Ensuring good corporate governance

Nampak is committed to conducting its business ethically and in compliance with all applicable laws and regulations, while focusing on effective risk management to ensure long-term sustainable development.

Our focus areas during the year and the year ahead

The performance of our businesses, which have been significantly impacted by currency volatility and concomitant adverse macro-economic conditions, continue to direct most of our focus areas. A number of initiatives have already resulted in improved performance in some areas. In South Africa, Bevcan is successfully navigating the growing beverage can market amid increased competition by delivering on increased line speeds, greater efficiencies and good overhead cost control. The turnaround in the South African Plastics business has picked up pace and the Paper business continues to grow across Africa. We also announced that an agreement for the sale of the Glass business was signed on 26 September 2019.

Ensuring that our remuneration and reward practices and policies continue to be fair, equitable and facilitate the delivery of the group's strategy on a sustainable basis to the benefit of all our stakeholders remains a focus area. We continue to drive a transformation agenda and believe that broad-based black economic empowerment is fundamental to ensuring that Nampak, as a responsible corporate citizen, is ultimately representative of the broader South African society and is strategically positioned to take advantage of the changing landscape and effectively deal with increased competition. Nampak has improved its group B-BBEE rating from level 6 to level 2.

You will find more details regarding our focus areas and the material issues and risks informing and affecting these areas throughout the integrated report.

Setting the tone and ensuring compliance and high standards of good governance and ethics

The board sets the direction of the organisation and 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 2019 financial year.

Nampak, as the group's ultimate shareholder, is involved in the decision making of its subsidiaries on material issues. The necessary processes are in place to ensure that all entities in the group adhere to essential group requirements and appropriate minimum corporate governance standards.

Our compliance programme is aimed at ensuring that Nampak conducts its business within the confines of the law. Its purpose is to assist in the detection of contraventions of laws, regulations and company policy, enabling the company to address transgressions immediately. Safety, health, environmental and competition laws, together with fraud and corruption management, are key compliance areas and receive the necessary attention on an ongoing basis. Extensive training in these areas is provided on a regular basis.

Our code of conduct and business ethics sets the minimum standards expected of all directors and employees with allegations of violations being reportable through "Tip-Offs Anonymous", which is independently administered by Deloitte and is accessible 24 hours a day, seven days a week.

During the year under review, there were neither material violations of any laws or regulations, nor any material penalties or fines imposed on the company or its directors for contraventions of any laws or regulations.

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 IV).

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

Our governance structures

The board and all the board committees actively support the company's strategic direction, namely the improvement of margins through operational efficiency, cost management and the unlocking of further value.

The committees play an important role in enhancing corporate governance within the group. The committees support the board by providing oversight and direction in their areas of responsibility and report to the board through their respective chairmen. One of the focus areas for the board during the year was to ensure the effectiveness of its committee structure. As a result, with effect from 1 January 2019, the board (i) combined the nominations and remuneration committees, (ii) assigned the risk management responsibilities of the risk and sustainability committee to the audit and risk committee, (iii) assigned the sustainability matters being dealt with by the risk and sustainability committee to the social, ethics and transformation committee, and (iv) dissolved the risk and sustainability committee. The board further decided that as a whole, it wanted to focus on high-risk and value investment and funding decisions and therefore the investment committee was dissolved with effect from 1 October 2019. The investment committee did not have any meetings during the financial year.

The committee charters outlining the responsibilities of each committee are reviewed annually by the board and are available on our website, www.nampak.com.

All non-executive directors are considered to be independent.

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.

A number of board resignations and appointments occurred during the year, the most recent being Mr de Ruyter's resignation. He will step down as chief executive officer and executive director on 14 January 2020. Mr Mboweni resigned as chairman and non-executive director with effect from 10 October 2018 to become the Minister of Finance. He was also the chairman of the nominations committee and a member of the remuneration committee. Mr Andersen, chairman of the remuneration committee with effect from 10 October 2018, and a member of the audit, nominations, and investment committees, retired after 10 years as non-executive director with effect from 6 February 2019. Professor Madi, chairman of the social, ethics and transformation committee and member of the risk and sustainability, and investment committees, retired after 10 years as non-executive director with effect from 6 February 2019. Ms Seleoane resigned as the executive director, human resources and member of the social, ethics and transformation committee on 28 February 2019. Dr Khoza, a member of the nominations committee, retired after 14 years as non-executive director on 30 May 2019 and Ms Lila, chairman of the risk and sustainability committee and member of the audit and risk committee, resigned as non-executive director on 30 May 2019. Ms John, chairman of the audit and risk committee, resigned as non-executive director with effect from 1 November 2019. For appointments, refer to the composition of our board on the following page.

Composition of our board and board committee structures, mandates and focus areas as at 30 September 2019

Our board of directors1

Independent non-executive directors

PM Surgey (chairman)2, E Ikazoboh, IN Mkhari, J John3, KW Mzondeki4, CD Raphiri5, SP Ridley5

Executive directors

AM de Ruyter (CEO), GR Fullerton (CFO)

Audit and risk committee6

Independent non-executive directors

J John (chairman)3, IN Mkhari, KW Mzondeki7, SP Ridley8

MANDATE AND
FOCUS AREAS

Oversees the quality and integrity of Nampak's integrated and financial reporting Oversees the qualification, independence and effectiveness of the internal and external audit functions Oversees the adequacy and effectiveness of internal controls, risk management and governance

REPORTING, FINANCIAL MANAGEMENT, KEY AUDIT MATTERS AND SIGNIFICANT AREAS OF JUDGEMENT

EXTERNAL AUDIT

COMBINED ASSURANCE, INTERNAL CONTROL AND RISK MANAGEMENT

CONTINUE TO ENSURE FINANCIAL SYSTEMS, PROCESSES AND CONTROLS OPERATE EFFECTIVELY AND RESPOND TO CHARGES IN THE OPERATING AND REGULATORY ENVIRONMENT

OVERSEE THE PROCESS OF MANDATORY AUDIT FIRM ROTATION

OVERSEE THE FURTHER REFINEMENT OF THE COORDINATION, INTEGRATION AND ALIGNMENT OF ASSURANCE ACTIVITIES

Also refer to the annual financial statements for the audit and risk committee report found on the website.


Nominations and remuneration committee9

Independent non-executive directors

SP Ridley (chairman)10, IN Mkhari11, CD Raphiri12, PM Surgey13


MANDATE AND
FOCUS AREAS

Ensures that the group remunerates its directors and employees fairly, responsibly and transparently Assists with the composition of the board and its committees, succession planning and the appointment of directors Manages the performance of the board, the board committees and directors

REMUNERATION POLICY AND REWARD PRACTICES

PERFORMANCE

COMPOSITION AND SUCCESSION

CONTINUED ENGAGEMENT WITH SHAREHOLDERS ON OUR REMUNERATION POLICY AND IMPLEMENTATION REPORT AND ENSURING THE APPROPRIATENESS OF OUR REWARD PRACTICES

ADDRESSING AREAS IDENTIFIED FOR IMPROVEMENT DURING THE FORMAL BOARD AND COMMITTEE EVALUATION

ATTRACTING AND RETAINING CRITICAL SKILLS

Also refer to the remuneration report for details of directors' remuneration and other relevant remuneration information.


Social, ethics and transformation committee14

Independent non-executive directors

CD Raphiri (chairman)10, E Ikazoboh1

Executive director

AM de Ruyter


MANDATE AND
FOCUS AREAS

Performs the role of a social and ethics committee as required in terms of the Companies Act

Assists with ensuring 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

TRANSFORMATION

ETHICS

SUSTAINABILITY

CONTINUE DRIVING THE TRANSFORMATION AGENDA WITH SET TARGETS

CONTINUE ENSURING PROCESSES ARE IN PLACE TO PROMOTE AN ETHICAL CULTURE

CONTINUE TO MONITOR THE GROUPS ACTIVITIES WITH REGARD TO GOOD CORPORATE CITIZENSHIP

 

The CEO attends meetings of the audit and risk committee and the nominations and remuneration committee by invitation. He is requested to leave the meeting, where appropriate, before decisions are made which relate to him personally.

For the biographical details of directors, refer to our board of directors in the integrated report. The roles and functions of the chairman and the CEO are described in the board charter available on our website at www.nampak.com.

1 For board meetings and attendance, refer to the table below.
2 Appointed as interim chairman of the board with effect from 10 October 2018. His appointment as chairman was confirmed by theboard on 19 September 2019.
3 Resigned as non-executive director with effect from 1 November 2019.
4 Appointed as independent non-executive director with effect from 1 September 2019.
5 Appointed as independent non-executive director with effect from 1 March 2019.
6 Meetings held on 2 November 2018 (special), 16 November 2018 (IN Mkhari unable to attend due to a family emergency), 8 March 2019 and 17 May 2019 (NV Lila unable to attend due to prior commitment).
7 Appointed as member with effect 1 October 2019.
8 Appointed as member with effect from 1 April 2019. Appointed as chairman with effect from 1 November 2019.
9 Remuneration committee meetings held on 14 November 2018 (IN Mkhari unable to attend due to a prior commitment) and16 November 2018 (IN Mkhari unable to attend due to a family emergency). Nominations and remuneration committee meetings heldon 14 February 2019 (special), 7 March 2019, 6 August 2019 (special) (IN Mkhari unable to attend due to a prior commitment) and17 September 2019.
10 Appointed as member and chairman with effect from 1 April 2019.
11 Appointed as member with effect from 8 November 2018.
12 Appointed as member with effect from 1 April 2019.
13 Appointed as chairman of the nominations committee with effect from 10 October 2018. Resigned as chairman of the remunerationcommittee but remained a member with effect from 10 October 2018. Mr Surgey remained a member of the nominations andremuneration committee when it was combined with effect from 1 January 2019.
14 Meetings held on 16 November 2018 and 15 May 2019 – all members attended.
15 Appointed as member with effect from 1 April 2019.

 

Directors       Meeting dates    
Board attendance by director   26 Nov 18   5 Feb 19 29 May 19 28 Aug 191 19 Sep 192  
                 
Independent non-executive directors                
PM Surgey (chairman)      
RC Andersen3      
E Ikazoboh      
IN Mkhari     X X  
J John      
RJ Khoza4     X  
NV Lila4      
PM Madi3      
KW Mzondeki      
CD Raphiri      
SP Ridley      
Executive directors                
AM de Ruyter      
GR Fullerton      
MMF Seleoane5      

Note: Attendance reflected for directors as at 30 September 2019. Board and committee attendance percentage reflected taking into consideration all directors’ attendance during the course of the financial year.

1 Special meeting.
2 Strategy conference.
3 Retired with effect from 6 February 2019.
4 Resigned on 30 May 2019.
5 Resigned on 28 February 2019.
- Not appointed as director at this point in time.
x Unable to attend due to prior commitment.

The board reconfirmed the independence of Mr Surgey, who has been in office for more than nine years. His experience, knowledge and independent judgement continue to benefit the company and subsequent to evaluating his performance, the board confirmed his appointment as chairman on 19 September 2019. No lead independent director has been appointed. The chairman of the nominations and remuneration committee, or any other independent non-executive director nominated by the board, shall lead discussions under circumstances where the chairman of the board is conflicted, unavailable or unable to act.

Considering the number of changes that took place during the year, the board will focus on achieving and maintaining stability going forward. We remain committed to ensuring diversity, as it 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 and race diversity policy is specifically taken into consideration. The board comprises an appropriate combination of executive and non-executive directors with a balance of skills, experience and independence, to conduct the business of the company in a professional and effective manner.

Our board comprises diverse skills and experience:

 

Gender diversity (%) Race diversity (%) Age Tenure

Board performance

The development of industry knowledge is a continuous process. The company has a formal induction programme, which includes the opportunity for new directors to visit key operations. The board is appraised of new developments and changes in Nampak’s business environment on an ongoing basis and training is also provided to individual directors on request. 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 formally assessed during the financial year and we are satisfied that the evaluation process is improving the board’s effectiveness.

Although it was determined that the board and its committees generally function effectively and professionally, most areas of performance are impacted, or could not be properly assessed, due to the number of new directors on the board and its committees. For this reason, the board has decided to formally assess its performance and that of its committees in financial year 2020 again. The performance of the chairman was also assessed and it was agreed that he leads the board in
an effective and appropriate manner.

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

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.

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.