THE MAIN BOARD OF DIRECTORS OF FOSCHINI LIMITED
Role
The direction and leadership of Foschini is the responsibility of the directors of the main board of Foschini Limited whilst the operating board has responsibility for the day-to-day management of the group.
Function
King III imposes various specific
responsibilities on the board and
the Foschini directors embrace this
responsibility and acknowledge that:
- the board should act in the best interests of Foschini;
- the board is the custodian of corporate governance and undertakes to provide leadership based on an ethical foundation, as well as ensuring that ethics are managed effectively;
- Foschini is, and must be seen to be, a responsible corporate citizen;
- strategy, risk, performance and sustainability are inseparable;
- Foschini has an effective and independent audit committee;
- risk management and IT governance:
- The board is responsible for the governance of risk (including information technology governance), as well as for determining the levels of risk tolerance.
- Whilst management has responsibility for the implementation of the risk management plan and for providing assurance to the board in this regard, the board will ensure that risk monitoring is a continual process and that risk assessments are performed on an ongoing basis with appropriate risk responses.
- In addition the board will ensure that the frameworks are such that they increase the probability of anticipating unpredictable risks and that appropriate risk disclosure is made to stakeholders;
- compliance:
- The board should ensure compliance with applicable laws and ensure that compliance risk is addressed in the risk management process.
- In addition each individual director undertakes to maintain a working understanding of the laws, rules, codes and standards applicable to Foschini.
- Management will be responsible for the implementation of an effective compliance function and processes;
- internal audit:
- Foschini has an effective internal audit function known as Group Audit Services, which follows a risk-based approach to its plan.
- Group Audit Services is appropriately positioned to achieve its objectives and is overseen by the audit committee.
- Group Audit Services provides a written assessment of the effectiveness of Foschini’s internal controls to the audit and risk committees of the board;
- stakeholder engagement:
- Whilst management is tasked with managing stakeholder relationships, the board gives due consideration to the effect of stakeholder perceptions on Foschini’s reputation and strives to achieve a balance between the various stakeholder groupings in its decision-making process.
- Appropriate consideration is given to the format and content of communication with stakeholders, as well as ensuring that dispute resolution is an effective process.
- Every effort is made to ensure equitable treatment of shareholders; and
- the board should ensure the integrity of the integrated report that should include financial and sustainability performance.
Leadership
The position of chairman is undertaken by an independent non-executive director, Mr D M Nurek whose role is separate and clearly defined from that of the chief executive officer (CEO), Mr A D Murray. There is a clear division of responsibilities between the chairman and the CEO with both providing leadership and guidance to the company’s board, encouraging deliberation on all matters requiring the board’s attention, and obtaining optimum input from the other directors.
Composition
In line with the requirements of King III, the board of directors of Foschini comprises a majority of non-executive directors, the majority of whom are independent. The current board structure comprises 11 directors, eight of whom are non-executive directors (of whom six are independent) and the remaining three who are executive directors. The executive directors, being the chief executive officer, the financial director and the managing director of FG Financial Services, are all salaried employees of Foschini.
Five sub-committees comprising the audit, remuneration, risk, nominations and transformation committees assist the board in the discharge of its duties.
The functions of these sub-committees are discussed later in this report. The board and its committees are currently constituted as follows:
Main Board of directors
Independent non-executive directors
Non-executive directors
Executive directors |
Remuneration Committee
Prof. F Abrahams (Chairperson)### |
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Sub-committee composition
In order to comply as far as practical with the recommendations of King III, the nominations committee recommended the following changes to the various sub-committees during the year:
Remuneration committee
Prof. F Abrahams replaced Mr D M Nurek
as chairperson of the remuneration
committee with effect from March 2010.
Risk committee
King III recommends that the chairman
of the board should not be the chairman
of this committee. The nominations
committee however recommended that
Mr D M Nurek continue to serve as the
chairman of the risk committee as he is
considered to be the most relevant and
practical choice.
Audit committee
Mr D M Polak stood down as a member
of the audit committee (as he is not
considered independent in terms of the
King III definitions and therefore not
eligible for membership) during the year.
Following his appointment as chairman of the board, Mr D M Nurek is no longer a member of this committee, but continues to attend meetings by invitation.
Nominations committee
Mr A D Murray attends the meetings
of this committee by invitation as is
recommended by King III.
Transformation committee
Prof. F Abrahams replaced Mr E Osrin as
chairperson of this committee on
1 April 2009.
In order to ensure a majority of non-executive directors on this committee, Mr R Stein now attends meetings of this committee by invitation.
Directors
The non-executive directors come from diverse backgrounds in commerce and industry. Their collective experience enables them to provide sound, independent and objective judgement in decision-making that is in the best interests of the group. They are ultimately responsible for the performance of the group, its long-term sustainable growth, and the enhancement of shareholder value. They review and ratify the group’s strategy in addition to monitoring and measuring its performance and executive management against key performance indicators. They provide opinion and advice regarding the group’s financial, audit, governance and risk management controls. In order to ensure sustainable leadership they review group transformation and succession planning at senior levels, and provide input into the remuneration process.
All directors exercise unfettered discretion in the fulfilment of their duties, resulting in constructive debate at meetings that continues to yield well-considered decisions.
Detailed information on the directors and their credentials appear here.
Director appointment and induction
Newly appointed non-executive directors hold office only until the next annual general meeting, at which time they retire and become eligible for re-election as directors. Each year, one-third of the existing board members are subject to retirement by rotation. This is in line with the requirements of King III. The nominations committee recommends re-election by the shareholders after due consideration is given to the individual directors’ attendance and performance. Non-executive directors have no fixed term of employment and the performance of all directors is subject to annual peer review.
A formal induction programme for new directors is in place with the objective of maximising their understanding of the group and enabling them immediately to provide input and make well-informed decisions.
Changes to the board during the current year
The appointment of Mr D M Nurek as chairman of the board and the appointment of Mr P S Meiring as a director of Foschini Limited were both effective on 1 April 2009 and were both reported in the 2009 annual report. Aside from these changes, no other changes were made in respect of the composition of the main board during the year under review.
Independence assessment
All directors are required to complete an independence questionnaire to establish whether they meet the objective independence criteria of King III. Six of the non-executive directors are independent according to the King III definition.
Mr M Lewis is not considered independent in terms of the King III definition by virtue of his indirect shareholding in the group. Mr D M Polak is likewise not currently considered independent in terms of the King III definition by virtue of the fact that he was employed by the group in an executive capacity until December 2007. He is required to undergo a cooling off period of three financial years (until 1 April 2011) before he may be considered independent.
Of the six directors that satisfy the objective independence requirements, three directors have served a term exceeding nine years. The nominations committee reviewed the independence of Mr D M Nurek, Mr S E Abrahams and Mr W V Cuba and after due consideration, concluded that their long association with the group has not impaired their independence.
Board charter
The board is governed by a formal charter supported by relevant authority limits. This charter has been reviewed and updated where necessary to take into account the King III requirements.
A process is in place to review this charter on an annual basis.
Board meetings
The board typically meets quarterly in Cape Town, and further meetings are held at short notice when necessary.
Proceedings at meetings are directed by a formal agenda. The proposed agenda is circulated prior to the meeting to allow board members sufficient opportunity to request additional agenda items.
In addition a comprehensive board pack is distributed to all members in advance of meetings to ensure that they are properly informed and enable them to undertake meaningful discussion and effectively discharge their duties. These packs typically include:
- Agenda
- Previous meeting minutes
- Copies of any resolutions passed since the last board meeting
- Update on matters arising since the last board meeting
- Minutes of all sub-committee meetings which have taken place since the last board meeting
- Shareholder analysis
- Summary of any announcements on SENS (stock exchange news service) in the intervening period
- Governance update to assist directors in remaining abreast of relevant legislation
All directors have unrestricted access to the company secretary and all company records as well as to independent professional advice at the company’s expense in appropriate circumstances.
Board evaluations
An annual evaluation of the board and each of the sub-committees is undertaken by means of a questionnaire sent to all board members. The results are collated by the company secretary and passed on to the chairman who has a one-on-one interview session with each director to discuss their feedback as well as any areas of concern. The chairman provides feedback to the full board on any actions arising from the evaluation process.
This annual evaluation is comprehensive, encompassing all aspects of the board’s responsibilities. It covers both individual member contributions and the effectiveness of the board as a whole. The results of the executive and non-executive directors are separately tabulated, in order to gauge any areas of difference in perception.
The evaluation undertaken during the current year resulted in the following actions being taken:
- nominations committee to consider the merits of appointing an additional non-executive director who possesses the suggested specific additional skills; and
- an additional board meeting has been scheduled specifically to deal with the three- to five-year strategy plan.
Directors’ remuneration and shareholdings
The remuneration paid to directors during the current year is disclosed in the Remuneration report that appears elsewhere in this report.
Information relating to the direct and indirect holdings of the directors at 31 March 2010, as well as their participation in share incentive schemes (where relevant) are likewise disclosed in the Remuneration report.
Non-executive directors do not participate in the share incentive schemes, with the exception of Mr D M Polak who obtained options whilst still an executive of the company.
Personal share dealings
The board complies with the requirements of the JSE Limited in relation to restrictions on the trading of Foschini’s shares by directors and employees during the defined closed periods. Restrictions may also be placed on share dealings at other times if the group is involved in corporate activity or sensitive negotiations. The company secretary notifies all directors and employees prior to the commencement of the closed trading periods of the prohibitions contained in the Insider Trading Act relating to share dealings whilst in possession of price-sensitive information.
Details of directors’ share dealings are disclosed to the listings division of the JSE Limited and communicated through its electronic news service, SENS. These dealings are also disclosed at board meetings. There is a process in place in terms of the requirements of the JSE Limited for directors to obtain prior clearance before dealing in the company’s shares. All transactions are conducted at the ruling market price on the JSE Limited.
Directors’ interests in contracts
In addition to a formal annual disclosure process, directors are required to make ongoing disclosures of any interests in contracts. During the year under review the directors had no interests in contracts as contemplated in section 234 of the Companies Act.
Succession
It is the responsibility of the nominations committee to ensure adequate succession planning for all main board directors, as well as to ensure that all sub-committees are appropriately constituted and chaired.
As reported previously the appointment of Mr D M Nurek as chairman and the appointment of Mr P S Meiring as a director were both effective on 1 April 2009. No further changes were deemed necessary during the year under review.
The nominations committee believes that advanced planning is the key to succession and gives due consideration to succession planning on an ongoing basis.
Board attendance
The attendance of the directors at board meetings and board committee meetings for the financial year was as follows:
| Remuneration | Risk | Audit | Nominations | Transformation | ||
| Board | committee | committee | committee | committee | committee | |
| Number of meetings | 4 | 3 | 4 | 3 | 3 | 3 |
| Directors’ attendance | ||||||
| D M Nurek | 4 | 3 | 4 | 2* | 3 | 3 |
| Prof. F Abrahams | 4 | 3 | 3 | |||
| S E Abrahams | 3 | 3 | 3 | |||
| W V Cuba | 4 | 3 | ||||
| K N Dhlomo | 4 | 1* | ||||
| M Lewis | 3 | s | ||||
| D M Polak | 3 | 4 | 1 | |||
| N V Simamane | 3 | 1# | ||||
| A D Murray | 4 | 3* | 4 | 3* | 3* | 3 |
| R Stein | 4 | 4 | 3* | 3* | ||
| P S Meiring | 4 |
| * | By invitation |
| # | Appointed February 2010 |
| ## | Appointed October 2009 |
