King III principles

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APPLICATION OF KING III PRINCIPLES

 
  Principle Comments
   
Overall score

1.

ETHICAL LEADERSHIP AND CORPORATE CITIZENSHIP

   
1.1 The board should provide effective leadership based on an ethical foundation The board is responsible for corporate governance and determining the group’s strategic direction. The directors formally acknowledge, by way of the board charter, that both their personal and professional reputations have a direct and material impact on their involvement with Reunert. Each of the directors undertake, by way of the board charter, to conduct themselves, both professionally and personally, with integrity in accordance with the ethics and values of Reunert and the laws of South Africa.

Ultimately the board is responsible to shareholders for their leadership decisions and the sustainability of the business. Each board member is obliged to resign after a three-year term of office and will only serve for a further term if re-elected by shareholders.
  Applied
1.2 The board should ensure that the company is, and is seen to be, a responsible corporate citizen Reunert, through its board (and assisted by the social, ethics and transformation committee), protects, enhances and invests in the wellbeing of the economy, society and the environment. Reunert reports on material aspects of its corporate citizenship in its annual integrated report with regard to each of the elements of the triple bottom line (economic, social and environmental).

Reunert publishes a comprehensive sustainability report on its website with more information of its commitment to being a responsible corporate citizen.
  Applied
1.3 The board should ensure that the company’s ethics are managed effectively The ethical standards guiding the group’s relationship with stakeholders are governed by the operations’ codes of conduct and the group’s code of ethics (available on the website). Ethical standards of the group are integrated into the group’s strategies and operations.

A group-wide electronic learning initiative has been undertaken to enhance the knowledge, understanding of and commitment of employees to the relevant codes of conduct and applicable legislation relating to business conduct.

Reunert has a zero-tolerance policy for unethical business conduct and its employees are required to comply with the Prevention and Combating of Corrupt Activities Act No 12 of 2004. Reunert has a formal anti-corruption and bribery policy, which was reviewed by the social, ethics and transformation committee in August 2013 (a copy of the policy is available on the Reunert website).
  Applied

2.

BOARD AND DIRECTORS

   
2.1 The board should act as the focal point for and custodian of corporate governance In addition to the board’s compliance with its governance duties and responsibilities set out in the Companies Act, 2008 and the JSE Listings Requirements, the board also complies with its formal charter which contains specific stipulations in respect of its role, powers and responsibilities for governance, board composition, meeting procedures and work plan. In terms of the board charter, the board considers itself bound to and responsible for the application of King III.

The integrated report contains additional information on the board’s governance role.
  Applied
2.2 The board should appreciate that strategy, risk, performance and sustainability are inseparable The board is actively involved in the interrogation and formulation of the group’s strategy. In addition to its general involvement and overview, the board holds an annual strategy meeting during which it deliberates on strategic considerations with executive and operational management exclusively. The most recent annual strategy meeting took place on 20 May 2013.

The board is assisted in its understanding of strategy, risk, performance and sustainability by its various committees, each of which reports to the board on the matters within its mandate. This process provides the board with a range of information to facilitate integrated decision-making.
  Applied
2.3 The board should provide effective leadership based on an ethical foundation The board provides effective leadership based on an ethical foundation of doing business. This ethical foundation is based on the values of responsibility, accountability, fairness and transparency and is set out in the operations’ codes of conduct and the group’s code of ethics.   Applied
2.4 The board should ensure that the company is and is seen to be a responsible corporate citizen The board ensures that the group is seen to be a responsible corporate citizen and is set out in the group’s anti-corruption and bribery, human rights and environmental policies.

Reunert participates on a voluntary basis, in the annual CDP climate change and CDP water disclosure projects to improve the transparency of its initiatives to remain a responsible corporate citizen.

  Applied
2.5 The board should ensure that the company’s ethics are managed effectively The management of ethics within the group forms an important aspect of the board’s focus and responsibility. A social, ethics and transformation committee that monitors ethical matters on behalf of the board is in place. In addition, any risks which may affect the reputation of the group are discussed and monitored by the risk committee.

Also see comments in respect of principle 1.3.
  Applied
2.6 The board should ensure that the company has an effective and independent audit committee An effective and independent audit committee is in place. The audit committee is appropriately comprised in terms of independence, skills and knowledge and the committee terms of reference outline the roles and responsibilities. The performance of the audit committee is evaluated annually by the board.

As required in terms of the Companies Act, 2008, membership of the audit committee is subject to shareholders’ election.

Further information on the composition, mandate, number of meetings and other relevant matters is published in the governance section of the integrated report.
  Applied
2.7 The board should be responsible for the governance of risk The risk committee assists the board in the execution of its responsibility in respect of the governance of risk. The committee is appropriately comprised in terms of skills, expertise and knowledge and operates under specific terms of reference which are reviewed annually. Risk management strategies, frameworks, policies and processes are in place and driven by management. The performance of the committee is evaluated annually.

The audit committee is primarily responsible for the governance of risks relating to financial reporting and the risk committee for all other risks. There is interaction between the audit and risk committees through cross-membership, to improve effectiveness of risk management.
  Applied
2.8 The board should be responsible for information technology (IT) governance The board takes responsibility for information technology (IT) governance and ensures that an IT framework, which includes relevant structures, processes and mechanisms that will deliver value to the business and mitigate risk, is in place.

The board has delegated IT governance to the audit committee. Management reports all important IT governance issues to the audit committee. In addition, a group information officer is in place and heads up the group’s IT governance function.
  Applied
2.9 The board should ensure that the company complies with applicable laws and considers adherence to non-binding rules, codes and standards The board takes responsibility for the group’s compliance with applicable laws and considers adherence to non-binding rules, codes and standards. Each functional head is responsible for compliance in their respective area with access to external advice where particular expertise is required. The group is aware of the applicable laws that are required to be complied with and assurance in terms of the level of compliance is fed back to the board.

In accordance with the provisions of the Companies Act, 2008, the individual who performs the company secretarial role makes the board aware of legislation that is relevant to the company or affects it.
  Applied
2.10 The board should ensure that there is an effective risk-based internal audit An effective risk-based internal audit function is in place and is monitored by the audit committee (in respect of financial reporting risk) and the risk committee (in respect of other risks). Internal audit’s mandate is regulated by its terms of reference, which is reviewed annually.

The internal audit policy and plan is prepared on a risk basis and reviewed and approved by the audit committee.
  Applied
2.11 The board should appreciate that stakeholders’ perceptions affect the company’s reputation Stakeholders’ perceptions and the potential effect that it may have on the reputation of the group is appreciated and focused on by the board. Specific engagement takes place regularly with updates to shareholders and presentations of the interim and final financial results of the group. There is also a dedicated employee responsible for managing shareholder relations and communications.   Applied
2.12 The board should ensure the integrity of the company’s integrated report The board, following recommendation by the audit committee, approves the integrated report after satisfying itself with respect to the accuracy, completeness and integrity of the report.   Applied
2.13 The board should report on the effectiveness of the company’s system of internal controls The board, through the audit and risk committees, obtains assurance and reports on the effectiveness of the group’s systems of internal control. The integrated report is based on reports by internal audit and external audit, among others.   Applied
2.14 The board and its directors should act in the best interests of the company
The board acts in the best interests of the group in accordance with:
the common law principles governing directors’ fiduciary duties and the duty of care and skill;
the Companies Act, 2008 requirements, particularly sections 75 to 78; and
JSE Listings Requirements.
The opportunity to disclose potential conflicts of interests is a standard agenda item for each board meeting. In addition, directors are required to disclose their other directorships, if any, at least annually.

In terms of the board charter, directors are permitted to take independent advice (in accordance with pre-agreed procedures) in connection with their duties or any other matters or decisions affecting the group.

The nomination committee reviews the skills and performance of the board’s committees, chairmen of the committees and all of its directors on an ongoing basis and, formally, at least once a year. The nomination committee monitors and advises on any questions that arise in respect of potential conflicts of interests.
  Applied
2.15 The board should consider business rescue proceedings or other turnaround mechanisms as soon as the company is financially distressed as defined in the Act The board (with the assistance of the audit committee) regularly monitors the solvency and liquidity of the company. The financial performance of the group is reported to the board at each board meeting by way of the chief financial officer’s (CFO’s) report, which is a standard agenda item. The CFO’s report specifically details the solvency and liquidity position of Reunert. During the 2013 financial year Reunert did not meet the definition of “financially distressed”

The board is apprised of the group’s going concern status, which is also independently assured by the external auditors each year.
  Applied
2.16 The board should elect a chairman of the board who is an independent non-executive director. The chief executive officer (CEO) of the company should not also fulfil the role of chairman of the board The chairman of the board is an experienced independent non-executive director and is not the chief executive officer (CEO). The performance and independence of the chairman is formally evaluated by the board each year, with the assistance of the nomination committee. The incumbent chairman does not participate in this process, in compliance with Section 75 of the Companies Act). The board elects (or re-elects) a chairman annually.   Applied
2.17 The board should appoint the CEO and establish a framework for the delegation of authority The board, with the assistance of the nomination committee, has appointed and will, in future, appoint the CEO by way of a formalised process. The performance of the CEO is evaluated annually. Succession planning of the CEO forms part of the nomination committee discussions.

A delegation of authority framework has been reviewed and approved by the board and is applied in the group. The delegation of authority framework is reviewed annually.
  Applied
2.18 The board should comprise a balance of power, with a majority of non-executive directors. The majority of non-executive directors should be independent The majority of board members are independent non-executive directors. All of the board committees are composed of at least a majority of independent non-executive directors. The audit committee, as required by Section 94 of the Companies Act, 2008, comprises only independent non-executive directors. The principles of a balance of power and authority are entrenched in Reunert’s Memorandum of Incorporation, the board charter and Reunert’s delegation of authority framework.   Applied
2.19 Directors should be appointed through a formal process Appointment of directors is done in terms of a formal policy, which is available on Reunert’s website. The nomination committee identifies suitable candidates who will address the board’s requirements in terms of knowledge, skills and diversity, and makes recommendations to the board on potential appointments.

Director appointments are further subject to formal requirements contained in the Companies Act and the Reunert Memorandum of Incorporation.
  Applied
2.20 The induction of and ongoing training and development of directors should be conducted through formal processes The induction of new directors is the primary responsibility of the chairman and the company secretary and this is largely tailored to the needs of the relevant individual. The Reunert director induction policy is available on the Reunert website.

The continued development requirements of the board are formally assessed each year. There is a standing invitation to all individual directors and all board committees to approach the company secretary at any time, to arrange any training or development required by the individual director or board committee.
  Applied
2.21 The board should be assisted by a competent, suitably qualified and experienced company secretary Reunert Management Services is the company secretary for the group. The individual primarily responsible for the secretarial role has suitable qualifications and experience for the role.

The competence, experience and qualifications of the company secretary are assessed annually and reported on in the integrated report.
  Applied
2.22 The evaluation of the board, its committees and the individual directors should be performed every year The chairman and the board formally perform an annual evaluation of the board, the board committees and individual directors as well as the chairmen of each of the committees. The results of the evaluations are considered by the nomination committee and recommendations are made to the board based on the feedback received.   Applied
2.23 The board should delegate certain functions to well-structured committees without abdicating its own responsibilities Audit, risk, remuneration, nomination, social, ethics and transformation and investment committees are in place. A formal terms of reference document sets out the mandate and authority of each committee and is reviewed annually by both the relevant committee and the board. Feedback is given to the board on the committees’ activities and the minutes of all committees are included in the board packs.

All committees comply with the relevant statutory requirements to the extent applicable and are constituted in accordance with King III and the Companies Act where applicable.
  Applied
2.24 A governance framework should be agreed between the group and its subsidiary boards
A governance framework is agreed between Reunert and its subsidiaries, and deals with:
compliance with respect to the JSE Listings Requirements, where applicable; and
the adoption of the holding company policies or procedures by the subsidiary, where applicable.
  Applied
2.25 Companies should remunerate directors and executives fairly and responsibly The remuneration committee reviews and advises the board on the remuneration philosophy and policy (which is subject to annual approval by shareholders). Executive employees are remunerated by way of a guaranteed package as well as short-term and long-term incentives. Periodically, the group’s remuneration policy, mechanisms and levels are benchmarked.

Additional information on remuneration in the group is included in the remuneration report of the integrated report.
  Applied
2.26 Companies should disclose the remuneration of each individual director and prescribed officers Disclosure of director and prescribed officer remuneration is done in the annual financial statements in compliance with the Companies Act.   Applied
2.27 Shareholders should approve the company’s remuneration policy The group’s remuneration policy is proposed to shareholders at the annual general meeting for a binding vote.   Applied

3.

AUDIT COMMITTEE

   
3.1 The board should ensure that the company has an effective and independent audit committee The company has an audit committee comprising at least three independent, non-executive directors who are nominated by the board on recommendation of the nomination committee, and elected at the annual general meeting by shareholders.

The audit committee has clear terms of reference, approved by the board, which inform the audit committee agenda and work plan. The terms of reference are reviewed annually.

The effectiveness of the audit committee is assessed annually.
  Applied
3.2 Audit committee members should be suitably skilled and experienced independent, non-executive directors The collective skills of the members of the audit committee are appropriate for the company’s size and circumstances, as well as industry, and are assessed annually. The audit committee has an appropriate understanding of integrated reporting (which includes financial reporting), internal financial controls, the external and internal audit process, corporate law, risk management, sustainability issues, information technology governance and the governance processes within the group.   Applied
The chairman of the Reunert board was appointed as a member of the audit committee on 7 December 2012, as the audit committee values his extensive experience and insight. The chairman’s membership of the audit committee is periodically re-evaluated.   Explained and compensated for
3.3 The audit committee should be chaired by an independent non-executive director The audit committee is chaired by an independent non-executive director who is not the chairman of the board. The audit committee takes primary responsibility for and has ultimate authority on matters pertaining to its statutory duties.   Applied
3.4 The audit committee should oversee the integrated reporting The audit committee is mandated to review the integrated report and to make recommendations in this regard to the board. In particular, the audit committee is responsible for evaluating the significant judgements and reporting decisions affecting the integrated report, including changes in accounting policy, decisions that require a major element of judgement and the materiality, clarity and completeness of the proposed financial and sustainability disclosures.

The audit committee ensures that the information in the sustainability report is reliable and that no material conflicts or differences arise when compared with the financial results or the integrated report.
  Applied
3.5 The audit committee should ensure that a combined assurance model is applied to provide a coordinated approach to all assurance activities The audit committee provides an effective balance to the executive management and upholds the independence of internal and external assurance providers.

The combined assurance provided by internal and external assurance providers, as well as by management, is sufficient to satisfy the audit committee that significant financial risk areas within the group have been adequately addressed and suitable controls exist to mitigate and reduce these risks.

The audit committee meets with the heads of the internal and external audit teams, without management present, to provide an opportunity to discuss assurance activities and confirm that these individuals are not subjected to undue influence or pressure.
  Applied
3.6 The audit committee should satisfy itself of the expertise, resources and experience of the company’s finance function The audit committee annually reviews the appropriateness of the expertise and adequacy of the resources of the finance function and the experience of the senior management responsible for the financial function and discloses the results of this review in the integrated report.   Applied
3.7 The audit committee should be responsible for overseeing of internal audit The group has an internal audit function that is independent from the day-to-day operations of the group, and has the necessary resources, budget, standing and authority within the group to discharge its functions.

The audit committee is responsible for the ratification of the appointment, performance management and dismissal of the head of internal audit.

The audit committee approves the internal audit plan and encourages cooperation between internal and external audit.
  Applied
3.8 The audit committee should be an integral component of the risk management process
The board has assigned responsibility for risk management processes to the risk committee. The chairman of the audit committee is also a member of the risk committee.

The audit committee satisfies itself that the following areas have been appropriately addressed:
financial reporting risk;
internal financial controls;
fraud risk as it relates to financial reporting; and
IT risk as it relates to financial reporting.
The audit committee concludes and reports annually to the board on the effectiveness of the company’s internal financial controls.

There is effective interaction between the audit, risk, and social, ethics and transformation committees relating to the reporting and monitoring of risk.
  Applied
3.9 The audit committee is responsible for recommending the appointment of the external auditor and overseeing the external audit process The audit committee recommends to the shareholders and informs the board of the appointment, reappointment and removal of the external auditor, based on an assessment of the firm, and the designated auditor’s qualifications, experience, resources, effectiveness and independence. These attributes are assessed annually.

The audit committee approves the external auditor’s terms of engagement and remuneration.

The audit committee regularly reviews and monitors the objectivity and independence of the external auditor and ensures that the engagement partner rotates every five years.

The audit committee defines a policy for board approval addressing the nature, extent and terms under which the external auditor may perform non-audit services, and ensures that all non-audit services rendered are disclosed in the annual financial statements.

The audit committee monitors concerns identified by internal or external audit and ensures that these are appropriately addressed.
  Applied
3.10 The audit committee should report to the board and shareholders on how it has discharged its duties
The audit committee reports to the shareholders on its statutory duties at the annual general meeting and reports to the board at board meetings. As a minimum, the audit committee reports on:
how its duties were carried out;
whether the committee is satisfied with the independence of the external auditor; and
the annual financial statements, accounting policies and internal financial controls.
An audit committee report, which includes information on how it discharged its duties, is included in the integrated report.
  Applied

4.

THE GOVERNANCE OF RISK

   
4.1 The board should be responsible for the governance of risk
The board takes responsibility for the governance of risk within the group and this is reflected in the board charter, the terms of reference of the audit and risk committees, and the group risk management policy.

Formal risk management policy, framework and processes developed by management and approved by the board on recommendation of the risk committee, have been implemented and widely distributed throughout the group.

The board, through the risk and audit committees, satisfies itself that risk assessments, responses and interventions are effective and discloses this in the integrated report.

The risk management policy incorporates the risk management framework, standards and methodologies adopted, risk management guidelines and details regarding the assurance and review of the risk management process. The risk committee reviews the risk policy annually.

The audit committee satisfies itself that the following areas have been appropriately addressed:
financial reporting risk;
internal financial controls;
fraud risk as it relates to financial reporting; and
IT risk as it relates to financial reporting.
  Applied
4.2 The board should determine the levels of risk tolerance The board, through the risk committee, monitors the significant risks applicable to the group and understands the implications of such risks.

Each year the risk committee sets specific limits on the levels of risk the group is willing to tolerate. The risk committee reviews these limits at each risk committee meeting as well as during periods of increased uncertainty or adverse changes to the business environment.
  Applied
4.3 The risk committee or audit committee should assist the board in carrying out its risk responsibilities
A risk committee is in place and assists the board in reviewing the risk management process, maturity and effectiveness of risk management activities as well as the key risks facing the group.

The audit committee remains responsible to assist the board with financial reporting risks and risks relating to financial controls.

Formal terms of reference detailing the risk committee’s responsibilities for risk management are in place.

The risk committee complies with the following:
members include executive and independent non-executive directors;
members of senior management are invited to attend meetings where the risk committee deems it expedient;
it has a minimum of three members;
it convenes at least twice per year, and
its performance is monitored annually.
The chairman of the audit committee is a member of the risk committee.
  Applied
4.4 The board should delegate to management the responsibility to design, implement and monitor the risk management plan Management is accountable to the board for designing, implementing and monitoring the system and process of risk management and integrating it into in the day-to-day activities of the group. The audit and risk committees assist the board to monitor management in this regard.   Applied
4.5 The board should ensure that risk assessments are performed on a continual basis An ongoing risk assessment process, consisting of risk identification, quantification and risk evaluation is in place. The board, on the recommendation of the risk committee, considers this process effective.

A top-down approach to conducting risk assessments has been adopted and the risk committee regularly receives and reviews a register of the company’s key risks. The risk committee ensures that particular attention is given to risks that could negatively impact the long-term sustainability of the group. Key risks, together with risk responses, are disclosed in the annual integrated report.
  Applied
4.6 The board should ensure that frameworks and methodologies are implemented to increase the probability of anticipating unpredictable risks The group has a risk management policy and framework which outlines the process and methodologies for identifying, monitoring and mitigating risks.

In addition to the formal reports to the audit and risk committees, the risk committee discusses and evaluates, as a standard agenda item, the group’s economic and competitive environment.
  Applied
4.7 The board should ensure that management considers and implements appropriate risk responses Management identifies and notes in the risk register, the risk responses decided upon. Responses include the following options: avoid; treat, reduce or mitigate; transfer; tolerate; exploit; terminate.

These responses are presented to, and interrogated by, the risk committee, and follow up on these responses is monitored as appropriate.
  Applied
4.8 The board should ensure continual risk monitoring by management The group has a risk policy and framework which outlines the process, responsibilities and methodologies for identifying, monitoring and mitigating risks. The group’s progress in managing the risks is reported to the risk committee at least twice a year.   Applied
4.9 The board should receive assurance regarding the effectiveness of the risk management process The board receives assurance from the chairman of the risk committee and CEO that management has implemented, monitored and integrated the risk management plan in the daily activities of the company.

Internal audit provides a written assessment of the effectiveness of the system of internal controls and risk management through the audit and risk committees to the board on an annual basis.
  Applied
4.10 The board should ensure that there are processes in place enabling complete, timely, relevant, accurate and accessible risk disclosure to stakeholders The board discloses any undue, unexpected or unusual risks taken in the pursuit of reward and any material losses and the causes of those losses in the integrated report, if applicable.

The board discloses any current, imminent or envisaged risk that may threaten the long-term sustainability of the company, if applicable, and complies with the relevant JSE Listings Requirements in this regard.

The board discloses its view on the effectiveness of the risk management process in the integrated report.
  Applied

5.

THE GOVERNANCE OF INFORMATION TECHNOLOGY

   
5.1 The board should be responsible for information technology (IT) governance The board is responsible for IT governance and understands the strategic importance of IT in achieving the group’s strategic objectives. The audit committee’s annual plan has IT governance as a standing item.   Applied
5.2 IT should be aligned with the performance and sustainability objectives of the company The IT strategy is aligned with the group’s strategic and business processes. IT is not simply viewed as a service provider to the business, but also as an enabler. When business plans are developed (strategic or operational), IT is involved and integrated into the plan.

Key group-wide initiatives have been identified and are in the process of being executed.
  Needs improvement
5.3 The board should delegate to management the responsibility for the implementation of an IT governance framework Management is responsible for implementing and executing the IT governance framework.

IT frameworks, policies and procedures are implemented to minimise IT risk, deliver value and ensure business continuity efficiently and cost effectively.

Management reports to the audit committee on whether the IT function is achieving its objectives and managing identified risks. The structure of the IT function is defined and there is an IT steering committee chaired by the CFO. The group information officer (GIO) is responsible for IT governance. The GIO is suitably qualified, and communicates through the CFO to the audit committee and executive management on IT governance.

The GIO is in the process of standardising and centralising certain IT services, such as content management, information security and common network services.
  Needs improvement
5.4 The board should monitor and evaluate significant IT investments and expenditure Appropriate technology, processes and people are utilised to support business and governance requirements. Return on investment is measured and reported on for IT investments and projects.   Applied
5.5 IT should form an integral part of the company’s risk management IT risks are assessed as part of the group’s normal risk management activities. Applicable IT laws, regulations, standards and leading practices are considered and complied with where applicable.

Although all entities within the group have disaster recovery initiatives in place, there is no formal business continuity plan (BCP). A formal framework that will assist each entity to create and implement a fit-forpurpose BCP is in the process of being drawn up.
  Needs improvement
5.6 The board should ensure that information assets are managed effectively An information management strategy is in place which monitors the management of IT assets. This includes the management of information privacy and security.   Applied
5.7 A risk committee and audit committee should assist the board in carrying out its IT responsibilities The risk committee ensures that IT risks are addressed through its risk management, monitoring and assurance processes. The risk committee obtains assurance from management regarding the effectiveness of controls to address IT risk. IT, as it relates to financial reporting and going concern, is the responsibility of the audit committee.   Applied

6.

COMPLIANCE WITH LAWS, CODES, RULES AND STANDARDS

   
6.1 The board should ensure that the company complies with applicable laws and considers adherence to non-binding rules, codes and standards Compliance is an ethical and legal imperative within the group. Legislative and regulatory compliance is monitored by the group company secretarial and compliance manager.

The board monitors the group’s compliance with regard to all material applicable laws, rules, codes and standards. External professional assistance is obtained where appropriate.
  Applied
6.2 The board and each individual director should have a working understanding of the effect of the applicable laws, rules, codes and standards on the company and its business It is the role of the group company secretarial and compliance manager to keep the board informed of any material changes to legislation which could have an impact on the group.

Continued development requirements of the board are formally assessed each year. There is also a standing invitation to all individual directors or board committees to approach the company secretary at any time, to arrange any training or development required by the individual director or board committee.
  Applied
6.3 Compliance risk should form an integral part of the company’s risk management process Compliance risk forms an integral part of the group’s risk management process.

The compliance function (as part of the broader management structure) provides assistance to the board and management in complying with applicable laws, rules, codes and standards.

The group legal counsel assists with the interpretation of regulatory requirements where necessary.
  Applied
6.4 The board should delegate to management the implementation of an effective compliance framework and processes The group’s procedures and control framework incorporates compliance with relevant laws, rules, codes and standards.

The leadership of the group encourages a culture of compliance; of establishing the appropriate structures, education and training relevant to compliance. Details of any material instances of non-compliance by either the group, or its directors or its prescribed officers are included in the integrated report, if applicable.
  Applied

7.

INTERNAL AUDIT

   
7.1 The board should ensure that there is an effective risk-based internal audit
An internal audit function is in place and has an internal audit charter defined and approved by the board following recommendation by the audit committee. The charter is reviewed annually. The internal audit function is risk based. The internal audit function adheres to the IIA Standards and code of ethics.

Internal audit performs the following functions:
evaluates the group’s governance processes;
performs an objective assessment of the effectiveness of risk management and the internal control framework;
systematically analyses and evaluates business processes and associated controls; and
provides a source of information as appropriate, regarding instances of fraud, corruption, unethical behaviour and irregularities.
  Applied
7.2 Internal audit should follow a risk-based approach to its plan The internal audit plan is risk-based and takes into account the strategy and risks of the group. Internal audit is independent from management. Internal audit planning takes the form of an assessment of risks and opportunities facing the group.

Internal audit reporting meets the needs and requirements of management and the audit committee.
  Applied
7.3 Internal audit should provide a written assessment of the effectiveness of the company’s system of internal control and risk management Internal audit forms an integral part of the group’s combined assurance model. Internal audit provides a written assessment of the system of internal controls and the effectiveness of risk management to the audit committee and the board.

The internal audit function possesses the appropriate competencies to focus its attention on risk and internal control.
  Applied
7.4 The audit committee should be responsible for overseeing internal audit The internal audit plan is agreed and approved annually by the audit committee.

Internal audit provides independent and objective assurance to the audit committee that the internal financial controls are adequate and effective.

The head of internal audit reports functionally to the audit committee and attends all audit committee meetings.

The audit committee ensures that the internal audit function is subjected to a quality review, either in line with the IIA standards or as and when the audit committee determines appropriate.

The audit committee provides reports on the state of the internal financial control environment in the group’s integrated report.
  Applied
7.5 Internal audit should be strategically positioned to achieve its objectives The internal audit function is independent and objective and reports functionally to the audit committee. There is sufficient interaction between internal audit and the audit and risk committees to ensure the optimum level of control oversight is maintained.

The internal audit function is appropriately skilled and resourced for the complexity and volume of risk and assurance needs. External assistance is obtained if the relevant skills are not readily available in the internal audit department. The adequacy of skills and resources are assessed annually by the audit committee.
  Applied

8.

GOVERNING STAKEHOLDER RELATIONSHIPS

   
8.1 The board should appreciate that stakeholders’ perceptions affect a company’s reputation The board is the custodian of the corporate reputation and stakeholder relationship. The Reunert CEO engages with stakeholders and reports to the board in this regard.

The gap between stakeholder perceptions and the performance of the group is monitored, managed and measured by the board and the audit and the risk committees (where appropriate) to enhance or protect the group’s reputation and avoid damage and destruction by the group’s actions.

Also refer to the response to principle 2.11.
  Applied
8.2 The board should delegate to management to proactively deal with stakeholder relationships Management has developed a strategy and formulated policies to manage relationships with all stakeholder groups.

The board encourages stakeholders to attend the annual general meeting, and the chairman of each board committee is present at the annual general meeting.

The group has a person dedicated to investor and stakeholder relations and communications, who assists the board.

The board discloses in its integrated report the nature of the group’s dealings with stakeholders and the outcomes of these dealings.
  Applied
8.3 The board should strive to achieve the appropriate balance between its various stakeholder groupings, in the best interests of the company The group’s CEO and CFO are primarily responsible for balancing the company’s interests and stakeholder interests for sustainable business. These activities are reported to the board.

As a listed entity, the group operates in a highly regulated and visible environment. Stakeholders are taken into account in decision-making, as set out in the sustainability report.
  Applied
8.4 Companies should ensure the equitable treatment of shareholders Compliance with the JSE Listings Requirements ensures equitable treatment of shareholders.   Applied
8.5 Transparent and effective communication with stakeholders is essential for building and maintaining their trust and confidence As a listed entity, much of the group’s stakeholder engagement is prescribed.

The group provides complete, timely, relevant, accurate, honest and accessible information to its stakeholders, taking into account legal and strategic considerations.

A stakeholder communication programme is in place. The objective of the programme is to ensure that all who have a right to know are properly informed, that effective feedback exists, that the board is alerted to matters that need to be communicated to stakeholders in good time, and that processes exist to deal rapidly with any crisis.
  Applied
8.6 The board should ensure that disputes are resolved as effectively, efficiently and expeditiously as possible Disputes are resolved as effectively, promptly and efficiently as possible. Where possible, out of court settlements are obtained or alternative dispute resolution mechanisms are sought. Dispute resolution is done as cost-effectively as possible.

The group legal advisor reports to the audit and the risk committees on litigation that could materially impact the finances or reputation of the group. The group legal counsel is a permanent invitee to the risk committee.

The investor relations and communications officer assists in formulating appropriate communication to stakeholders in the event of material disputes.
  Applied

9.

INTEGRATED REPORTING AND DISCLOSURE

   
9.1 The board should ensure the integrity of the company’s integrated report The group issues an annual integrated report that is approved by the board, on the recommendation of the audit committee. The board ensures that, to the best of its knowledge and belief, the report provides a truthful and factual representation of material issues, is reliable and that no conflicts or differences arise when the various sections of the report are compared.

A strong correlation exists between the strategic, financial, risk management and sustainability information provided.
  Applied
9.2 Sustainability reporting and disclosure should be integrated with the company’s financial reporting The annual integrated report includes commentary on the group’s financial statements. This allows the reader to contextualise the financial results based on the material issues that impact the group, its stakeholders and the communities in which it operates. The full set of annual financial statements is not included in the integrated report, but is available on the Reunert website. The sustainability report follows the guidelines of the Global Reporting Initiative (GRI) and is also available online.   Applied
9.3 Sustainability reporting and disclosure should be independently assured External independent assurance is not provided for the sustainability information. Instead, internal audit has performed appropriate procedures to assess the completeness and accuracy of non-financial information presented in the integrated report.

The board is satisfied that the internal audit procedures are sufficient to provide the required level of comfort as to the reliability of the information presented. The desirability of external assurance is periodically reassessed.

BBBEE levels for all group operating entities are externally verified by rating agencies.
  Explained and compensated for