Corporate
governance report

The Supervisory Board of TFG remains committed to the highest standards of corporate governance and supports the governance outcomes and principles set out in the King IV Report on Corporate Governance™ for South Africa 2016 (King IV™) and the Listings Requirements of the JSE.

The Supervisory Board is committed to exercising ethical and effective leadership towards the achievement of the following desired governance outcomes as stated in King IV™:

  • ethical culture;
  • good performance;
  • effective control; and
  • legitimacy.

Our value creation process supports these outcomes in the short, medium and long term. Executive and senior management aims to create and maintain a culture of good governance throughout the Group, thereby extending governance beyond merely regulatory compliance. Transparency and accountability remain the key principles on which all TFG’s business activities are conducted.

A King IV™ application register is available on our website and demonstrates how TFG is applying specific governance structures, processes and practices to achieve the 16 King IV™ principles and, as a result, the desired governance outcomes.

Leadership, ethics and corporate citizenship

TFG aims to create an enjoyable, ethical and values-based working environment and the opportunity for employees to develop and grow in a respectful, collaborative, high-performing, career-oriented environment. The TFG code of good ethical conduct guides how we do business and maintain a workplace that is free from all forms of discrimination and where we ensure fair and ethical practices for all employees.

The Supervisory Board promotes a culture of openness and transparency throughout the organisation in accordance with the Group’s values of trust and mutual respect.

The Group has a zero tolerance approach to fraud, corruption and other forms of crime or dishonesty. During the year, the Group continued to invest in measures to minimise the number of incidents. A whistle-blowing facility has been in place since February 1998 for the reporting of suspected fraud and unethical behaviour. Whistle-blowing is encouraged through the outsourced Deloitte tip-off anonymous line. Reports are submitted to the Group Forensics department for investigation. The line is promoted among employees and suppliers.

During the year, 202 reports were received (2017: 234). All these reports were investigated and appropriate action was taken as required. There were no significant issues during the year.

202

WHISTLE-BLOWING REPORTS

(2017: 234)

Strategy, performance and reporting

The Supervisory Board appreciates that TFG’s vision, values and differentiating factors, combined with the four strategic pillars, material risks and opportunities, business model and sustainability strategy, are all inseparable elements of our value creation process.

Supplementary information and archives relating to our financial and non-financial performance are available online, and include:

  • SENS announcements
  • Investor presentations
  • Notice of 2018 AGM
  • Voting results of the 2017 AGM
  • Minutes of the 2017 AGM

Read more about the reporting frameworks and approval process for our financial reporting in the Scope and boundary of the report. Our combined assurance approach is set out in the Risk Committee report.

GOVERNING STRUCTURES AND DELEGATION

The Supervisory Board is ultimately accountable for the strategy, direction, leadership, governance and performance of TFG. It also has oversight of the development, approval and updating of TFG’s vision, mission, and value statements, and significant policies and goals related to economic, environmental and social impacts. The Operating Board is responsible for day-to-day management and operations. Refer to the Operating Board’s responsibilities.

The scope and functioning of the Supervisory Board and board committees are governed by charters. These charters are reviewed and updated regularly. They outline the relevant authority, responsibilities, powers, composition and functioning of the Supervisory Board and its committees.

The Supervisory Board is satisfied that it has fulfilled its responsibilities in accordance with its charter for the 2018 financial year.

A Group governance framework assists in setting the direction for how the relationships and exercise of power within the Group should be approached and conducted.

The Supervisory Board has established a framework for the delegation of authority. In terms of this framework, certain matters are reserved for final decision-making by or require the consent of the Supervisory Board or committees. The Supervisory Board has delegated authority, not expressly reserved for the Supervisory Board, to the CEO and executive management and continuously monitors the activities of individuals with such delegated authority. The Supervisory Board is satisfied that the delegation of authority framework contributed to role clarity and the effective exercise of authority.

Five committees assist the Supervisory Board in discharging its duties. An ad hoc Finance Committee, comprising both non-executive and executive directors and chaired by Mr G H Davin, is also tasked from time to time to assist the Supervisory Board in a number of areas, including making dividend recommendations to the Supervisory Board and specifically considering and investigating all potential acquisition opportunities and their funding.

SUPERVISORY BOARD COMPOSITION

The Supervisory Board mainly comprises non-executive directors, with the majority being independent.

The Supervisory Board is committed to having a diverse board and, as required by the JSE Listings Requirements, has adopted a policy on the promotion of gender and race diversity at Supervisory Board level. In terms of this policy, the Supervisory Board acknowledges the following:

  • that diversity is important in order to provide the necessary range of perspectives, experience and expertise required to achieve effective stewardship and management of the company and TFG as a whole; and
  • that a truly diverse board will include and make good use of different skills, regional and industry expertise, background, race, gender and other distinctions between directors.

The Nomination Committee gives due consideration to succession planning for all Supervisory Board directors and ensures that all committees are appropriately constituted and chaired, and will address gender and race diversity as an explicit element of its oversight work.

The current Supervisory Board comprises 11 directors, nine of whom are non-executive directors, of which eight are independent directors and one is not regarded as independent. The remaining two directors are executive directors, namely the Chief Executive Officer and the Chief Financial Officer, and are salaried employees of TFG.

DIRECTORS

The non-executive directors come from diverse backgrounds in commerce and industry and have both South African and international experience (detailed information on the directors and their credentials appears in Supervisory Board and Operating Board). Their collective experience enables them to provide sound, independent and objective judgement in decision-making that is in the best interests of TFG. They are ultimately responsible for the performance of TFG, its long-term sustainable growth and the enhancement of shared value for all stakeholders. They review and ratify TFG’s strategy in addition to monitoring and measuring its performance and the Operating Board members against key performance indicators (refer to Remuneration Committee report and Leadership strategy review).

The Supervisory Board is accountable for strategy, direction, leadership, governance and performance of the Group.

The graphics below provide a visual summary of our Supervisory Board’s diversity:

The directors provide their opinion and advice regarding the Group’s financial, audit, governance, legal compliance and risk management controls. In order to ensure sustainable leadership, they review transformation and succession planning at senior levels and give input on 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. There exists a balance of power and authority among the members of the Supervisory Board.

Director appointment, induction and ongoing education

Potential new non-executive directors go through a thorough interview process until a suitable candidate has been chosen and appointed. The process is contained in a policy that details the appointment procedure and ensures that appointments are a matter for the Supervisory Board of Directors as a whole, assisted by the Nomination Committee. Newly appointed directors hold office only until the next annual general meeting at which time their original appointment is confirmed and they stand for re-election at that meeting. Each year, one third of the existing non-executive directors are subject to retirement by rotation. This is in line with the memorandum of incorporation. The Nomination Committee recommends re-election by shareholders after due consideration is given to the director’s attendance at meetings and his/her performance. Non-executive directors have no fixed terms and the performance of all directors is subject to an evaluation process as recommended by King IV™ (read more about these evaluations).

A formal induction programme for new non-executive directors is in place to maximise their understanding of the Group and enable them to provide input and make well-informed decisions as quickly as possible.

All non-executive directors are exposed to the key aspects of the Group on a regular basis and are invited to proactively participate in this process.

The following Supervisory Board members will stand for re-election at the 2018 AGM:

  • B L M Makgabo-Fiskerstrand
  • E Oblowitz
  • G H Davin

Changes to the Supervisory Board and committees

There were no changes to the Supervisory Board or any of its committees during the financial year.

As previously indicated on 7 June 2016 and as was announced on SENS on 12 March 2018 and 24 May 2018, Mr A D Murray will retire as CEO of the Group on 3 September 2018 after 33 years’ service, 11 of which were as CEO. Mr Murray will retire from the Group at the end of September 2018. Given his wealth of knowledge and experience in the international retail sector in general and TFG in particular, the Supervisory Board has decided to appoint Mr Murray as a consultant to the end of September 2019 and as a non-executive director from 1 October 2019.

As indicated, Mr A E Thunström, currently the CFO of the Group, became the CEO Designate on 12 March 2018 and will assume the position of CEO on 3 September 2018. Mr Thunström will then be appointed to the Social & Ethics Committee and will be an invitee to the Remuneration and Nomination Committees. The process to recruit a CFO is well advanced.

Supervisory Board performance evaluation process

Independence and performance evaluation

In accordance with King IV™ recommended practices, the Supervisory Board of TFG categorises non-executive directors as independent if it concludes that there is no interest, position, association or relationship which, when judged from the perspective of a reasonable and informed third party, is likely to influence unduly or cause bias in decision-making in the best interests of TFG. The Supervisory Board considers the King IV™ and other indicators holistically, and on a substance-over-form basis when performing this assessment, and is aided by an annual independence questionnaire completed by each non-executive director.

On this basis, eight of the nine non-executive directors are categorised as independent and one, Mr R Stein, is not yet considered to be independent. Mr R Stein is expected to be categorised as an independent non-executive director from 1 April 2019. Of the eight independent non-executive directors, four have served a term in excess of nine years. The Supervisory Board reviewed the independence of Mr S E Abrahams, Mr M Lewis, Prof F Abrahams and Ms N V Simamane and after due consideration (during the relevant meeting the aforementioned directors recused themselves) concluded that the length of their association with the Group does not impair their independence.

A formal board evaluation process is followed every two years as is recommended by King IV™. In terms of this process, comprehensive questionnaires are sent to all Supervisory Board members to evaluate the performance of the Supervisory Board, its committees, its chair and its individual members. The results are collated and passed on to the Chairman who has a one-on-one interview session with each director to discuss his/her feedback and any areas of concern. The Chairman provides feedback to the Supervisory Board on any actions arising from the evaluation process. This formal process was last followed in the 2017 financial year and will therefore be undertaken again in the 2019 financial year.

The Nomination Committee appointed Mr S E Abrahams, an independent non-executive director with substantial board experience, to lead the evaluation of the Chair’s performance.

In the 2018 financial year the Supervisory Board, with the assistance of the Nomination Committee, scheduled an opportunity for consideration, reflection and discussion of its performance and that of its committees, its Chair and its members as a whole. The themes discussed included succession planning, diversity at board level, strategy formulation and board performance.

The Supervisory Board is satisfied that the evaluation process is improving its performance and effectiveness.

Remuneration and shareholding

The remuneration paid to directors during the current year as well as details of direct and indirect shareholdings are disclosed in the Remuneration Committee report. Information regarding their participation in share incentive schemes (which is limited to executive directors) is also disclosed.

Dealing in shares

The Supervisory Board complies with the Listings Requirements of the JSE in relation to restrictions on directors and employees trading with TFG shares during closed periods. Restrictions may also be placed on share dealings at other times if TFG is involved in corporate activity or sensitive negotiations.

There is a process in place in terms of the Listings Requirements of the JSE for directors to obtain prior clearance before dealing in TFG shares. All transactions are conducted at the ruling market price on the JSE.

Details of directors’ share dealings are disclosed on SENS.

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 interest in contracts as contemplated in the Companies Act.

COMPANY SECRETARY

The Company Secretary, Mr D van Rooyen, is accountable to the Supervisory Board, and all directors have access to his professional corporate governance advice and services. He has unfettered access to the Supervisory Board, but at the same time maintains an arm’s length relationship with it and is not a director of the company. The Company Secretary is independent and functionally reports to the Supervisory Board on company secretarial matters.

The Company Secretary’s duties include but are not limited to those listed in section 88 of the Companies Act.

Every year, as part of the Supervisory Board evaluation process, the directors assess whether the Company Secretary has fulfilled the required obligations and duties. The assessment questionnaire also gives directors the opportunity to not only evaluate the Company Secretary, but to raise any concerns they may have.

The Supervisory Board believes that the Company Secretary is objective, suitably qualified, competent and an experienced individual who is able to provide the Supervisory Board with the requisite support for its effective and efficient functioning and discharge of its duties as prescribed by the Companies Act, King IV™ and the JSE Listings Requirements. The Supervisory Board further believes that the office of the Company Secretary is empowered and that the position carries the necessary authority.

SUPERVISORY BOARD MEETINGS

The Supervisory Board typically meets five times per year in Cape Town and further meetings are held as required. Proceedings at meetings are directed by way of an agenda. The proposed agenda is circulated in advance of the meeting to allow Supervisory Board members the opportunity to request additional agenda items.

In addition, a comprehensive board pack is distributed to all members prior to meetings to ensure that they are properly informed, able to engage in meaningful discussions and effectively discharge their duties.

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.

During the current financial year, the Supervisory Board inter alia:

  • approved projections and results;
  • approved dividends;
  • approved acquisitions;
  • considered compliance and governance matters (including the application of King IV™);
  • approved the King IV™ application register;
  • approved the Stakeholder Engagement Policy as recommended by King IV™;
  • considered the independence of non-executive directors;
  • considered and implemented enhanced governance structures for TFG London and TFG Australia;
  • finalised succession planning for the CEO;
  • considered and approved the change of external auditor from KPMG Inc. to Deloitte & Touche;
  • reviewed and updated the board charter;
  • reviewed strategy at various levels;
  • focused on current performance; and
  • considered report backs from board committees.

Supervisory Board committees

The Supervisory Board delegated specific responsibilities to board committees, each with its own charter that defines its responsibilities. The committees aim to review their charters annually and undertake an annual performance evaluation. All committees are chaired by an independent non-executive director.

The board committees meet independently and provide feedback to the Supervisory Board through their chairpersons. In addition, minutes of all committee meetings are included in the Supervisory Board packs and all directors are given the opportunity to raise any concerns or questions arising from these minutes.

The directors confirm that the committees functioned in accordance with their written terms of reference as contained in their charters during the financial period. All committee charters are available on the website.

An overview of each committee’s functioning and responsibilities follows later in this report.

Supervisory Board and committee attendance

The attendance of the directors at Supervisory Board and committee meetings for the financial year was as follows:

# Invitee.
^ Absent with apology.