COMPLIANCE TO KING III REPORT ON CORPORATE GOVERNANCE EVRAZ HIGHVELD STEEL AND VANADIUM LIMITED
King III Reference
Item
Compliance Yes
Compliance No
Comments
1
1
ETHICAL LEADERSHIP AND CORPORATE CITIZENSHIP
2
1.1
The Board should provide effective leadership based on an ethical foundation
The Board’s activities are guided by the Memorandum of Incorporation (“MOI”) and associated Board and Board Committees Charters which are informed by the Company’s Code of Ethics and monitored by the Social and Ethics Committee of the Company
3
1.2
The Board should ensure that the Company is and is seen to be a responsible corporate citizen
The Board fulfills this function by means of a properly constituted Social and Ethics Committee that assesses and monitors and reports to the Board on all matters of the Company’s corporate citizenship
4
1.3
The Board should ensure that the Company’s ethics are managed effectively
The Board fulfills this function by means of a properly constituted Social and Ethics Committee that assesses and monitors and reports to the Board on all matters of the Company’s ethics
5
2
BOARD AND DIRECTORS
6
2.1
The Board should act as the focal point for and custodian of corporate governance
The Board is constituted and its activities are guided by the MOI and associated
King III Reference
Item
Compliance Yes
Compliance No
Comments Board and Board Committees’ Charters which are informed by the Company’s Code of Ethics and other principles of corporate governance and that are monitored by its respective Board committees, who report at least quarterly to the Board on matters of corporate governance
7
2.2
The Board should appreciate that strategy, risk, performance and sustainability are inseparable
The Board appreciates that strategy, risk, performance and sustainability are inseparable and therefore the Board has appointed an Audit and Risk Committee to give effect to this obligation
8
2.3
The Board should provide effective leadership based on an ethical foundation
The Board provides effective leadership based on an ethical foundation and therefore the Board has appointed a Social and Ethics Committee to give effect to this obligation
9
2.4
The Board should ensure that the Company is and is seen to be a responsible corporate citizen
The Board ensures that the Company is and is seen to be a responsible corporate citizen and therefore the Board gives effect to this obligation through its respective Board committees, and in particular its Social and Ethics Committee that reports regularly to the Board on matters of corporate citizenship, including whether the Company continues to be a responsible corporate citizen. The Committee is informed by a diversity of sources, including management that informs the committee how it implements and maintains compliance to this requirement
10
2.5
The Board should ensure that the Company’s ethics are managed effectively
The Board gives effect to this obligation through its respective Board committees, and in particular its Social and Ethics
2
King III Reference
Item
Compliance Yes
Compliance No
Comments Committee that reports regularly to the Board on matters of ethics
11
2.6
The Board should ensure that the Company has an effective and independent audit committee
The Chairman and other members of the Audit and Risk Committee are all Independent non-executive directors of the Company. The Committee’s performance is evaluated and reported on annually
12
2.7
The Board should be responsible for the governance of risk
Governance of risk is one of the main agenda items of the Audit and Risk Committee and it is mandated to assess and approve the risk management plan, the risk appetite and the risk matrix of the Company which is compiled by management and reported on to the Board on a quarterly basis
13
2.8
The Board should be responsible for information technology (IT)
Information technology is one of the main agenda items of the Audit and Risk Committee and the status of the Company’s Information technology is assessed quarterly
14
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 committees are responsible to monitor compliance to applicable laws and consider adherence to non-binding rules, codes and standards and report thereon to the Board on a quarterly basis
15
2.10
The Board should ensure that there is an effective risk-based internal audit
Risk-based internal audit is one of the main agenda items of the Audit and Risk Committee and the status of the Company’s internal audit is assessed on a quarterly basis
16
2.11
The Board should appreciate that stakeholders’ perceptions affect the Company’s reputation
Stakeholder management is one of the main agenda items of the Social and Ethics Committee and the status of the
3
King III Reference
Item
Compliance Yes
Compliance No
Comments Company’s Stakeholder management is assessed on a quarterly basis
17
2.12
The Board should ensure the integrity of the Company’s integrated report
18
2.13
The Board should report on the effectiveness of the Company’s system of internal controls
The Board reports on the effectiveness of the Company’s system of internal controls through the annual integrated report
19
2.14
The Board and its directors should act in the best interests of the Company
The performance of the Board and its directors, including how the Company’s interests are considered, is formally assessed annually
20
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
Business rescue proceedings or other turnaround mechanisms as soon as the Company is financially distressed as defined in the Act are prescribed in the MOI and relevant charters
21
2.16
The Board should elect a chairman of the Board who is an independent non-executive director. The CEO of the Company should not also fulfill the role of chairman of the Board
The Chairman of the Board is an independent non-executive director, elected by the Board. The Board has confirmed the independence of the Chairman despite his tenure of more than nine years. The CEO of the Company does not fulfill the role of chairman of the Board
22
2.17
The Board should appoint the chief executive officer and establish a framework for the delegation of authority
The appointment of the CEO is done by a formal process as prescribed by the MOI and the Board charter, which is within the mandate of the Remuneration and Nominations Committee
The Board and its sub- committees together with all relevant managers participate in the compilation of the integrated report. The Board approves the final report. The integrated report is however not subject to external assurance due to current cost constraints
4
King III Reference
Item
Compliance Yes
Compliance No
Comments
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2.18
The Board should comprise a balance of power, with a majority of nonexecutive directors. The majority of non-executive directors should be independent
The Board comprises two executive directors, four independent non-executive directors and five non-executive directors, which is considered optimal against the majority stake held by EVRAZ plc. The directors have the required combination of various business skills, including financial, legal, economic and strategic planning and minority shareholders’ interests are adequately protected through the Independent Board whose membership includes only independent non-executive directors
24
2.19
Directors should be appointed through a formal process
The appointment of the directors is done by a formal process as prescribed by the MOI and the Board charter, which is within the mandate of the Remuneration and Nominations Committee
25
2.20
The induction of, and ongoing training and development of directors should be conducted through formal processes
The induction of, and ongoing training and development of the directors are done by a formal process as prescribed by the MOI and the Board charter and implemented by the relevant Induction and Training policy, which is within the mandate of the Remuneration and Nominations Committee
26
2.21
The Board should be assisted by a competent, suitably qualified and experienced Company secretary
The Board is assisted by a competent, suitably qualified and experienced Company secretary who is legally qualified in the relevant and applicable areas of commercial law and other law relevant to the Company’s operations, as well as Corporate Governance
27
2.22
The evaluation of the Board, its committees and the individual directors should be performed every year
Internal evaluation of the Board, including its committees and directors, is performed
5
King III Reference
Item
Compliance Yes
Compliance No
Comments annually. Based on a decision taken by the Board, an external evaluation is conducted every three years, with the last external evaluation having been conducted by the Institute of Directors in South Africa (IoDSA) during 2011.
28
2.23
The Board should delegate certain functions to well-structured committees but without abdicating its own responsibilities
The Board has delegated certain functions to the Audit and Risk Committee, the Social and Ethics Committee and the Remuneration and Nominations Committee of whom the members are elected from the Board directors and that are informed by several sub-committees of the Company and report to the Board quarterly or ad hoc as required
29
2.24
A governance framework should be agreed between the Group and its subsidiary Boards
The governance framework as set out in the MOI and the Board and Committee charters, have been agreed between the Group and its subsidiary Boards
30
2.25
Companies should remunerate directors and executives fairly and responsibly
The remuneration of the directors and the executives are considered and approved by the Board as recommended by the Remuneration and Nominations Committee and as prescribed by the Remuneration policy. Non-executive directors’ fees are subject to shareholder approval
31
2.26
Companies should disclose the remuneration of each individual director and persons falling within the definition of prescribed officers of the Company
The remuneration of each individual director and persons falling within the definition of prescribed officers of the Company is disclosed in the Integrated report
32
2.27
Shareholders should approve the Company’s remuneration policy
Shareholders approve the Company’s remuneration policy annualy at each
6
King III Reference
Item
Compliance Yes
Compliance No
Comments Annual General Meeting
33
3
AUDIT COMMITTEES
34
3.1
The Board should ensure that the Company has an effective and independent audit committee
The Company has a combined Audit and Risk Committee that consists of three independent non-executive directors of the Board and attended by relevant managers from the Company. Its performance is assessed annually
35
3.2
Audit committee members should be suitably skilled and experienced independent non-executive directors
The Audit and Risk Committee members are suitably skilled and experienced independent non-executive directors of the Board with the relevant knowledge in the required skills
36
3.3
The audit committee should be chaired by an independent non-executive director
The Audit and Risk Committee is chaired by an independent non-executive director
37
3.4
The audit committee should oversee integrated reporting
The Audit and Risk Committee reviews the annual integrated report and recommends the integrated report to the Board for approval
38
3.6
The audit committee should satisfy itself of the expertise, resources and experience of the Company’s finance function
The Audit and Risk Committee assesses the expertise, resources and experience of the Company’s finance function on an annual basis
39
3.7
The audit committee should be responsible for overseeing the Company’s internal audit function
The Audit and Risk Committee oversees the Company’s internal audit function through an annual assessment of the internal auditor and quarterly reporting and closed sessions
40
3.8
The audit committee should be an integral component of the risk management
The Audit and Risk Committee oversees the Company’s risk management function, including the risk management plan, the risk appetite and risk matrix through
7
King III Reference
Item
Compliance Yes
Compliance No
Comments quarterly assessments and reporting to the Board
41
3.9
The audit committee is responsible for recommending the appointment of the external auditor and overseeing the external audit process
The Audit and Risk Committee recommends the appointment of the external auditor to the Board for approval and voting at each Annual General Meeting and oversees the external audit function through quarterly assessments and reporting to the Board, as well as an annual assessment of the external auditor
42
3.10
The audit committee should report to the Board and shareholders on how it has discharged its duties
The Audit and Risk Committee reports to the Board and shareholders through its quarterly reports and annual assessments
43
4
THE GOVERNANCE OF RISK
44
4.1
The Board should be responsible for the governance of risk
The Board discharges its responsibility for the governance of risk through the Audit and Risk Committee that oversees the Company’s risk management function, including the risk management plan, the risk appetite and risk matrix through quarterly assessments and reporting to the Board
45
4.2
The Board should determine the levels of risk tolerance
The Board through the Audit and Risk Committee determines the levels of risk tolerance of all components of the business which are documented in the risk management plan, risk matrix and risk appetite
46
4.3
The risk committee or audit committee should assist the Board in carrying out its risk responsibilities
The Audit and Risk Committee assists the Board through its quarterly assessment of the risk management plan, risk matrix and risk appetite and reporting to the Board on these matters
8
King III Reference
Item
Compliance Yes
Compliance No
Comments
47
4.4
The Board should delegate to management the responsibility to design, implement and monitor the risk management plan
The Board has delegated the responsibility to design, implement and monitor the risk management plan to management who has appointed a dedicated manager to take the sole responsibility for this function
48
4.5
The Board should ensure that risk assessments are performed on a continual basis
The Board ensures that risk assessments are performed on a continual basis through quarterly reporting and assessment by the Audit and Risk Committee
49
4.6
The Board should ensure that frameworks and methodologies are implemented to increase the probability of anticipating unpredictable risks
The Board ensures that frameworks and methodologies are implemented to increase the probability of anticipating unpredictable risks following on the risk appetite assessment and the risk matrix that has been compiled in accordance with the risk management plan and which informs frameworks and methodologies to deal with risk
50
4.7
The Board should ensure that management considers and implements appropriate risk responses
The Board ensures that management considers and implements appropriate risk responses that are identified through its risk matrix to mitigate the probabilities of risk events materializing
51
4.8
The Board should ensure continual risk monitoring by management
The Board ensures that continual risk monitoring is performed by management through the Audit and Risk Committee which assesses and reports on the matter on a quarterly basis
52
4.9
The Board should receive assurance regarding the effectiveness of the risk management process
The Board receives assurance regarding the effectiveness of the risk management process from the Audit and Risk Committee that assesses and reports on the matter quarterly and that forms part of
9
King III Reference
Item
Compliance Yes
Compliance No
Comments its annual performance assessment
The Board ensures that there are processes in place enabling complete, timely, relevant, accurate and accessible risk disclosure to stakeholders through its SENS announcements, its integrated report, its community forum and the media
The Board should be responsible for information technology (IT) governance
The Audit and Risk Committee assists the Board in carrying out its information technology (IT) governance responsibilities through the IT management plan and quarterly assessment report and reports to the Board on these matters
5.2
IT should be aligned with the performance and sustainability objectives of the Company
IT is aligned and integrated with the performance and sustainability objectives of the Company. These objectives are assessed and reported on to the Audit and Risk committee and the Board on a quarterly basis
57
5.3
The Board should delegate to management the responsibility for the implementation of an IT governance framework
The Board has delegated to management the responsibility for the implementation of an IT governance framework and a dedicated IT manager is responsible for this function and reports hereon to the Audit and Risk Committee on a quarterly basis
58
5.4
The Board should monitor and evaluate significant IT investments and expenditure
The Board through the Audit and Risk Committee monitors and evaluates significant IT investments and expenditure on a quarterly basis
53
4.10
The Board should ensure that there are processes in place enabling complete, timely, relevant, accurate and accessible risk disclosure to stakeholders
54
5
THE GOVERNANCE OF INFORMATION TECHNOLOGY (IT)
55
5.1
56
10
King III Reference
Item
Compliance Yes
Compliance No
Comments
59
5.5
IT should form an integral part of the Company’s risk management
IT forms an integral part of risk management within the Company and is considered in the Company’s risk matrix
60
5.6
The Board should ensure that information assets are managed effectively
The effective management of information assets is assessed by the Audit and Risk Committee on a quarterly basis, who reports to the Board on the matter
61
5.7
A risk committee and audit committee should assist the Board in carrying out its IT responsibilities
The Board’s combined Audit and Risk Committee assists the Board in carrying out its IT responsibilities
62
6
COMPLIANCE WITH LAWS, RULES, CODES AND STANDARDS
63
6.1
The Board should ensure that the Company complies with applicable laws and considers adherence to non-binding rules, codes and standards
The Board assesses the Company’s compliance with applicable laws and considers adherence to non-binding rules, codes and standards through the Audit and Risk and Social and Ethics Committees
64
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
The Board and individual directors are appraised of changes in applicable regulation and the effect of the applicable laws, rules, codes and standards on the Company and its business, at least quarterly or more frequently if required
65
6.3
Compliance risk should form an integral part of the Company’s risk management process
Compliance is an identified risk that is assessed quarterly in the risk matrix
66
6.4
The Board should delegate to management the implementation of an effective compliance framework and processes
The Board has delegated the implementation of an effective compliance framework and processes to management
67
7
INTERNAL AUDIT
68
7.1
The Board should ensure that there is an effective risk based internal
The Board has ensured that there is an
11
King III Reference
Item
Compliance Yes
audit
Compliance No
Comments effective risk based internal audit with a duly appointed internal auditor that conducts the internal audit function in accordance to the internal audit plan and reports to the Audit and Risk Committee on a quarterly basis. The internal audit function is assessed annually and reported on to the Board. In addition the Chairman of the Audit and Risk Committee conducts a closed session with the Internal auditor quarterly to discuss the internal audit report and associated matters
69
7.2
Internal audit should follow a risk based approach to its plan
The Internal audit plan and progress reports follow a risk-based approach and is reported on accordingly to the Audit and Risk Committee and the Board
70
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 provides a written assessment of the effectiveness of the Company’s system of internal control and risk management to the Audit and Risk Committee and the Board on a quarterly basis
71
7.4
The audit committee should be responsible for overseeing internal audit
The combined Audit and Risk Committee oversee the internal audit function
72
7.5
Internal audit should be strategically positioned to achieve its objectives
Internal audit is strategically positioned to achieve its objectives, with the internal audit function being managed by a dedicated internal audit manager
73
8
GOVERNING STAKE HOLDER RELATIONSHIPS
74
8.1
The Board should appreciate that stakeholders’ perceptions affect a Company’s reputation
The Board appreciates that stakeholders’ perceptions affect a Company’s reputation and therefore the matter of stakeholder management is overseen by the Social
12
King III Reference
Item
Compliance Yes
Compliance No
Comments and Ethics Committee of the Board and assesses progress quarterly. In addition the risk matrix also takes cognisance of stakeholder management
75
8.2
The Board should delegate to management to proactively deal with stakeholder relationships
The Board has delegated to management to proactively deal with stakeholder relationships. A dedicated manager is responsible for the stakeholder management portfolio and reports to the Social and Ethics Committee of the Board quarterly
76
8.3
The Board should strive to achieve the appropriate balance between its various stakeholder groupings, in the best interests of the Company
The stakeholder management plan strives to achieve the appropriate balance between its various stakeholder groupings, in the best interests of the Company
77
8.4
Companies should ensure the equitable treatment of shareholders
Shareholders are one of the stakeholders groups and are treated equitable in line with the stakeholder management plan
78
8.5
Transparent and effective communication with stakeholders is essential for building and maintaining their trust and confidence
The Board acknowledges that transparent and effective communication with stakeholders is essential for building and maintaining their trust and confidence and hence the stakeholder management plan is structured accordingly
79
8.6
The Board should ensure that disputes are resolved as effectively, efficiently and expeditiously as possible
The Board ensures that disputes are resolved as effectively, efficiently and expeditiously as possible as set out in the stakeholder management plan
80
9
INTEGRATED REPORTING AND DISCLOSURE
81
9.1
The Board should ensure the integrity of the Company’s integrated report
The Board and its committees assess the Company’s integrated report and formally approve the report
13
King III Reference
Item
82
9.2
Sustainability reporting and disclosure should be integrated with the Company’s financial reporting
83
9.3
Sustainability reporting and disclosure should be independently assured
Compliance Yes
Compliance No
Comments Sustainability reporting and disclosure is integrated with the Company’s financial reporting and is presented to the market and shareholders together with the Notice of Annual General Meeting
Cost constraints currently prevent the Company from obtaining independent, external assurance of the sustainability portion of the integrated report
14
