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Good governance contributes to value creation and Clicks Group’s governance philosophy is founded on the principles of accountability, transparency, ethical management and fairness.
Clicks Group recognises the value of corporate governance in ensuring the sustainability of the business and in enhancing long-term equity performance. While compliance with applicable regulation and voluntary codes is a good baseline from which to measure governance, and a non-negotiable demand by the board, the group’s commitment to good governance goes beyond compliance.
The group’s governance and compliance framework is founded on the principles of accountability, transparency, ethical management and fairness. Sound governance is entrenched across the entire business. Governance processes are regularly reviewed to align with regulatory changes and to reflect best practice.
The board believes that effective governance is also contributing to value creation in at least the following respects:
Strong compliance structures and processes to support the effective functioning of these structures are essential to help avoid sanctions for non-compliance with regulation and to contribute to the sustainability of the business. The board accordingly maintains a focus on supporting and, where necessary, enhancing these structures and processes.
The contribution of talent management and succession planning to the sustainability of the business is embraced in the group.
The group’s corporate governance report is published on the website.
Elected by the shareholders, the directors are responsible for the sustainability of the business within the triple context of the economy, society and the environment. The board’s composition, authority, responsibilities and functioning are detailed in the board charter.
The board fulfils a range of legal duties, while being the primary source of effective, ethical leadership for the group. In executing its mandate the board is required to approve strategic plans; monitor operational performance; ensure that risk management and internal controls are effective; monitor regulatory compliance; and promote good governance. It must also approve significant accounting policies and the annual financial statements; monitor transformation and empowerment; manage the process of selection and appointment of directors; and ensure that the group’s remuneration policies and practices are effective and fair. Certain of these functions are delegated to board committees.
The board addressed the following key issues during the year:
The board consists of nine directors, with three salaried executive directors and six independent non-executive directors. The age, tenure, experience and expertise of each director is briefly set out in the board of directors’ report.
All the directors, both executive and non-executive, understand their legal duty to act with independence of mind in the best interests of the company.
While the tenure of non-executive directors is not a determinant of independence in terms of King lV, David Nurek has served as a non-executive director for 22 years, Martin Rosen for 12 years and Fatima Abrahams, John Bester and Fatima Daniels have each served for 10 years. The company derives extensive benefit from the depth of knowledge of the business and the consistent approach to the strategy that long-serving directors bring, particularly with the appointment of a new CEO who will be able to rely on their in-depth knowledge, experience and expertise during the transition period. Strong, suitably qualified new independent non-executive directors will be appointed from time to time to ensure that fresh and critical thinking is maintained at board level.
The remuneration and nominations committee conducted an evaluation of the independence of the chairman and non-executive directors during the year. Factors which could impact on their independence and performance were considered, in particular the factors contained in King IV and the JSE Listings Requirements. In the opinion of the remuneration and nominations committee there are no factors which prevent the directors from exercising objective, unfettered judgement or acting in an independent manner. All of the non-executive directors, including the chairman, are therefore appropriately classified as being independent.
The company has no controlling shareholder or group of shareholders and there is no shareholder representation on the board.
The directors are diverse in terms of gender, race and professional backgrounds, contributing to strong decision-making and ensuring that a range of perspectives are brought to bear on matters under consideration by the board. The directors have extensive experience and specialist skills across a range of sectors, including retail, commercial, governance, human resources remuneration, accounting and finance, legal, healthcare and marketing. The board race and gender diversity policy sets voluntary targets of 25% black and 25% female representation at board level. During the year under review 44% of the directors were female and 44% were black, which exceeds these targets.
A third of non-executive directors are required to resign at each AGM, and executive directors are required to resign on the third anniversary of their appointment or most recent re-election to the board. This provides shareholders with the ability to hold directors to account and to appoint directors to the board whom shareholders believe will add value to the business.
Each director is required annually to assess the performance of the board, its committees, the chairman and the chief executive officer. This year’s assessment indicated that, in the opinion of the directors the board, its committees and the company’s most senior executives have discharged their responsibilities effectively. The directors believe that the board is well balanced in terms of skills, qualifications and experience, and makes a meaningful contribution to the group.
The roles of the chairman and the chief executive officer are formalised, separate and clearly defined. This division of responsibilities at the helm of the company ensures a balance of authority and power, with no individual having unrestricted decision-making powers. The chairman leads the board and the chief executive officer is responsible for the executive management of the group.
While the board and executive management collectively determine the strategic objectives of the group, the board is responsible for approving the group’s strategy, and the executive is responsible for executing this strategy and for the ongoing management of the business. Regular reporting by the executive on progress made in executing its mandate allows the board to monitor implementation of strategy and to assess the effectiveness thereof. Non-executive directors have direct access to management and may meet with management independently of the executive directors.
| Board | Audit and risk | Remuneration and nominations | Social and ethics | |
|---|---|---|---|---|
| Number of meetings | 4 | 4 | 3 | 2 |
| David Nurek | 4+ | (4) | 3^ | 2 |
| Fatima Abrahams | 4 | 3^^+ | 2+ | |
| John Bester | 4 | 4+ | 3 | |
| Fatima Daniels | 4 | 4 | ||
| Bertina Engelbrecht | 4 | (4) | (3) | (2) |
| Michael Fleming | 4 | (4) | ||
| Nonkululeko Gobodo | 4 | 4 | ||
| David Kneale | 4 | (4) | (3) | 2 |
| Martin Rosen | 4 | 2 | ||
| Meeting attendance 2018 (%) | 100 | 100 | 92 | 100 |
| Meeting attendance 2017 (%) | 97 | 100 | 100 | 100 |
| (•) | Indicates number of meetings attended as an invitee |
| + | Chair |
| ^ | Chairs nominations agenda items |
| ^^ | Chairs remuneration agenda items |
The board discharges its oversight function both directly and through its three committees. The board and its committees are each chaired by independent non-executive directors. The composition of the committees conformed to regulatory requirements and King IV for the reporting period. Detailed disclosure on the roles, functions and composition of the committees is contained in the corporate governance report.
The group has applied King IV for the 2018 financial year. Certain elements of King IV were already adopted by the group in the preceding year.
The group subscribes to high ethical standards of business practice. A set of values and a behavioural code of conduct require staff to display integrity, mutual respect and openness. Members of staff have an obligation to challenge others who are not adhering to these values. The social and ethics committee is responsible for monitoring ethical practices. The group has various documented policies which require all employees to adhere to ethical business practices in their relationships with one another, suppliers, intermediaries, shareholders and investors. These policies also set stringent standards relating to the acceptance of gifts from third parties and declarations of potential conflicts of interests. A fraud prevention policy ensures that a firm stance is taken against fraud and the prosecution of offenders.
Oversight, governance and risk management processes are in place to promote compliance with statutory prescripts relating to competition, and the effectiveness of these processes is borne out by the fact that the group has not been sanctioned for anti-competitive conduct. The group has market-leading positions in healthcare retailing and supply. This emphasises the need for the group to remain vigilant in guarding against engaging in anti-competitive practices.
With the changes required by King IV now implemented, the group will continue to seek out and apply relevant best practices in governance. Initiatives to further strengthen governance that the group will consider for the ensuing year are likely to include training for directors and prescribed officers, and the refreshing and refinement of core governance policies and documents.