Massmart believes that the first steps towards good corporate governance must include embracing the requirements of the relevant governance and regulatory frameworks, as well as corporate best practice.

More than this, Massmart believes that sustainable and effective corporate governance is best demonstrated through a consistent pattern of doing the right thing regardless of the circumstances.

The primary South African corporate governance framework is the King Report on Governance for South Africa, 2009 and King Code of Governance Principles (King III), which forms the backbone to Massmart’s own corporate governance framework; in addition Massmart applies high ethical standards to its operating environment as reflected in the Group’s Code of Ethical Conduct.

Massmart believes that these guides to corporate decision making are essential for any governance framework to achieve desired outcomes consistent with our Company values. In addition to this corporate governance framework, the Group is committed to complying with all legislation, regulations and best practices relevant to our business, in every country where we conduct business. A register documenting the assessment of all 75 principles of King III is available here.

 

The purpose of King III

The philosophy of King III revolves around leadership, sustainability and corporate citizenship. To facilitate an understanding of the thought process, debate and changes in King III, the following key aspects are highlighted:

  • Good governance is essentially about effective leadership. Leaders should rise to the challenges of modern governance. Such leadership is characterised by the ethical values of responsibility, accountability, fairness and transparency and based on moral duties that find expression in the concept of Ubuntu. Responsible leaders direct company strategies and operations with a view to achieving sustainable economic, social and environmental performance.
  • Sustainability is the primary moral and economic imperative of the 21st century. It is one of the most important sources of both opportunities and risks for businesses. Nature, society, and business are interconnected in complex ways that should be understood by decision-makers. Most importantly, current incremental changes towards sustainability are not sufficient – we need a fundamental shift in the way companies and directors act and organise themselves.
  • The concept of corporate citizenship which flows from the fact that the company is a person and should operate in a sustainable manner. Sustainability considerations are rooted in the South African Constitution which is the basic social contract that South Africans have entered into. The Constitution imposes responsibilities upon individuals and juristic persons for the realisation of the most fundamental rights.
Main chapters of King III
 
Chapter 1
 
Ethical Leadership
and Corporate Citizenship
 
Chapter 2
 
Boards and Directors
 
Chapter 3
 
Audit Committees
 
Chapter 4
 
The governance of risk
 
Chapter 5
 
The Governance of Information Technology (IT)
 
Chapter 6
 
Compliance with Laws, Rules,
Codes and Standards
 
Chapter 7
 
Internal audit
 
Chapter 8
 
Governing Stakeholder
Relationships
 
Chapter 9
 
Integrated reporting
and disclosure

For the year ended December 2013, apart from the exceptions outlined below, the Board confirms that the Group complied with the Code of Governance Principles as set out in King III.

 

Massmart exceptions to King III

  • Principle 2.25
     
    Not applied

    The Company remunerates its Directors and Executives fairly.

    Non-executive Directors’ fees comprise both a base fee and an attendance fee per meeting.

    The Board does not believe that Directors should earn attendance fees in addition to a base fee. Many Directors add significant value and apportion significant time to the Group outside of the formal Board and Committee meetings, sometimes greater value than they might do within the confines of a formal meeting.

     

    Partially applied

    The remuneration report discloses performance measures for vesting of share options and the reasons for choosing those performance measures.

    The report discloses performance measures for vesting of share options but not the reasons for choosing those performance measures.

  • Principle 2.26
     
    Not applied

    The Company has disclosed the remuneration of each individual Director and prescribed officer.

    The remuneration report includes the term of Executive service contracts as well as the notice period for termination. The remuneration report discloses both the nature and period of restraint provided for in Executive service contracts.
    Whilst the remuneration of each Director and prescribed officer is disclosed, their notice periods for termination are not disclosed. There are no executive service contracts.

  • Principle 3.4
     
    Partially applied

    The Audit Committee oversees integrated reporting.

    The Audit Committee recommends to the Board to engage an external assurance provider over material elements of the sustainability reporting within the integrated report. The Audit Committee evaluates both the independence and quality of the external providers of assurance on sustainability.

    Massmart’s sustainability report has not been audited by an external assurance provider but verification of the key sustainability metrics have been obtained through agreed upon procedures performed by Massmart Internal Audit Services (MIAS). A copy of the agreed upon procedures report is available at the registered offices of the Company.

  • Principle 9.3
     
    Partially applied

    Sustainability reporting and disclosure should be independently assured.

    The integrated report discloses the scope and methodology of independent assurance of the sustainability report, as well as the name of the assurer. Sustainability reporting is independently assured in accordance with a formal assurance process established.

    Massmart’s sustainability report has not been audited by an external assurance provider but verification of the key sustainability metrics have been obtained through agreed upon procedures performed by MIAS. A copy of the agreed upon procedures report is available at the registered offices of the Company.