodies to
gain knowledge and interact with peers. All executive directors are members of the Institute of
Directors. Directors resign every three years by rotation and are re-elected by shareholders at
the annual general meeting to facilitate board continuity. The board follows an annual process
to review the effectiveness and role of the board as well as the effectiveness of the respective
board committees.
Meetings and attendance
The board meets approximately six times a year. The meetings are scheduled in advance to
ensure the maximum attendance. Board packs, including an agenda, are distributed in a
timely manner prior to the meeting and include relevant information so that directors can be
adequately prepared and make an informed contribution to the deliberations at the meeting.
Directors may add items to the agenda.
Meeting dates are circulated annually in advance in order to afford board members the
opportunity to plan their attendance and participation. The number of meetings held and
attendance by each director since the last annual report are detailed below.
Dates and attendance of board meetings:
Board sub-committees
Certain duties of the board have been delegated to sub-committees to give more detailed
attention to specific areas and to better channel the board’s expertise.
Audit and risk committee
The committee comprises three independent non-executive directors and is chaired by an
independent non-executive director, Professor Ben Marx. An assessment of the
independence of the committee members has been conducted.
The committee operates under a charter that sets out its responsibilities as mandated by the
board. The committee meets on average four times a year. A detailed work plan itemising
items on the agenda for each meeting for the year ahead is agreed with the chairman of the
committee and the financial director.
A self-assessment of the functioning of the audit and risk committee was concluded in the last
year and includes a focus on the key competencies of the committee.
The CEO, financial director and other executive directors and management attend meetings
by invitation. Representatives from the external and internal auditors attend the committee
meetings by invitation.
Under the guidance of the audit and risk committee, risk assessments were performed for all
companies in the group. The results of these assessments have been studied by the
respective executive directors who have been tasked with reporting back to the committee on
appropriate mitigation strategies. A review of the internal controls by
the internal auditors during the year has aided in the assessment of the risks within the
companies of the group.
The results of the risk assessment and the reports issued by the internal auditors are used to
compile future internal audit plans which are approved by the audit and risk committee. The
internal audit function reports directly to the committee.
The audit and risk committee report has been incorporated into the annual financial
statements.
Dates and attendance of audit committee meetings:
Remuneration committee
The committee currently comprises one executive and two nonexecutive directors. NA Gasa,
a non-executive director, chairs the meeting. The CEO is a member of the committee, but is
excused when his remuneration is discussed.
The committee advises the board on executive remuneration policies and the annual review
of remuneration packages, profit share paid and issuing share options to executive directors
and senior management.
Dates and attendance of remuneration committee meetings:
Conflicts of interest
DigiCore has incorporated into its board charter a duty and responsibility on directors to
ensure they are free of conflicts of interest between the obligations they have to the company
and their private interests. Any interests in contracts with the company must be formally
disclosed and documented.
Internal control
The board is responsible to ensure an adequate system of internal controls, based on the
group’s policies and guidelines, in all subsidiaries and associates under its control, is
maintained to ensure that the group's assets are safeguarded and managed.
The group’s internal controls and systems are designed to provide reasonable assurance on
the integrity and reliability of the financial statements; to safeguard, verify and maintain
accountability of its assets; and to detect fraud, potential liability, loss and material
misstatement, while complying with applicable law and regulations.
The internal auditors have reviewed areas of the internal control system and reported their
concerns and recommendations to the audit and risk committee for further attention. The
external auditors also consider elements of the internal control systems as part of their audit
and communicate deficiencies when identified.
Going concern
The board, after making enquiries and at the time of approving the annual financial
statements, has formed the opinion that the group has adequate resources to continue its
business as a going concern for the year ahead. The financial statements have therefore
been prepared on the going-concern basis as detailed in the directors’ report.
Closed periods
No director or employee with access to price-sensitive information may trade in company
shares between the date of the end of a reporting period and the date of publishing results for
that period, or in periods where the company is trading under cautionary announcement.
Procedures have been implemented to prohibit share dealings during closed periods.
Code of ethics and business conduct
The group is committed to the highest standards of honesty, organisational integrity and
ethical behaviour in all its dealings. The group’s directors and employees are required to
maintain the highest ethical standards which, in all reasonable circumstances, are above
reproach. Conduct that violates these principles may constitute grounds for disciplinary action
or even dismissal.
The group has established a formal code of ethics and business conduct and has
communicated the code to all staff and published it on the group website.
A whistle-blowing policy has been implemented throughout the group to report fraudulent and
unethical behaviour. The anonymity and the protection of employees reporting such
behaviour, where possible, are ensured. There were no incidents reported over the last year.
Staff members dealing with security matters of customers in the group are regularly required
to take polygraph tests.
Stakeholder engagement
Communication with investors and shareholders takes various forms, primarily via the annual
and interim reports and circulars published to shareholders. The board encourages
shareholders to attend the annual general meeting, details of which are contained in this
report, and shareholders’ meetings which may take place from time to time.
Regular investor roadshows and meetings are held with analysts and institutional
shareholders after the release of financial results. Press releases are issued immediately on
the release of important information.
Further details on the group appear on our website, on the JSE Securities Exchange News
Service and in the press from time to time.
During closed periods, no communication with the investor community by directors or
employees with access to price-sensitive information is permitted.
Communication with all employees, including those in the UK and the Netherlands, takes
place frequently through the mediums of written memorandums, staff meetings and the
recently established intranet.
DigiCore communicates regularly with customers and suppliers to add further impetus to the
drive for sustainability. These meetings are also held to ensure communication channels
remain open and that mutually beneficial opportunities are capitalised upon.
DigiCore is mindful of its impact on society and the community it operates in and strives to
maintain a balanced approach between shareholder and community interests.