WESCOAL HOLDINGS LIMITED KING IV COMPLIANCE ANALYSIS 2018

As a regulated mining company, the application of the King IV corporate governance principles the group’s ability to operate. The company therefore strives to apply these principles.

 

1. THE GOVERNING BODY SHOULD LEAD ETHICALLY AND EFFECTIVELY.

The directors of Wescoal commit to the highest standards of corporate governance as illustrated in the King IV report.  The directors hold each other and all stakeholders accountable for decision-making based on integrity, competence, responsibility, ethics, fairness and transparency through their commitment to lead the company consistent with the company’s values. The Board Charter and Memorandum of Incorporation set the strategic direction of the company, and this is monitored by the regular induction and evaluation processes of the directors. The chairman monitors this process on an ongoing basis, as part of his duties as Chairman, and ensures the best interests of the Company, its employees and stakeholders, the environment, society and the community benefit from the productivity and profitability of the Company.

 

2. THE GOVERNING BODY SHOULD GOVERN THE ETHICS OF THE ORGANISATION IN A WAY THAT SUPPORTS THE ESTABLISHMENT OF AN ETHICAL CULTURE.

 The governing body, which is the board of Directors of the Company, assisted by the Social and Ethics Committee, oversees the governance of ethics in the company.

The board-approved Code of Ethics Policy and Code of Conduct guides the ethical behaviour of the directors, employees and other stakeholders with whom the company interacts. Respect for human rights, ethical business conduct and tolerance for all people regardless of their race, religion, gender or other differences is encouraged, with no acceptance of bribery or corruption being allowed.

The tone of Ethical behaviour is set at the top by the directors, and management is responsible for the implementation of the code and policy of ethics. Any material breaches are reported to the Social and Ethics committee and the Audit, Risk and Compliance committee.  Ethical behaviour throughout the Company and Group ensures constant profitability and sustainability.

The company has a fraud/ethics/whistleblowing hot line that enables employees to report ethical breaches.

 

3. THE GOVERNING BODY SHOULD ENSURE THAT THE ORGANISATION IS AND IS SEEN TO BE A RESPONSIBLE CORPORATE CITIZEN.

Responsibility for identifying and monitoring overall responsible corporate citizenship has been delegated to the Social and Ethics Committee, with an oversight from the Audit, Risk and Compliance Committee, which also ensures statutory and regulatory compliance including compliance with internal protocols.

The well being of the community in which Wescoal operates is an integral part of our business strategy, and Wescoal delivers value to employees and other stakeholders in its operational activities.

 

4. THE GOVERNING BODY SHOULD APPRECIATE THAT THE ORGANISATION’S CORE PURPOSE, ITS RISKS AND OPPORTUNITIES, STRATEGY, BUSINESS MODEL, PERFORMANCE AND SUSTAINABLE DEVELOPMENT ARE ALL INSEPARABLE ELEMENTS OF THE VALUE CREATION PROCESS

The board oversees the implementation of the strategy and plans carried out by management against agreed performance measures and targets, and specifically against goals set by the Board.  The company has a clear strategy for anticipating, managing and mitigating risks in the area of operations of the company.

The Audit, risk and compliance committee closely monitors risks by regularly receiving reports on potential challenges which may occur based on board approved key performance targets and measures of identified risks.

Risks can impact on any of the activities related to the six capitals.  The board assesses both the positive and negative outcomes resulting from its business model continuously and responds to it.

 

5. THE GOVERNING BODY SHOULD ENSURE THAT REPORTS ISSUED BY THE ORGANISATION ENABLE STAKEHOLDERS TO MAKE INFORMED ASSESSMENTS OF THE ORGANISATION’S PERFORMANCE, AND ITS SHORT-, MEDIUM- AND LONG-TERM PROSPECTS.

Stakeholders, through the Integrated Annual Report are provided with a full synopsis of the company and its activities.

The annual financial statements show the historic record of the financial results of the company, other reports indicate the future prospects of the company, reviewing the sustainability of the Company, and the strategy to be employed going into that future.

Reporting processes comply with the Companies Act 71 of 2008, with the JSE Listings Requirements, with International Financial Reporting Standards (IFRS) and International Accounting Standards (IAS), King IV, with the Global Reporting Initiative (GRI) and with other regulatory bodies.  Assurance can be maintained through the adherence to the integrity of sustainability reporting.

The Audit, Risk and Compliance Committee oversees the integrated reporting process and reviews the annual financial statements, which are audited by the external auditor. Internal auditors monitor processes and policies throughout the company on a frequent basis, subsidizing the work done by the external auditors.

The Social and Ethics Committee oversees the sustainability reporting process, which is independently assured by a sustainability assurer and the Remuneration Committee monitors remuneration reporting, which is reviewed by the Company’s remuneration consultants.

 

6. THE GOVERNING BODY SHOULD SERVE AS THE FOCAL POINT AND CUSTODIAN OF THE CORPORATE GOVERNANCE IN THE ORGANISATION.

The board of directors of Wescoal is the focal point and custodian of corporate governance.  The roles and responsibilities are set out in the Board Charter, which is reviewed on a regular basis.

The directors, collectively and individually, have unfettered access to the company secretary, who, in terms of Section 88 of the Companies Act 2008, is required to guide the directors and to provide up to date information to directors on governance issues. The company secretary is evaluated for competence on an annual basis in compliance with the JSE Listings Requirements.

The Board also ensures that the Company applies governance principles contained in King IV and where required continues to further entrench and strengthen recommended practices through the Group’s governance structures, systems, processes and procedures. Appropriate governance policies are in place contained in policies and procedures to guide stakeholders.

 

7. THE GOVERNING BODY SHOULD COMPRISE THE APPROPRIATE BALANCE OF KNOWLEDGE, SKILLS, EXPERIENCE, DIVERSITY AND INDEPENDENCE FOR IT TO DISCHARGE ITS GOVERNANCE ROLE AND RESPONSIBILITIES OBJECTIVELY AND EFFECTIVELY

The board is satisfied that its current composition takes into account the size of the company, the optimal mix of knowledge, skills and experience to facilitate strategic planning, this includes the pre-selected directors and other knowledgeable people for its committees, and ensures policies and procedures are set up to ensure governance and compliance requirements are met.

The board has a stringent, vigorous policy for nominations taking into account, in respect of non-executive directors, their independence, and knowledge of markets so that proper debate is engendered at each meeting, and the correct decisions for the group are reached. There are currently 10 directors in Wescoal Holdings with only three being executive, therefore the majority of our directors are non-executive, and the majority of those are independent.  Ongoing recruitment of directors is a prerequisite to fulfil the needs of the company.

The board is meeting its set diversity targets as per board-approved policy.

The Chairman of the board and the CEO roles are separated.

The chairs of the Committees are all independent non-executives, and the committee members are all skilled in the required fields.

 

8. THE GOVERNING BODY SHOULD ENSURE THAT ITS ARRANGEMENTS FOR DELEGATION WITHIN ITS OWN STRUCTURES PROMOTE INDEPENDENT JUDGEMENT, AND ASSIST WITH BALANCE OF POWER AND THE EFFECTIVE DISCHARGE OF ITS DUTIES.

The board has approved the delegation agreements of the company which cover all transactions in the group.  The individuals who have had responsibilities delegated to them have been appointed following a rigorous selection policy within the board, subsidiary boards, groups and committees.  There is a clear balance of power to maintain that no individual cannot exceed their decision-making, responsibilities or powers than is within their mandate.

Each committee has board-approved terms of reference reviewed on a regular basis, annually where possible, and these terms of reference include all aspects of the mandates given to those committees, and the responsibilities delegated to it.

Each committee is tasked with responsibilities which on an overall basis ensure that the group covers all its responsibilities and has the capacity to function effectively.

Cross committee meetings are organised when there is an overlap of responsibilities.

Any member of the board is entitled to attend any committee meeting as an observer. Management is invited to attend committees when it is in the best interests of the company to do so.

 

9. THE GOVERNING BODY SHOULD ENSURE THAT THE EVALUATION OF ITS OWN PERFORMANCE AND THAT OF ITS COMMITTEES, ITS CHAIR AND ITS INDIVIDUAL MEMBERS, SUPPORT CONTINUED IMPROVEMENT IN ITS PERFORMANCE AND EFFECTIVENESS.

Regular evaluations are carried out on the board, individually and collectively, and on the Chairman, CEO, CFO and the Company Secretary.  Evaluations are also carried out on the board and statutory committees and their members.

The Audit, Risk and Compliance (“ARC”) committee meets at least four times a year and provides independent oversight of the assurance functions and on the integrity of the AFS and other external reports. The ARC committee oversees risks that may affect the integrity of the business, and the committee and board are satisfied that it has the necessary financial literacy, skills and experience to evaluate, oversee and monitor its duties.

The ARC committee provides independent review and oversight of the IT function and the IT risks.

The ARC Chairperson attends the AGM of the company and is available to answer questions raised by shareholders and other stakeholders on aspects associated with the company.

The Remuneration committee initiates improvements in overall remuneration of executives, senior staff and other employees, and has oversight of remuneration governance.  The Nomination Committee assists the board in recruitment of directors and senior executives when these are required.

Updating and regular monitoring of the Remuneration Policy and the implementation thereof is undertaken by the Remuneration Committee on a regular basis.

The Chairperson of the Remuneration committee regularly interacts with shareholders prior to company meetings to anticipate any questions which may arise at an AGM or GM.

The Social and ethics committee has oversight of all duties present in Section 72 of the Companies Act 2008 and Regulation 43 of the Companies Regulations 2011.

The Projects and Investments committee supervises any requirements of the board concerning research into new projects or acquisitions and advises the board on acquisitions.

 

10. THE GOVERNING BODY SHOULD ENSURE THAT THE APPOINTMENT OF, AND DELEGATION TO, MANAGEMENT CONTRIBUTE TO ROLE CLARITY AND EFFECTIVE EXERCISE OF AUTHORITY AND RESPONSIBILITIES.

The CEO and CFO of the company attend the Executive Committee meetings and ensure that the board strategy is passed onto management and monitors the responsibility for leading strategy implementation throughout the company. Regular reports are provided on a quarterly basis to the board on progress.

The board approved and implemented delegation of authority matrixes, detailing the powers and matters to be delegated to management via the CEO are implemented and monitored by executives.

The board ensures that key management functions are led by a competent and appropriately authorised individual and they are adequately resourced.

 

11. THE GOVERNING BODY SHOULD GOVERN RISK IN A WAY THAT SUPPORTS THE ORGANISATION IN SETTING AND ACHIEVING ITS STRATEGIC OBJECTIVES.

The ARC has the responsibility of monitoring all risks in the group, including IT risks, and at each ARC meeting written reports are provided to the committee for discussion amongst the members of the committee. Quarterly reports are submitted to the board on risks.

The Audit, Risk and Compliance Committee has delegated to management the implementation of processes to ensure that risks to the sustainability of the business are identified and managed within acceptable thresholds and reported on when necessary.

 

12. THE GOVERNING BODY SHOULD GOVERN TECHNOLOGY AND INFORMATION IN A WAY THAT SUPPORTS THE ORGANISATION’S SETTING AND ACHIEVING OF ITS STRATEGIC OBJECTIVES.

The board, together with the Audit, Risk and Compliance Committee, oversees the governance of Information Technology (IT) in the company.

The group IT manager prepares a quarterly report for submission to the ARC committee in which he describes the processes in place to protect the information technology of the group.

The report of the group IT Manager is in line with the strategic objectives of the board and supports such objectives.

 

13. THE GOVERNING BODY SHOULD GOVERN COMPLIANCE WITH APPLICABLE LAWS AND ADOPTED, NON-BINDING RULES, CODES AND STANDARDS IN A WAY THAT IT SUPPORTS THE ORGANISATION BEING ETHICAL AND A GOOD CORPORATE CITIZEN.

The Social and Ethics Committee, the Remuneration Committee and the Audit Risk and Compliance Committees all have oversight in ensuring that the company follows applicable laws, adopted non-binding rules, codes and standards.

The Group Legal Executive of the company has identified all laws, regulatory requirements, codes and standards that impact the operations that would impact a mining company and submits reports on a quarterly basis to the committees and the board detailing what compliance issues have arisen and what action was taken.

 

14. THE GOVERNING BODY SHOULD ENSURE THAT THE ORGANISATION REMUNERATES FAIRLY, RESPONSIBLY AND TRANSPARENTLY SO AS TO PROMOTE THE ACHIEVEMENT OF STRATEGIC OBJECTIVES AND POSITIVE OUTCOMES IN THE SHORT-, MEDIUM- AND LONG-TERM.

The board, assisted by the remuneration committee, are cognisant of the requirements of King IV with regard to remunerating executives and general staff being remunerated fairly and responsibly.

The view of the group as detailed in the remuneration policy is to attract and retain staff by encouraging a performance-based attitude in the group resulting in the creation of value in a sustainable manner.

The company’s remuneration policy is reviewed annually by the remuneration committee and approved by the board, before submission to shareholders at an AGM. The policy is designed to promote the achievement of strategic objectives, positive outcomes, an ethical culture and responsible corporate citizenship. 

 

15. THE GOVERNING BODY SHOULD ENSURE THAT ASSURANCE SERVICES AND FUNCTIONS ENABLE AN EFFECTIVE CONTROL ENVIRONMENT, AND THAT THESE SUPPORT THE INTEGRITY OF INFORMATION FOR INTERNAL DECISION-MAKING AND OF THE ORGANISATION’S EXTERNAL REPORTS.

The audit, risk and compliance committee is tasked with the responsibility of supervising internal and external assurance and to review and report on the internal control environment through reports received from internal and external auditors. The ARC also monitors the integrity of information from the group to be released to external stakeholders.

Other committees and the board receive regular reports from the ARC, which in turn is supplied with internal and external auditor’s reports, and reports from the company secretary.

 

16. IN THE EXECUTION OF ITS GOVERNANCE ROLES AND RESPONSIBILITIES, THE GOVERNING BODY SHOULD ADOPT A STAKEHOLDER-INCLUSIVE APPROACH THAT BALANCES THE NEEDS, INTERESTS AND EXPECTATIONS OF MATERIAL STAKEHOLDERS IN THE BEST INTERESTS OF THE ORGANISATION OVER TIME.

The board, assisted by the committees regularly meet with, provide information to, and supply answers to questions asked by key stakeholders.

The CEO is mandated to achieve effective stakeholder relationships with material stakeholders and to identify their needs, interests and expectations of the company.

The company confirms it manages stakeholders equally and protects minority interests.

 

17. THE GOVERNING BODY OF AN INSTITUTIONAL INVESTOR ORGANISATION SHOULD ENSURE THAT RESPONSIBLE INVESTMENT IS PRACTICED BY THE ORGANISATION TO PROMOTE GOOD GOVERNANCE AND THE CREATION OF VALUE BY THE COMPANIES IN WHICH IT INVESTS.

This principle is not relevant to the Wescoal group.

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