Corporate governance

Appointment and re-election of directors

Directors are subject to retirement by rotation and re-election by shareholders at an annual general meeting at least once every three years in terms of the company’s articles of association. The board charter is an integral part of the conditions of appointment of all directors. Procedures for appointments are formal and transparent and a matter for the board as a whole to consider.

Non-executive directors retire after reaching the age of 70 at the next annual general meeting. Executive directors retire from the board at 63 years of age at the following annual general meeting.

Ms KW Mzondeki and Mr R van Rooyen, having been elected to the board during the year, are required to retire at the next annual general meeting, but being eligible, offer themselves for re-election. Messrs BP Connellan, KJ Makwetla and GH Oosthuizen retire by rotation at the next annual general meeting. The nomination committee, at its meeting held on 17 November 2009, has recommended that they be re-elected and they have offered themselves for re-election.

Mr MJ Shaw who was requested by the board to stay for another year after turning 70 last year, resigned as chairman of the board in May 2009. Mr TS Munday was appointed chairman.

Messrs Fuller and Shaw, having reached retirement age, will retire at the forthcoming annual general meeting. Mr SD Jagoe, who has started a financial advisory business offshore, will also step down from the board at the forthcoming annual general meeting.

Details of remuneration, fees or other benefits earned by directors in the past year are detailed in note 28 to the annual financial statements.

Board committees

In terms of the articles of association, the board has the power to appoint board committees and to delegate powers to these committees. The board has four sub-committees: the audit and risk committee, the remuneration commitee, the nomination committee and the group executive and risk management committee. Minutes are kept of all committee meetings. These committees can, at their own discretion, seek independent, outside professional advice when necessary. All committees have charters approved by the Reunert board. The committees are directly responsible to the board.

Audit and risk committee
KS Fuller (chairman), BP Connellan, SD Jagoe, Ms KW Mzondeki, MJ Shaw and R van Rooyen.

Mr MJ Shaw was appointed to the committee on 1 June 2009. Ms KW Mzondeki and Mr R van Rooyen were appointed to the committee on 1 November 2009. The external auditor, chief executive, financial director and head of internal audit attend committee meetings by invitation.

The audit and risk committee, chaired by an independent non-executive director comprises only independent non-executive directors. The committee meets at least twice a year and reviews the group’s internal and external audit reports and agrees on the scope of audits. The committee operates in terms of its charter and assists the board with regard to financial and risk management matters in the group.

In terms of the revised JSE Listings Requirements, the committee has satisfied itself of the appropriateness of the expertise and experience of the financial director.

• Monitoring the integrity of the financial statements and other relevant financial reports and reviewing all judgements and inputs to ensure that a balanced assessment of the performance and financial position of the group is presented.
• Satisfied itself of the adequacy and appropriateness of the internal control procedures of the group.
• Recommends the appointment of the independent registered auditors.
• Determining the terms of engagement and approving fees for external audit and non-audit work appointments.
• Ensuring that the appointment of the auditor complies with the Companies Act and any other legislation relating to the appointment of auditors.
• Implementing corporate governance policies.
• Monitoring the financial reporting cycle and developments in accounting standards.
• Supervision of the effective operation of the internal audit department.
• Overseeing the operation of the risk management function that incorporates insurance, security, occupational health and safety and environmental issues.
• Material litigation affecting the group.
  
  

The terms of reference of the audit and risk committee allows investigation into any activity of the group and it can seek information and advice from any employee or expert in order to carry out its duties. The committee has not received any complaints relating to accounting practices or other matters for any of the operations in the group.

The chairman of the audit and risk committee has met on an individual basis with external and internal audit, the chief executive and financial director without the attendance of any other executives of Reunert.

The committee discharges its duties with regard to its widely held subsidiaries in the same meetings that are held for Reunert Limited, as permitted by section 269A of the Companies Act.

During the year, the following meetings took place:

Executive remuneration policy

The remuneration of executive directors and executives in operating divisions is determined by a sub-committee of the Reunert Limited board, the remuneration committee. The committee consists of at least three members who are non-executive independent directors of the board. The chairman of the Reunert board may not act as the chairman of the committee.

• The aim with remuneration is to ensure long-term, sustainable performance while ensuring that staff of the right calibre is attracted and retained.
• A significant portion of the total remuneration is linked to value creating objectives.
• Components of the reward structure are intended to provide alignment between senior executives and shareholders.
• The total remuneration paid to executives is made up of a fixed pay component (cash and benefit costs), a short-term incentive (variable) component and a long-term incentive.

Fixed remuneration
Fixed remuneration is reviewed annually and determined with due regard to market factors such as size, complexity, strategic requirements, profits and asset base.

Variable remuneration
A significant portion of senior management’s reward is variable and is based on the following principles.

• The incentive is self funding, where a percentage of returns in excess of the required growth is available for distribution to management and is smoothed over a period of time to avoid opportunism.
• All executives have, in addition to their financial targets, additional non-financial objectives that form part of the short-term incentive scheme. The scheme is structured to find an appropriate balance between financial and non-financial objectives as well as performance and behavioural criteria.
• The potential pool for distribution to executives is determined by:
• An economic value-added reward structure linked to long-range targets in respect of executive management in operating divisions. A portion is coupled to the performance of the group. In addition, stretch targets are in place to reward exceptional performance; however, all bonuses are capped. Depending on performance, bonus payments are banked and released over a three-year period to guard against rewarding non-sustainable performance.
• Growth in basic headline earnings per share for executive directors. This is aimed at achieving an adequate balance between growth, economic value-added and adequate investment.
• The committee has discretion in the payment of short-term incentives.
  
  

• Long-term incentives have been provided for many years through share option schemes. Options are normally allocated biennially. The committee has the discretion to issue options more frequently if it deems appropriate.
• Options are allocated to employees who have the capability of contributing towards the group achieving its objectives.
• The maximum number of options that may be awarded is capped. Options are capable of being exercised in tranches over three-, four- and five-year periods, after the options are granted.
• Reunert offers a finance scheme to employees to encourage ownership of shares when options are exercised. The loans granted to employees are bearing interest at a rate prescribed by the South African Revenue Services.
• The group has the option to cash settle options instead of issuing shares. The appropriateness of the settlement method is constantly being reviewed.
• Participation in the long-term incentive scheme is limited and the overall number of shares under the option scheme is limited to 10% and has historically been less than 3% of Reunert’s issued shares at any time.

Remuneration committee
SD Jagoe (chairman), TS Munday, MJ Shaw and JC van der Horst. The committee meets at least twice a year to make recommendations to the board on the framework of executive remuneration. These recommendations include granting share options in terms of the Reunert Share Option Scheme and performance-based incentives. The chief executive attends these meetings by invitation.

In the past year, the remuneration committee met on:

This committee comprises independent non-executive directors only and meets at least annually to make recommendations to the board on the composition of the board and to identify and nominate candidates to fill any vacancies. In addition, the committee is tasked to advise the board on succession planning. The chief executive attends by invitation. The committee met on the following dates:

Group executive and risk management committee
G Pretorius (chairman), BP Gallagher, GJ Oosthuizen and DJ Rawlinson.

The group executive and risk management committee comprises executive directors only and is constituted to assist the chief executive to manage the group. Executive directors and senior executives meet regularly to guide and control the overall direction of the group and to identify potential risk areas. The committee has met at least 23 times during the past year. The internal audit department assists the board and management in monitoring the risk management process.