Corporate governance


Other corporate governance issues

External audit
The audit and risk committee has appointed Deloitte to perform an independent and objective audit of the group. The financial statements are prepared in terms of IFRS.

The committee has satisfied itself that Deloitte is independent of the group, as set out in section 94(8) of the Companies Act, 2008, which includes consideration of compliance with criteria relating to independence or conflicts of interest as prescribed by the Independent Regulatory Board for Auditors. Requisite assurance was sought and provided by Deloitte that internal governance processes in the audit firm support and demonstrate its claim to independence.

The committee, in consultation with executive management, agreed to the engagement letter, terms, audit plan and budgeted audit fees for the 2010 year. There is a formal procedure that governs the process whereby Deloitte is considered for non-audit services and approves the nature and extent of nonaudit services Deloitte may provide in terms of the agreed pre-approval policy.

The audit and risk committee has satisfied itself that Deloitte is accredited on the JSE list of auditors and advisers.

Internal audit
Internal audit operates under a charter approved by the audit and risk committee. Internal audit attends all audit and risk committee meetings by invitation and reports its findings to the committee.

The internal audit function reports independently on whether risk management, control and governance processes are adequate and functioning in the group. Internal audit responds to requirements by performing periodic independent evaluations of the adequacy and effectiveness of controls, financial reporting structures and integrity of all information systems and records. Biannual risk assessments are facilitated by the internal audit function and the annual risk-based internal audit work plan is approved by the audit and risk committee. The head of internal audit has a standing invitation to attend executive committee meetings and attends operational board meetings.

Internal audit has unrestricted access to the chairman of the audit and risk committee. Functionally, internal audit reports to the audit and risk committee. This committee approves the appointment and dismissal of the head of internal audit and assesses the internal audit team’s performance, objectivity and independence.

Accounting and internal controls
Accounting and internal controls focus on critical risk areas. The controls are designed to provide reasonable assurance that assets are safeguarded from loss and unauthorised use and financial records may be relied on for preparing the financial statements and maintaining accountability for assets and liabilities. The identification of risks and implementation and monitoring of adequate systems of internal, financial and operating controls to manage such risks are delegated to senior executive management. Risk management policies are communicated directly to executive management and the appropriate levels of management in the various entities.

The board acknowledges its responsibility for ensuring that management implements and monitors the effectiveness of systems of internal, financial and operating controls. The board, via the audit and risk committee, monitors the effectiveness of established controls and procedures to ensure the accuracy and integrity of accounting records and monitors the wider group’s businesses, risks and performance.

Based on the results of the formal documented review of the design, implementation and effectiveness of Reunert’s system of internal financial controls conducted by the internal audit function during the 2010 financial year and, in addition, considering information and explanations given by management and discussions with Deloitte on the results of its audit, nothing has come to the attention of the audit and risk committee that caused it to believe that Reunert’s system of internal financial controls is not effective and does not form a basis for the preparation of reliable financial statements.

Risk management
The board considers risk management to be a key business discipline designed to balance risk and reward and protect Reunert against risks and uncertainties that could threaten achieving its business objectives. The board’s risk strategy has been established through deliberation with the audit and risk committee where Reunert’s risk tolerance has been considered and balanced against the drive towards achieving its strategies and objectives.

The board acknowledges its responsibility for the entire process of risk management, as well as forming an opinion on the effectiveness of this process. Management is accountable to the board for designing, implementing and monitoring the process of risk management, as well as integrating it into the day-to-day activities of the business.

Risk assessments are conducted periodically by all group companies and appropriate mitigation or treatment actions are identified and driven through a risk improvement management system. Formal risk management meetings are conducted biannually across all group companies and are attended by the financial director and Reunert executive directors. Internal audit attends all group company risk meetings and facilitates the process. In addition to formal risk management meetings, risks are discussed monthly at all group company management meetings.

The results of risk meetings are communicated to the audit and risk committee biannually.

Information technology
IT is a key enabler for Reunert in providing employees and decision makers of the group with critical information needed to make effective decisions on behalf of the group. Due to the diverse nature of the group’s IT requirements, Reunert does not have an overarching IT governance framework, charter and policies. However, substantial work is done throughout the group to ensure adequate system security, data integrity and business continuity controls and processes are in place. Key IT risks are assessed and reported biannually to the audit and risk committee. While the board is responsible for IT governance, IT is monitored by the Reunert IT Forum which meets quarterly and is chaired by an experienced IT practitioner in the group.

The board believes the systems of internal control over IT are adequate and effective and is not aware of any material breakdown in the functioning of the internal IT control systems during the year.

Company secretary
RMS fulfils the role of company secretary and provides guidance and advice to the board and, within the company, on matters of governance and changes in legislation. Individual directors and the board collectively have access to the advice and services of RMS, enabling the board and its members to properly discharge their responsibilities and duties. The board believes the management of RMS has the requisite attributes, experience and qualifications to fulfil its company secretarial commitments effectively.

Board and subcommittee meeting agendas, minutes and papers are made available to all members of the board and committees. In addition, RMS administers the share option schemes and all statutory requirements of the company and the group.

The company continues to use RMB as its sponsor. RMB’s services include advising the board on the interpretation of, and compliance with, the Listings Requirements of the JSE and reviewing all notices required in terms of its statutes and JSE rules and regulations.

Employment equity
The group supports employment equity. All business units have employment equity programmes that comply with legislative objectives and requirements. Various skills development, mentoring and training programmes exist within the group. A review of Reunert’s focus on people development is available here.

Environmental issues
Systems and policies are in place to control or influence issues that may have any major impact on the environment and are addressed in detail here.

Stakeholder relations
Reunert is committed to ongoing and effective communication with all stakeholders. More details on these interactions are listed here.

Reunert subscribes to a policy of open, frank and timely communication in line with JSE guidelines and sound corporate governance practice. Executive directors conduct interviews with the investment community during open periods, while executive management interacts with investors and shareholders through participative investor days.

Numerous channels are used to disseminate information according to the preferences of the intended target audiences. These include dialogue with identified stakeholder groups and a corporate website with updated information on the group.

Business conduct

Code of ethics
Reunert is committed to achieving the highest standards of ethical behaviour and places strong emphasis on promoting awareness of, and compliance with, its code of ethics. All employees are required to adhere to this code, which appears here and on the company website. The code is periodically reviewed.

Whistle-blowing function
Reunert has implemented a whistle-blowing programme that gives employees and suppliers the opportunity to anonymously report perceived cases of unethical practice. All reports received are thoroughly investigated and acted on under the guidance of internal audit.

Corruption and fraud
All processes in business units are analysed for risks of potential corruption and fraud. Unfortunately three cases of fraud, totalling nearly R4 million, were uncovered and addressed in the past year. Fraud risk is high on the agenda and processes are continually improved to curtail and eliminate opportunities for fraud to be perpetrated.

Dealing in the company’s shares and closed periods
Employees are restricted from dealing either directly or indirectly in the company’s shares on the basis of privileged price-sensitive information before it is publicly announced to the market. Senior executives require permission from the chief executive before shares are purchased or sold. All directors require permission from the chairman before dealing in the company’s shares.

The group operates a closed period in line with the JSE ruling prior to the publication of its interim and year-end results. During these periods, the group’s directors, officers and senior management may not deal in the shares of the company, nor may they discuss the group’s financial prospects with any outside party. Additional closed periods are enforced as required by corporate activity.

Political donations
Reunert remains impartial to party politics and does not contribute any funding to political parties, their elected representatives, or persons seeking political office. This includes think-tanks, trade unions and other support organisations linked to the creation of support for political parties, their representatives or candidates for office. We do contribute to business institutions that might debate policy issues affecting our business operations.

Anti-competitive behaviour
At the date of this report, no legal actions for anti-competitive behaviour, anti-trust or monopolistic practices have been brought against the group. All senior managers in each business sign annual declarations confirming they have complied fully with competition matters. Comprehensive training in competition matters is provided to all relevant employees throughout the group.

Promotion of access to information
Reunert complies with the requirements of the Promotion of Access to Information Act of 2000. Relevant documents are made available on the group’s website and are also available from the commercial director or the company secretary.