Creating value through good corporate governance

Nampak believes in the principle that good corporate governance contributes to enhanced accountability, competence, fairness and transparency. The board of directors leads with integrity, thereby ensuring an ethical approach to all matters. The board sets the direction for the organisation, ensuring that strategy, risk, performance and sustainable development are appropriately balanced and integrated while bringing informed and independent judgement and leadership to bear on material decisions.

ENSURING COMPLIANCE AND HIGH STANDARDS OF GOVERNANCE AND ETHICS

The board is ultimately accountable and responsible for the performance and affairs of the company and is satisfied that it has fulfilled all its duties and obligations in the 2017 financial year.

Nampak has complied with the Listings Requirements of the JSE Limited and applied all the principles of the King IV Report on Corporate Governance for South Africa 2016 (King IVTM).

A statement on Nampak's application of the principles of King IVTM is available on www.nampak.com.

Nampak has the necessary processes in place to ensure that all entities in the group adhere to essential group requirements and appropriate corporate governance standards. Nampak is committed to conducting its business in compliance with all applicable laws and regulations, while focusing on effective risk management to ensure long-term sustainable development and growth. The primary purpose of Nampak's compliance programme is to ensure that Nampak conducts its business strictly within the confines of the law.

Our board’s diversity targets and statistics
Our boards diversity

The programme provides for the detection of contraventions of laws, regulations and company policy, enabling the company to address transgressions immediately.

Safety, health, environmental and competition laws are all identified as key legal compliance areas and therefore receive the necessary attention on an ongoing basis. Another key area to receive specific attention during the year ahead will be the implementation of the provisions of the Protection of Personal Information Act, No 4 of 2013.

During the year under review, there were no material violations of any laws or regulations, nor were any material penalties or fines imposed on the company or its directors for contraventions of any laws or regulations.

A code of conduct and business ethics sets the minimum standards expected of all directors and employees. Alleged violations may be reported through "Tip-Offs Anonymous", which is independently administered by Deloitte and is accessible 24 hours a day, seven days a week.

OUR GOVERNANCE STRUCTURES

Nampak's board of directors

The board comprises an appropriate combination of executive and non-executive directors with the right balance of skills, experience and independence, to conduct the business of the company in a professional and effective manner.

The board is truly diverse in every respect: expertise, experience, age, gender and race. This diversity enriches the collective perspective and contributes towards a sustainable and competitive advantage. When reviewing the composition of the board and its committees, the board's gender diversity policy is specifically taken into consideration.

All non-executive directors are considered to be independent. Nampak has reconfirmed the independence of its non-executive directors who have been in office for more than nine years, namely RJ Khoza, RC Andersen and PM Madi. Their experience, knowledge and independent judgement continue to benefit the company.

Refer to a summary of the biographical details of directors.

For full details, refer to our website, www.nampak.com.

The board met five times during the financial year. Directors and attendance details were as follows:

Board of directors1 21 Nov-16 01 Feb-17 05 May-17 30 May-17 19 Sep-17
Independent non-executive directors
         
TT Mboweni (Chairman)
RC Andersen
E Ikazoboh
RJ Khoza 5
NV Lila
PM Madi 6
IN Mkhari
PM Surgey
J John2 n/a n/a n/a
DC Moephuli3 n/a n/a n/a n/a
CWN Molope3 n/a n/a n/a
Executive directors
         
AM de Ruyter (CEO)
GR Fullerton (CFO)
MMF Seleoane4 n/a n/a n/a n/a
FV Tshiqi4 n/a
1 Nampak's memorandum of incorporation provides that the minimum number of directors shall be six and not less than such number as the board may determine from time to time. One-third of directors must retire at every annual general meeting (excluding the CEO and CFO) and are eligible for re-election.
2 Appointed on 5 May 2017.
3 Resigned on 1 February 2017.
4 FV Tshiqi retired as executive director: human resources on 30 June 2017 and MMF Seleoane was appointed on 1 July 2017.
5 Did not attend the meeting due to prior commitments.
6 Did not attend the meeting due to family commitments.

Board attendance

Mr Surgey has been appointed as the lead independent director. In the event of the chairman's absence or the chairman's inability to perform his duties, or where the independence of the chairman is questionable or impaired, the lead independent director will assume the chairmanship for as long as circumstances require.

The roles and functions of the chairman, the lead independent director and the CEO are described in the board charter available on our website at www.nampak.com.

THE ROLE OF OUR COMMITTEES

The committees support the board by providing oversight and direction in their areas of responsibility. The committees play an important role in enhancing corporate governance and effectiveness within the group. The committees report to the board through their respective chairmen.

The CEO is not a member of the audit committee, the nomination committee or the remuneration committee, but attends meetings by invitation. He is requested to leave the meeting, where appropriate, before decisions are made which relate to him personally.

Audit committee

Chairman Roy Andersen: "The audit committee plays a key role in ensuring the integrity of Nampak's corporate reporting and this year the focus was on key accounting issues including the carrying value of assets, particularly Glass."

The committee met six times during the financial year. Members and attendance details were as follows:

Members 8 Nov-16 10 Nov-16 14 Nov-16 10 Mar-17 19 May-17 08 Sep-17
Independent non-executive directors
           
RC Andersen (Chairman)1
NV Lila 4
IN Mkhari
J John2 n/a n/a n/a n/a
CWN Molope3 n/a n/a n/a
1 Appointed as Chairman on 1 February 2017.
2 Appointed on 5 May 2017.
3 Resigned on 1 February 2017.
4 Did not attend the meeting due to illness.

The committee is a statutory committee constituted in terms of the Companies Act, No 71 of 2008. The committee primarily assists the board to oversee the quality and integrity of Nampak's annual, integrated and financial reporting; the qualification and independence of the internal and external auditors; the scope and effectiveness of the external audit function, and the effectiveness of the internal audit function and internal controls.

Focus going forward: Continue to ensure that the financial systems, processes and controls, including IT controls, operate effectively, and respond to changes in the operating and regulatory environment.

Refer to the annual financial statements for the audit committee report.

Remuneration committee

Chairman Peter Surgey: "With our remuneration approach, we attempt to align reward with performance and achievement of the group's strategic initiatives and at the same time balance business imperatives with retention and shareholder interests."

The committee met three times during the financial year. Members and attendance details were as follows:

Members 09 Nov-16 15 Mar-17 21 Sep-17
Independent non-executive directors
     
PM Surgey (Chairman)
RC Andersen
TT Mboweni

The committee is responsible for ensuring that the group remunerates its directors and employees fairly, responsibly and transparently.

Focus going forward:

  • Continued engagement with our shareholders on our remuneration policy and implementation report
  • Continue ensuring the appropriateness of our reward practices

Refer to the remuneration committee report for details of directors' remuneration and other relevant remuneration information.

Nomination committee

Chairman Tito Mboweni: "In the year we appointed two new directors - an independent non-executive director and an executive director. Both women bring a wealth of relevant experience to Nampak and further improve our diversity, enriching the board's collective perspective. In 2018, we will focus on further bolstering our succession planning."

The committee met twice during the financial year. Members and attendance details were as follows:

Members 15 Mar-17 21 Sep-17
Independent non-executive directors
   
TT Mboweni (Chairman)
RC Andersen
RJ Khoza 1
PM Surgey (LID)
1 Did not attend the meeting due to family commitments.

The committee is mainly responsible for assisting the board and makes recommendations regarding the composition of the board and its committees, succession planning and the appointment of directors as well as managing the performance of the board, the board committees and directors

Focus going forward:

  • Succession planning with a long-term focus
  • Attracting and retaining critical skills
Investment committee

Chairman Ipeleng Mkhari: "Management introduced a stage-gate approach to capex, ensuring proper assessment of capital projects before they are considered by the board. In 2018, we plan to better review investments made in the past 24 to 36 months and establish whether they have met the targets set at the time of investment, and ensure they are performing."

The committee met once during the financial year. Members and attendance details were as follows:

Members 19 May-17
Independent non-executive directors
 
IN Mkhari (Chairman)
RC Andersen
E Ikazoboh
PM Madi 1
DC Moephuli2 n/a
Executive directors
 
AM de Ruyter (CEO)
GR Fullerton (CFO)
1 Did not attend the meeting due to prior commitments.
2 Resigned on 1 February 2017.

The committee is responsible for providing strategic direction and ensuring prioritisation and optimisation on group-wide, high-risk and value investment and funding decisions.

Focus going forward:

  • Continue to focus on optimising funding decisions and capital allocation and monitoring the progress of high-value capital projects
Risk and sustainability committee

Chairman Nopasika Lila: "It is essential that the company understands the risks it faces, so that it can ensure its sustainability. One of the important emerging risks for businesses everywhere comes from the internet: IT platforms are at risk of cyber attack. Mitigation is a continual process: from a financial point of view insurance is important; from an operational viewpoint, companies have to constantly upgrade their security and carry out penetration tests to determine the strength of their systems."

The committee met twice during the financial year. Members and attendance details were as follows:

Members 04 Nov-16 09 May-17
Independent non-executive directors
   
NV Lila (Chairman)
RC Andersen1 n/a 3
PM Madi
PM Surgey
DC Moephuli2 n/a
CWN Molope2 n/a
Executive directors
   
AM de Ruyter (CEO)
GR Fullerton (CFO)
1 Ex officio member (audit committee chairman).
2 Resigned 1 February 2017.
3 Did not attend meeting due to prior commitments.

The committee is responsible for ensuring effective risk management oversight and providing direction on the overall sustainability processes.

Focus going forward:

  • Continued focus on the top risks affecting the group's operations and our risk management processes
  • Continue to identify, monitor and manage risks, which could affect the company's sustainability, reputation and/or environment in which we operate and ensuring that the appropriate controls are in place
Social, ethics and transformation committee

Chairman Phinda Madi: "Like many, Nampak suffered a B-BBEE status downgrade in line with the new codes. At the same time, the black ownership scheme matured and was wound up. We redoubled efforts on every aspect of B-BBEE. We refreshed our values and updated our code of ethics. We broadened our CSI reporting to include details of initiatives beyond South Africa's borders."

The committee met twice during the financial year. Members and attendance details were as follows:

Members 02 Nov-16 11 May-17
Independent non-executive directors
   
PM Madi (Chairman)
IN Mkhari
PM Surgey
Executive directors
   
AM de Ruyter (CEO)
MMF Seleoane1 n/a n/a
FV Tshiqi1
1 FV Tshiqi retired as executive director: human resources on 30 June 2017 and MMF Seleoane was appointed on 1 July 2017.

The committee charters are reviewed regularly by the board and are available on our website, www.nampak.com.

The committee performs the role of a social and ethics committee as required in terms of the Companies Act, No 71 of 2008 and assists the board to ensure that the appropriate strategies, policies and processes are in place in order to drive transformation and the continued development and sustainability of an ethical culture within the group.

Focus going forward:

  • Continue driving the transformation agenda
  • Ensuring that the proper processes are in place to promote an ethical culture
Average committee attendance

A common future focus area for the board and all the committees is to actively support the company's long-term strategy, ensuring Nampak improves margins through operational efficiency and cost management and unlocks further value.

 

THE DEVELOPMENT AND PERFORMANCE OF OUR DIRECTORS

The development of industry knowledge is a continuous process and the board is continually appraised of new developments and changes in Nampak's business environment. Training is also provided to individual directors on request. The company has a formal induction programme, which includes the opportunity for new directors to visit key operations.

Directors are entitled to obtain independent professional advice, at Nampak's expense, and enjoy unfettered access to group records and company employees, in order to discharge their duties.

The evaluation of the performance and effectiveness of the board, its committees, individual directors and the chairman was externally assessed in 2017. The assessment confirmed that the board functions effectively and professionally and that decision-making processes are robust. The exercise affirmed the good relationship between the chairman and the CEO and there was an acknowledgment of the chairman's leadership skills. Priority focus recommendations for the year ahead include board succession (with a focus on formalised succession planning for the position of CEO), the attraction and retention of critical skills and the establishment of a more structured approach to balancing long-term strategy while driving short-term performance.

The effective functioning of the board is facilitated and supported by the company secretariat. Nampak's company secretary is IH van Lochem, who was appointed with effect from 1 September 2017, in accordance with the Companies Act, No 71 of 2008. Ms van Lochem was appointed to replace Mr NP O'Brien, who retired on 31 August 2017.

Ms van Lochem is a member of the group executive committee and reports to the CEO. The company secretary is not a director.

Having considered the competence, qualifications and experience of the company secretary, the board is satisfied that she is competent and has the appropriate qualifications and experience to serve as the company secretary.

The board considered the interactions between the company secretary and the board, and is satisfied that there is an arm's length relationship between the board and the company secretary.

For more details on the responsibilities, powers, policies, and processes of the board, directors, the group executives, the company secretary and other officials, refer to the board charter as well as the memorandum of incorporation of the company on our website, www.nampak.com.