AGM

Attendance by all Directors at Massmart’s Annual General Meeting is strongly encouraged while attendance for Board Committee Chairpersons is compulsory.

At the May 2014 Massmart Annual General Meeting the Chairperson of the Nomination Committee and the Chairperson of the Remuneration Committee, the Audit Committee and the Risk Committee were in attendance, as were the Board Chairman, CEO, COO and Group FD. In total, five non-executive directors attended the Annual General Meeting.

The Company’s transfer secretaries attend every general meeting of shareholders to assist with the recording of shareholders’ attendance and to tally the votes. The Chairman confirms with the meeting that votes will be counted by way of poll, i.e. all votes are counted, rather than by way of a show of hands.

Share buy-back programme

Annually the Group seeks, and obtains, the approval of the shareholders in the general meeting to repurchase Massmart shares. This authority – valid until the following year’s Annual General Meeting and subject to the Listings Requirements of the JSE – allows the Group to purchase its own shares not exceeding 5% of that class of the Company’s issued share capital, at a price not greater than 10% above the preceding five-day volume-weighted average. Shareholders have been asked to renew this authority at the forthcoming May 2015 Annual General Meeting.

During the 52 weeks ended 28 December 2014, no Massmart shares were purchased on the open market by Massmart or any Massmart subsidiary. The amount and timing of any future purchases will be determined by the Board and are dependent on the Board’s view on the intrinsic value of Massmart shares, the ruling market price from time to time, the Group’s cash position and future cash requirements, and prevailing market conditions.

The Massmart Employee Share Trust acquires shares from time to time on the JSE open-market to mitigate the dilution caused by the Company issuing new shares when options are exercised by participants. During the 52 weeks ended 28 December 2014, the Massmart Employee Share Trust purchased 0.6 million shares for R73.7 million which were utilised to meet vesting share options.

Share dealings

No Director, Executive or employee, nor the Massmart Employee Share Trust, may deal, directly or indirectly, in Massmart shares where that person may be aware of unpublished price-sensitive information. There are strict closed periods during which all Directors, Executives, employees and the Massmart Employee Share Trust are not allowed to deal in Massmart shares.

The periods begin one month prior to the end of each reporting date (these reporting dates being December and June) and end on the public release of the Group results. A closed period also applies from the date when Massmart issues a cautionary announcement until the date on which the cautionary is lifted, either by withdrawal or the publication of full terms.

In addition, all Directors, Executives, employees and the Massmart Employee Share Trust, and their associates as defined by the JSE, are not allowed to deal in Massmart shares in the final hour of trading on the JSE. All share dealings by a Director, Executive or employee must be authorised by the CEO or the CFO. Any dealings by the CEO are authorised by the Chairman, and dealings by the CFO are authorised by the CEO.

 

Corporate Ethics

Massmart is committed to achieving the highest standards of ethical behaviour and continued its strong emphasis on promoting awareness of, and compliance with, Massmart’s Code of Ethical Conduct. Massmart’s Code of Ethical Conduct was revised in January 2013, to bring it in line with the Walmart Statement of Ethics, and distributed to all 36,000 Massmart employees and contractors between April and August 2013.

Massmart Ethics Lines

Massmart has an Ethics Reporting Line and Ethics Guidance Line that is independently run by Deloitte Tip-Offs Anonymous. Deloitte Tip-Offs Anonymous has been certified by the External Whistle-blowing Hotline Services Provider Standard E01.1.1.

The Ethics Reporting Line exists to assist our employees and suppliers to confidentially report workplace dishonesty, fraud, theft and other unethical behaviour.

The Ethics Guidance Line exists to assist our employees with guidance on the Code of Ethical Conduct, company policies and ethical dilemmas.

Callers have the option of:

  • providing their details,
  • remaining confidential or
  • remaining anonymous.

Controls are in place to ensure that callers who contact the ethics lines in good faith are protected and not retaliated against.

Ethics structure and system

The Massmart Ethics Office adopted Walmart’s ethics tracking system, IntegriLink, to record all calls received. Calls are investigated by Divisional Ethics Officers (who are suitably qualified and are certified ethics officers) and, where necessary, by Massmart Forensic Services Department. All calls are monitored by the Massmart Ethics Office, Ethics Officers’ conclusions and opinions are independent and are not allowed to be interfered with. For significant calls these are investigated in conjunction with the Walmart Global Ethics Office. Group ethics is led by the Chief Ethics & Compliance Officer who is a member of the Massmart Executive Committee, reports functionally to the Massmart Risk Committee and the Social and Ethics Committee and administratively to the Massmart CEO. Group ethics statistics are reported at each Executive Committee meeting and each subsidiary Board meeting. The Group Ethics Forum meets twice a year where the call statistics and trends are discussed. The appointment of Ethics Officers in all Divisions, and the formulation and regular meetings of the Group Ethics Forum, have ensured the continued focus on the consistent application of ethics practice and training within Massmart.

Call statistics

During the 52 weeks ended December 2014, 61% of calls received on the ethics line were non-ethics related matters with 39% of calls involving ethics issues (see table below).

Total calls
2014 2013
January 65 66
February 77 51
March 52 58
April 70 51
May 66 54
June 68 29
July 58 75
August 71 75
September 61 77
October 65 88
November 62 73
December 51 58
Total 766 755
Increase 1.5% 755

 

EthicsPie_v1-01

 

BREAKDOWN OF CALLS

MASSMART ETHICS LINE

Ethics awareness

The Massmart Ethics Office continuously distributes ethics awareness communications throughout Massmart in the form of emailed communications, such as emailers and 5 Minute Integrity Focus. Ethics posters are displayed at all sites. The current ethics posters are ‘Do what is right’, ‘How can I be sure my actions are ethical’, ‘Our values’ and ‘Trust us, tell us’. These are soon to be replaced with a new set of ethics posters.

Ethics education

The Massmart Ethics Office develops ethics training that employees attend or participate in such as Leading with Integrity and Code of Ethical Conduct training. This training is developed in conjunction with the Walmart Global Ethics Office.

Ethics surveys

In 2013, Walmart Global Ethics partnered with Corporate Executive Board (CEB) to administer a 21-item integrity survey to a statistically significant global sample of employees deployed to all businesses. Massmart tailored the CEB questions to be part of the BUA engagement survey, a local derivative of the survey. This BUA survey involved ascertaining the involvement and ownership that drives an employee to make a valuable contribution for the betterment and success of Massmart. Our philosophy is that when the engagement is high, the employee is much better able to respect, add value, and seek opportunities to go above what the job requires. This, we believe, impacts the culture and success of Massmart.

 

The table below reflects the response between the BUA survey for 2014 and 2013.

Themes BUA 2014 BUA 2013 % change
Comfort speaking up 49% 57% -8%
Tone at the Top 38% 44% -6%
Director Manager Leadership 52% 59% -7%
Ethical pressure 60% 65% -5%
Awareness 72% 81% -9%
Observed misconduct 34% 37% -3%

 

As seen in the table above, the results have decreased across all themes year on year.

 

Suppliers and service providers

Massmart regularly communicates its ethical and ethical-sourcing standards to suppliers and service providers, and attempts to ensure that they comply with these standards as well as all legal requirements in all the countries where we operate including laws and regulations relating to corrupt activities. This is achieved in the following ways: suppliers and service providers are invited to make use of the ethics lines, Massmart’s formal trading agreements detail ethical practices that suppliers are expected to uphold, and supplier ethics messages are distributed in supplier communications and training.

Legal and Regulatory Compliance

Monitoring and managing legal and regulatory risks across the Group has always been a fundamental tenet of our business model. King III requires that an effective compliance framework should include, among other features, formalized control processes with clear responsibilities and reporting channels. To ensure compliance with King III in an increasingly regulated market, the Group has sharpened its focus in this area by expanding and realigning certain functional legal and regulatory areas, including the following:

  • In 2011, the Board appointed a Group General Counsel and Legal Executive with Group-wide scope;
  • In 2013, Management created a Compliance and Ethics Sub-Committee of its Executive Committee to focus on governance, regulatory compliance and ethics matters;
  • In 2013, Management divided the role of General Counsel and Chief Compliance Officer and appointed an executive to lead the regulatory compliance function. Management has realigned certain reporting lines and added resources within both the regulatory and legal areas to accommodate this enhanced structure.
  • In 2015, Management appointed a Chief Ethics and Compliance Officer to oversee the ethics, compliance and anti-corruption efforts of Massmart

These expanded and realigned resources have dual objectives of (i) providing legal/regulatory subject matter expertise to the Massmart Divisions and (ii) ensuring that each division assesses and manages those legal/regulatory risks that the Group identifies. With support from the Group, the Finance Directors in each Division continue to ensure that legal/regulatory risks are appropriately assessed and managed and this is overseen at a Subsidiary Board level and ultimately through the Massmart Risk Committee. Compliance across the Group is exercised as follows:

  • The environment is monitored, formally and informally, via several sources including key subject matter experts within the Group legal/regulatory function, external service providers that review all proposed or impending legislation and regulations, as well as non-executive Directors, and contacts within government bodies, supplier bodies and consumer groups;
  • Depending upon where the response to the pending legislation can most efficiently and effectively be addressed, the task falls to one of the trading forums (Food, Liquor, General Merchandise, Cellular) or functional forums (TIP, Finance) or even the Group Executive Committee. The members of these forums are also tasked with keeping their respective Divisions apprised of intentions to support the role of the Divisional Compliance Officers; and
  • On-going compliance is monitored and tested through various means including internal compliance monitoring through subject matter experts within the group compliance functions, through Massmart Internal Audit Services, External Audit and third-party service providers. Reports from these entities are presented to the Risk Committee and the Compliance and Ethics Committee.

Pending legislation or recently enacted laws that may have a potentially material impact on the Group include:

  • Payment Card Industry Data Security Standard;
  • Labour and Employment legislation
  • Protection of Personal Information Act; and
  • Various regulations relating to food safety and product safety, most significantly the Consumer Protection Act.

Extraterritorial laws now relevant to Massmart via our subsidiary association with Walmart that may have a material impact on the Group include:

  • The U.S. Foreign Corrupt Practices Act;
  • Sarbanes Oxley;
  • Dodd-Frank; and
  • Various trade sanctums relevant to subsidiaries of US companies.