Abridged corporate governance report

Statement of compliance
Vodacom is committed to the highest standards of business integrity, ethics and professionalism.

The Board recognises the need to conduct the business in accordance with the principles of the King Code of Corporate Practices and Conduct (King III). These principles include discipline, independence, responsibility, fairness, social responsibility, transparency and the accountability of directors to all stakeholders. Many of these principles are entrenched in the Group’s internal controls, policies and procedures governing corporate conduct. The Board is satisfied that every effort has been made during the reporting period to comply in all material aspects with King III. Where we do not comply, this is stated and explained.


Corporate governance structure

The following diagram shows the Group’s governance structures as at 31 March 2016:

Board leadership and committees

Board

Vodacom has a unitary Board of 12 directors, of whom five (including the Chairman) are independent non-executive directors, five are non-executive (but not independent as they represent Vodafone) and two are executive directors. Although King III recommends that more than half of non-executive directors are independent, the Board is satisfied that the balance of power and objectivity on the Board is sufficient and does not require additional independent voices.

Accountability

The Board takes overall responsibility for Vodacom’s success. Its role is to exercise leadership and sound judgement in directing Vodacom to achieve sustainable growth and act in the best interests of shareholders.

In line with best practice, the roles of Chairman and Chief Executive Officer are separate. The Chairman is responsible for leading the Board, while the Chief Executive Officer is responsible for the operational management of the Group.

Directors

Vodacom’s memorandum of incorporation specifies that non-executive directors have no fixed term of appointment. Executive directors are subject to standard employment terms and conditions and a six-month notice period. Directors are subject to retirement by rotation and re-election by shareholders at least once every three years. Any director appointed to fill a temporary vacancy must retire at the first annual general meeting following their appointment.

Chairman

The memorandum of incorporation requires the Board to re-elect the Chairman yearly, in line with King III. Peter Moyo was re-elected on the anniversary of his appointment in May 2016.

Independent advice

The Board recognises that there may be occasions where directors consider it necessary to take independent professional advice. This is done at the company’s expense according to agreed procedures.

Board meetings

The Board holds a minimum of four meetings, four teleconferences and a strategy session every year. Special Board meetings are convened when necessary. Two special Board meetings were convened during the year.

The table below records the attendance of directors at Board meetings for the year.

Name of director 14 May
2015
  19 June
2015
Special
  29 June
2015
Special
  22 July
2015
Telecon
  9 Sep
2015
  6 Nov
2015
Telecon
  3 Dec
2015
  2 Feb
2016
Telecon
  10 Mar
2016
  18 Mar
2016
Telecon
 
MP Moyo                    
MS Aziz Joosub                    
DH Brown                    
IP Dittrich1                    
HMG Dowidar2                    
M Joseph                    
BP Mabelane                    
TM Mokgosi-Mwantembe                    
PJ Moleketi                    
M Pieters3                    
RAW Schellekens                    
JWL Otty                    
T Streichert4                    
S Timuray                    

Notes:
1. IP Dittrich resigned 31 July 2015.
2. HMG Dowidar resigned 30 September 2015.
3. M Pieters appointed 1 October 2015.
4. T Streichert appointed 1 August 2015.

Board committees

The non-executive directors contribute their extensive experience and knowledge to the Board’s committees. All committees operate under Board-approved terms of reference, which are updated from time to time to stay abreast of developments in corporate law and governance best practice.

Executive Committee

During the year, the Executive Committee included the Chief Executive Officer (Chairman), Chief Financial Officer, Chief Human Resources Officer, Chief Officer: Corporate Affairs, Executive Director: Finance Vodacom South Africa, Chief Operating Officer: International Business, Chief Technology Officer, Chief Officer: Legal and Regulatory, Chief Officer: Strategy and New Business, Chief Officer: Consumer Business Unit, Chief Officer: Customer Operations and Chief Officer: Enterprise Business Unit.

The committee is responsible for managing the Group’s operations, developing strategy and policy proposals for the Board’s consideration, and implementing the Board’s directives. It has a properly constituted mandate and terms of reference.

The committee’s other responsibilities include:

Audit, Risk and Compliance Committee

Current members: DH Brown (Chairman), BP Mabelane, PJ Moleketi.


Remuneration Committee

Current members: TM Mokgosi-Mwantembe (Chairman), DH Brown, RAW Schellekens, S Timuray.

The Remuneration Committee, in consultation with executive management, ensures that the Group’s directors and senior executives are fairly rewarded for their individual contributions to overall performance and in line with Vodacom’s remuneration policy.

The membership of the Remuneration Committee does not comply fully with King III or the JSE Listings Requirements, which advocate a majority of independent non-executive directors. Of the non-executive directors on the committee, only half are independent. Thoko Mokgosi-Mwantembe, the Chairman of the committee, and David Brown are independent non-executive directors. The Board is satisfied that Vodafone’s representation on this committee is appropriate given the valuable contribution of the Vodafone directors. Serpil Timuray, who is the Vodafone Regional CEO for Africa, Middle East and Asia Pacific, has oversight over Vodacom, and Ronald Schellekens is the Vodafone Human Resources Director. To address non-compliance with the JSE Listings Requirements, it was agreed with the JSE that the Chairman of the committee would have a casting vote in the event of any deadlock or dispute that could arise. The mandate of the committee was revised accordingly.

In the year, the Remuneration Committee met five times with attendance as follows:

Name of director 13 May
2015
  22 Feb
2015
Telecon
  8 Sep
2015
  3 Dec
2016
  9 Mar
2016
 
TM Mokgosi-Mwantembe Tick   Tick   Tick   Tick   Tick  
RAW Schellekens Tick   Tick   Tick   Tick   Tick  
DH Brown Tick   Tick   Tick   Tick   Tick  
S Timuray Tick   Tick   Tick   Tick   Tick  

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Nomination Committee

Current members: MP Moyo (Chairman), TM Mokgosi-Mwantembe, RAW Schellekens, S Timuray.

The Nomination Committee’s duties include identifying and evaluating suitable potential candidates for appointment to the Board, as well as candidates for the position of Chief Executive Officer and Chief Financial Officer. The authority to appoint directors remains a function of the Board. The committee also makes recommendations on the composition of the Board in terms of the mix of skills, size and the number of committees required, and it reviews and approves executive succession.

The membership of the Nomination Committee does not comply fully with King III or the JSE Listings Requirements, which advocate a majority of independent non-executive directors. Of the non-executive directors on the committee, only half are independent. Peter Moyo, the Chairman of the committee, and Thoko Mokgosi- Mwantembe are independent non-executive directors. The Board is satisfied that Vodafone’s representation on this committee is appropriate given the valuable contribution of the Vodafone directors. Serpil Timuray, who is the Vodafone Regional CEO for Africa, Middle East and Asia Pacific, has oversight over Vodacom, and Ronald Schellekens is the Vodafone Human Resources Director. To address non-compliance with the JSE Listings Requirements, it was agreed with the JSE that the Chairman of the committee would have a casting vote in the event of any deadlock or dispute that could arise. The mandate of the committee was revised accordingly.

In the year, the Nomination Committee met five times with attendance as follows:

Name of director 13 May
2015
  22 Feb
2015
Telecon
  8 Sep
2015
  3 Dec
2016
  9 Mar
2016
 
MP Moyo Tick   Tick   Tick   Tick   Tick  
MP Moyo TM Mokgosi-Mwantembe Tick   Tick   Tick   Tick   Tick  
RAW Schellekens Tick   Tick   Tick   Tick   Tick  
S Timuray Tick   Tick   Tick   Tick   Tick  

The committee’s key focus areas during the year included:

Social and Ethics Committee

Current members: PJ Moleketi (Chairman), MP Moyo, RAW Schellekens, MS Aziz Joosub.

There were no changes to the composition of the Social and Ethics Committee during the year. Key executives attend meetings by invitation but have no vote, including the Chief Risk Officer, Group Company Secretary (Ethics Officer), Chief Human Resources Officer, Chief Officer: Corporate Affairs, Chief Officer: Legal and Regulatory and Chief Officer: Consumer Operations.

As required by the Companies Act, No 71 of 2008 (as amended) and King III, this committee oversees and monitors Vodacom’s activities in relation to:

The Social and Ethics Committee met four times during the year with attendance as follows:

Name of director 8 May
2015
  3 Sep
2015
  30 Oct
2015
  8 Mar
2016
 
PJ Moleketi Tick   Tick   Tick   Tick  
MP Moyo Tick   Tick   Tick   Tick  
RAW Schellekens Tick   Tick   Tick   Tick  
MS Aziz Joosub Tick   Tick   Tick   Tick  


The committee’s key focus areas during the year included;

Board evaluation

The Chairman plays a crucial role in the Board’s overall effectiveness. This year, the Board used a free style approach where directors met individually with the Chairman to express their top of mind issues around the Board’s effectiveness. Overall, directors felt that the Board is highly effective, engagement is robust and open dialogue is encouraged. One query was raised and this was around the role and function of the Social and Ethics Committee where there appeared to be overlap with other committees and over extension of its mandate. This is being addressed with a review in progress of the mandate against the requirements of the Companies Act, 2008, as amended, and the proceedings of the Social and Ethics Committee, to ensure alignment with statutory requirements and reduction in any overlap with other committees.

Company Secretary

All directors have access to the advice and services of the Group Company Secretary, Sandi Linford, who is responsible to the Board for ensuring compliance with procedures and applicable statutes and regulations. For the Board to function effectively, all directors have full and timely access to information that helps them do their duties properly. This includes corporate announcements, investor communications and information about developments that may affect Vodacom and its operations. Directors have full access to management as required.

The Group Company Secretary is responsible for director training. The Group Company Secretary and Chief Executive Officer induct new directors, which includes briefings on their fiduciary and statutory responsibilities, as well as on the Group’s operations as required.

Share dealings

Vodacom has a share dealing policy requiring all directors, senior executives and the Group Company Secretary to obtain prior written consent from either the Chairman or Chief Executive Officer to deal in Vodacom Group shares. The Chairman has to obtain prior written clearance from the Chairman of the Audit, Risk and Compliance Committee. Closed periods are implemented as per JSE Listings Requirements, during which the Group’s directors, executives and employees are not allowed to deal in Vodacom Group shares. Additional closed periods are enforced should Vodacom be subject to any corporate activity requiring a cautionary announcement.

Shareholder relations

Vodacom proactively communicates its strategy and activities to shareholders through a planned investor relations programme which includes:

Risk management

Management continuously develops and enhances its risk and control procedures to improve risk identification, assessment and monitoring. The Board considers business risks when setting strategies, approving budgets and monitoring progress against budgets.

A division reporting to the Chief Risk Officer assists in identifying, assessing and recording the strategic risks facing the Group and, where appropriate, monitors mitigating actions.

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Internal control

Management implements internal controls, which comprise of policies, procedures and processes, to provide reasonable assurance on safeguarding assets, preventing and detecting errors, the accuracy and completeness of accounting records, and the reliability of financial statements. Internal audit provides independent, objective assurance of the system of internal controls within the Group.

Stakeholder engagement

The Board has delegated to management the responsibility to deal with stakeholder relationships in a proactive and constructive manner. There is an approved stakeholder policy in place.


Technology governance

In line with King III, technology governance forms part of our governance structures, policies and procedures. It forms part of the Group’s strategic and business processes and is managed by the Chief Technology Officer.

The Vodacom Technology Governance Framework and charter, which are mapped to the IT governance principles of King III, have continued to be reinforced in the organisation. Each framework element is substantiated through demonstrable processes to align technology strategy and business needs, deliver value and manage performance, and to strengthen information security management, information management, risk management, business continuity management and compliance.

Our attention in the past year has focused on putting mechanisms in place to ensure independent assurance of services provided by outsourced providers, and moving towards compliance of the Protection of Personal Information (PoPI) Act.