Massmart’s governing body (‘the Board’) accepts collective responsibility for effectively leading the Group and ultimate accountability for achieving the Group’s strategy, operating performance and financial results within the Group’s corporate governance framework. The Board endorses and accepts responsibility for achieving the values underpinning good governance, namely: integrity, competence, fairness, responsibility, transparency and accountability.
As reflected in the Group’s Code of Ethical Conduct, Massmart applies high ethical standards to its operating environment. The Massmart Code of Ethical Conduct applies to all employees across all levels of the organisation, as well as all members of the Board. It also applies to all employees and directors of Massmart-controlled subsidiaries. The Board ensures that Massmart’s Code of Ethical Conduct is reviewed and approved on an annual basis. Furthermore, the Board ensures ethical behaviour and compliance with laws and regulations by the Group and the Group’s own governing documents, codes of conduct, legal and ethics policies. These programmes include but are not limited to: the Compliance Program; Anti-Corruption; the USA FCPA; Anti-Money Laundering; Anti-trust; Privacy & Records Retention; Consumer Protection; Environmental Compliance; Responsible Sourcing; Food Safety; Trade (Import/Exports); Health & Safety and Ethics.
To support its stakeholder inclusive approach, Massmart participates in one-on-one meetings with key stakeholders throughout the year and undertakes regular engagements and themed discussions with subject matter experts. The Group is involved in public policy forums with government and civil society representatives, and engage with consumer interest groups. In addition, Massmart seeks opinions from its customers and suppliers. The Board ensures that all stakeholders of the Massmart Group receive complete, timely and relevant updates as required or requested.
Directors are required to disclose in writing any conflicts of interest and shareholdings in the Company or in other relevant stakeholders, including suppliers, through Director’s related parties. The Company Secretary reminds Directors of this obligation quarterly.
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. The Board, through the Social and Ethics Committee, has approved a Code of Ethical Conduct that addresses the key ethical risks of the Group as well as articulate and give effect to the Board’s direction on organisational ethics.
The responsibility for the implementation and execution of Massmart’s Code of Ethical Conduct has been delegated to Massmart’s Ethics Office who provide regular feedback thereon to the Social and Ethics Committee.
The Code of Ethical Conduct is published on the website and is incorporated by reference in supplier and employee contracts. We continue to ensure that our ethics programme is well known through employee induction programs, booklets and training and continuous communication programs to all employees. The Massmart ethics’ programme dovetails and aims to replicate global practices used in Walmart, a process that has been easy to adopt.
The Code of Ethical Conduct applies to all employees across all levels of the organisation, as well as all members of the Board. Massmart expects all suppliers, consultants, law firms, public relations firms, contractors and other service providers and professional advisors to act ethically and in a manner consistent with this Code of Ethical Conduct. Massmart’s formal trading agreements detail ethical practices and guiding principles that suppliers are expected to uphold, and supplier ethics messages are distributed in supplier communications and training.
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.
Key areas of focus during the reporting period and planned areas of future focus are detailed in the Board Committees section of the Integrated Annual Report.
Massmart’s business model and structure is underpinned by its purpose to be the most trusted, high volume, lowest cost, wholesale and retail Group in sub-Saharan Africa, delivering exceptional value to mass market consumers. The Board oversees that Massmart’s core purpose and values, strategy and conduct are congruent with it being a responsible corporate citizen.
The Board, through the Social and Ethics Committee, is responsible for overseeing and monitoring, on an ongoing basis, how the consequences of Massmart’s activities affect its status as a responsible corporate citizen. This is measured against performance targets agreed with management in support of Massmart’s strategic priorities.
Massmart continues to implement a comprehensive corporate accountability programme We have, since 2007, participated in a number of global disclosure and reporting initiatives including the CDP, the FTSE/JSE Responsible Investment Index and the Global Reporting Initiative. In 2017, we scored in the A– band of the CDP’s scorecard for climate change, the highest of South Africa’s big five retailers. We remain a participant in the FTSE/JSE responsible Investment index, having first been admitted at inception of the index in 2004. While we are currently on the Top 30 reserve list, it is our objective to once again be included in the top 30 Leadership Index following our FTSE/JSE Responsible Investment Index Review scheduled for the first quarter of 2018. In fulfilling its committed to saving customer’s money so they can live better, Massmart is dependent on the transparent trust-based relationships it builds with its customers, employees, shareholders, suppliers, regulators and the communities in which we operate.
The Social and Ethics Committee monitors and discloses the following matters: ethics and anti-compliance; consumer and product safety; responsible sourcing; human capital management; regulatory and compliance matters; stakeholder relations; BBBEE and socio-economic development; environmental impact.
The following key performance indicators across the six capitals are disclosed in the Group’s Integrated Annual Report: Massmart’s efforts towards supporting small local manufacturers; socio-economic development; responsible sourcing; the Group’s efforts to minimise its environmental footprint and enable sustainable supply and consumerism, and consumer protection; Massmart’s contribution to society through employment, skills development, the development of businesses in our supply chain and our contribution to tax revenues in the regions where it operates; and the Group’s remuneration policy; occupational health offering; transformation efforts; and learning and development initiatives
Key areas of focus during the reporting period and planned areas of future focus are detailed in the Board Committees section of the Integrated Annual Report.
The Board assumes responsibility for setting Massmart’s core purpose and values’ strategy and for giving direction on how it should be approached and addressed by the Group. They annually review and approve the Group’s competitive and sustainability strategies, and adopt business plans and budgets for the achievement of short, medium and long term strategic objectives. In the short-term, the Annual Operating Plan is submitted to Walmart and to the Board for consideration and approval. Progress against this plan is tracked by the Executive Committee on a monthly basis. Over the medium-term a 3-Year-Plan and the execution thereof is monitored by the Board on a quarterly basis. The Massmart Executive Committee assesses management’s progress against this plan. A 5-Year-Plan is submitted to the Board and Walmart for approval. This plan takes into account strategies over longer time horizon. The Executive Committee develop a longer-term strategy and this is presented to the Board annually for consideration at its strategy session.
The Board delegates operational strategy implementation and general executive management of the business to its Executive Directors and Executive Committee. In approving Massmart’s strategy, the Board: adopts a holistic view, actively challenging and debating the impact of the proposed strategy on the various forms of capital; takes into account the legitimate and reasonable needs, interests and expectations of Massmart’s key stakeholders; gives consideration to the interconnectivity and inter-dependence of the various forms of capital, and interests and expectations of material stakeholders; and considers the material risks and opportunities.
In exercising its ongoing oversight of risk management, the Board considers the results of Massmart’s assessment of risks and opportunities emanating from the triple context in which the Group operates and the capitals that the Group uses and affects. The material risks and opportunities are disclosed in the Integrated Annual Report and are approved by the Risk Committee. Through the Social and Ethics Committee, the Board is able to assess and responsibly respond to sustainability risks that may impact the long-term value creation of the business and/or the reputation of the Group.
The Board continually monitors Massmart’s general viability and determines whether it appears reasonably unlikely that the Company will be unable to pay its debts as they fall due and payable within the ensuing six months or become insolvent within the ensuing six months. The Audit Committee reviews the Annual Financial Statements and interim reports, the preliminary report and any other announcement regarding the Group’s results or other financial information, focusing on (among other matters) the basis on which the Group has been determined to be a going concern.
The Board has assumed responsibility for approving the preliminary financial statements, Integrated Annual Report and other reports and announcements to shareholders. The Board satisfies itself that the combined assurance model is effective and sufficiently robust for the Board to be able to place reliance on the combined assurance underlying the statements that the Board makes concerning the integrity of the Group’s external reports. The Board delegates its responsibility for the disclosure of the Group’s sustainability practices, achievements and risks in the Group’s Accountability Report. The Social and Ethics Committee ensures full, relevant and useful disclosure therein.
The Massmart Integrated Annual Report focuses on those matters that could substantially affect Massmart’s ability to create value over the short, medium and long term. In identifying material matters, the Board considers: Massmart’s business model and its interactions with the six capitals; its operating context; and the interests of its key stakeholders. Management’s basis for determining materiality is reviewed, approved and signed off by the Audit Committee on behalf of the Board. Massmart’s Integrated Annual Report is available on Massmart’s website.
The Board is wholly responsible for the formulation, development and effective implementation of Group strategy and delegates operational strategy implementation and general executive management of the business to its Executive Directors and Executive Committee. This is achieved through the direction provided by the application of the Board charter, Memorandum of Incorporation, its respective letters’ of appointment and its application of the King Code of Corporate Governance. The corporate governance terms of reference are codified and are reviewed on an annual basis to ensure that they are relevant to the Group and its strategic objectives. The Board’s sub-Committees play a pivotal role in ensuring that corporate governance is achieved through embedding the terms and its mandate established in their respective charters.
The Board is the focal point for corporate governance within the organisation and is directed through its charter. The Board, through its various sub-Committees, monitor and oversee the Group governance framework. The Board monitors governance and any transgressions thereof are reported to the Board by the management team, represented by the two Executive Directors and the Company Secretary. Digression from the Board’s corporate governance framework is deliberated at Board meetings and is ratified by the Board, where required and where relevant. The Board has the ultimate decision-making ability and relevant policies around protocol are in place to direct the Board in its furtherance of governance in the Group.
Should the Board require additional information, they are authorised to engage with members of the management team or employees to request resources or information at the expense of the Company. These resources include the Board’s ability to obtain professional and expert guidance on matters presented by management. Additionally, the Board has access to all Group information, records, documents and property.
Massmart’s subsidiaries adopt the corporate governance framework as ratified by the Board.
The Board of Directors are appointed in accordance with the Johannesburg Stock Exchange Listings Requirements and are selected for their experience, expertise and ability to act in the best interests of the Group. The range of skills and expertise on the current Massmart Board include, but are not limited to: finance; audit; legal and regulatory; international retail; risk; corporate governance; accounting; public policy; transformation; real estate and commerce; and finance and banking. During the year under consideration, the Board made two Board appointments: Ms Muigai and Mr Burnley, both of whom have specialist knowledge in the retail and international market sectors. Directors of the Board are subject to, and participate in, an annual assessment conducted by the Company Secretary. The annual assessment considers and evaluates the performance of each Director’s knowledge, skill-set and experience. The 2017 annual Board assessment indicated that all members of the Board are adequately and suitably equipped with knowledge, skills and experience to discharge of their duties and that the Board and its Committees are all comprised of an encouraging mix of skills. The abridged curriculum vitae of each Director and the Company Secretary appear here.
Directors are categorised as Executives, non-Executives and independent non-Executives, and this is disclosed in the Corporate Governance section of the Integrated Annual Report and on the Massmart website. Currently, 57% of the non-Executive Directors of the Board are considered independent. The remaining 43% of the non-Executive Directors are representatives of the majority shareholder, Walmart. The Chairman of the Board is deemed independent and a robust assessment of independence of the Board is conducted on an annual basis by the Company Secretary. This assessment thoughtfully evaluates the tenure of Directors who are on the Board in excess of 9 years. Annually, one third of Directors retire by rotation and are re-elected, subject to shareholder approval at the Annual General Meeting held in May. At the 2017 Annual General Meeting, shareholders adopted ordinary resolutions which approved the re-election of Ms Langeni and Dr Gwagwa to the Board. Both these Directors have served tenure in excess of 9 years. Mr Seabrooke, the Deputy Chairman and Lead Independent Director of the Board, has also served tenure in excess of 9 years on the Board and is also deemed to be independent. Mr Seabrooke’s role is to guide and steer the Board where the Chairman is unavailable or is conflicted. The only two Executive Directors on the Board are the Chief Executive Officer and the Chief Financial Officer. All Directors and the Company Secretary declare and disclose any conflicts of interest they may have in accordance with the provisions of section 75 of the Companies Act no 71 of 2008. None of the Board members hold securities in the Group which are deemed to be material to their personal wealth. Two of the independent non-Executive Directors have a minor interest in Massmart. The Directors’ interests are disclosed on an annual basis in the Directors’ Report contained in the Integrated Annual Report.
There is a clear split of roles and responsibilities on the Board and cross functioning is achieved through members of the Board having cross Committee membership. A balance of powers is maintained and all major decisions regarded by the Committees, are tabled to the Board for holistic consideration and approval. Regarding its stance on diversity, during 2017, through the Nominations and Social and Ethics Committees, the Board established, adopted and implemented a gender diversity policy and a race diversity policy. These policies identify gender and race targets for the Board to achieve and there is a focus to ensure that as much as potential Board and Committee members do meet the race and gender targets, that they also meet the requirements of being adequately skilled and qualified. The Nominations Committee and the Social and Ethics Committee are tasked with ensuring that the objectives of the race and gender diversity policy are met and will continue to monitor the compliance thereof into 2018.
The Nominations Committee is responsible for conducting a full inquisition into a potential identified Board member and proposes the appointment of the identified candidate to the Board. Once the Board has approved the appointment of a Director, the Company Secretary ensures that the Director attends a rigorous Board induction in which a detailed overview of the Group, its regulatory landscape, its strategic objectives, its risk and governance framework and its operational structure, is explained. The Director induction is robust and affords the newly appointed Directors to maximise their impact on the Board within the shortest time.
The Board frequently discusses succession planning of Executive management including the Chief Executive Officer and the Chief Financial Officer and this will be considered in greater extent in 2018. Informal succession plans are in place and in line with the Group’s talent acquisition strategy, the succession plans are to be formalised during 2018.
The Board of Directors actively delegate their authority to the five sub-Committees and the Executive Committee, and exercise overarching judgement on matters within their mandate. The Board is able to monitor the matters dealt with by the sub-Committees through attending the sub-Committee meetings as members or invitees, and the reports of the respective sub-Committee chairs are shared with the Board on a quarterly basis. Additionally, the minutes of the sub-Committee meetings are further included in the Board pack for deliberation and noting. The Board delegates to its sub-Committees in accordance with the scope and mandate prescribed in their respective sub-Committee charters. The ultimate responsibility still vests with the Board. Any responsibilities which have not been delegated to the sub-Committees’ remain the responsibility of the Board.
The Board sub-Committees’ charters are reviewed and approved annually, by the Board. These include the charters for the Audit, Risk, Nominations, Remuneration and Social and Ethics Committees’. All Board sub-Committees’ charters deal with the respective sub-Committee roles, duties, functions, responsibilities, mandate required composition, objectives, purpose and activities, delegated authorities – including the extent of power to make decisions, tenure and reporting mechanism to the Board. The Board sub-Committees’ charters deal adequately with tenure and prescribe that the term of office of the sub-Committee members shall be one year and that the Board will review sub-Committees’ respective compositions and chairmanship annually. The Board assesses the sub-Committees’ composition annually in May. External advisors, Executive Directors and members of management attend Committee meetings by invitation. The Committees play an important role in enhancing high standards of governance and achieving increased effectiveness within the Group and this is maintained by exercising their independent judgment and decision-making ability.
The Board and sub-Committee charters enable cross membership between the Board and its sub-Committees which in turn permits coordinated timing of meetings; and avoidance or duplication or fragmented functioning in so far as possible and consequently, the Board is achieves effective collaboration and this in turn enables the Board to effectively discharge its duties and balance its powers. There is a balanced distribution of power in respect or membership across Committees, so that no individual has the ability to dominate decision-making, and no undue reliance is placed on any individual. Massmart’s Board charter ensures that a relevant system of policies and procedures is in place to ensure control and the devolution of authority and responsibility to individuals as identified. Practically the decisions are made on a consensus model/basis.
Each of the five Massmart Board sub-Committees comprise no less than three members and the Board sub-Committee meetings are attended by senior management, as-and-when invited. Some members of the Executive Committee have standing invitations to certain sub-Committee meetings. Senior management’s attendance at Board sub-Committee meetings is documented in the Integrated Annual Report. The names, experience and qualifications of all members of the Board, as well as any sub-Committees on which those members sit, are disclosed in the Integrated Annual Report and on the Massmart website.
Massmart Audit Committee
The Audit Committee oversees the continued application of a combined assurance model which provides a coordinated approach to all assurance activities; financial reporting risks; internal financial controls; fraud risks related to financial reporting; and IT risks related to financial reporting. This sub-Committee also ensures that the combined assurance received from management and internal and external assurance providers, is sufficient to address all identified significant risks. The Audit Committee oversees and has regard to all factors and risks that may affect the integrity (i.e. accuracy and reliability of information) of the Integrated Annual Report and other external reports within its mandate. The Audit Committee oversees the Group internal audit function and the Audit Committee is responsible for the appointment, performance assessment and dismissal of the Chief Audit Executive and Massmart Audit Services (“MAS”).
Massmart Risk Committee
A formal Risk Committee has been established and comprises of a mix of Executive and non-Executive Directors and senior and Executive management. This Committee is responsible for overseeing and directing the Groups Risk functions.
Massmart Remuneration Committee
Massmart has a formally constituted Remuneration Committee comprising only non-Executive Directors of the Board and tasked with oversight over non-Executive Director and senior management remuneration protocols and philosophy.
Massmart Nominations Committee
This sub-Committee is tasked with Directorate and Executive management appointments; terminations; resignations; and succession planning.
Massmart Social and Ethics Committee
This sub-Committee is responsible for overseeing and reporting on ethics, responsible corporate citizenship, sustainable development, health and safety and stakeholder relationships. It is also responsible to execute on the statutory duties set out in the Companies Act. The Social and Ethics Committee comprises three Directors, two of whom are non-Executives. Professor Derek de Jong is an independent permanent invitee of the sub-Committee.
In 2018, the Board, through management, will focus on operationalising, embedding, and creating awareness and understanding of its Delegation of Authority Framework and governance protocols within the Group.
On an annual basis, the Board and its sub-Committees undergo an informal, internally conducted assessment navigated by the Company Secretary. The 2018 assessment results indicated that the Board and its sub-Committees were generally satisfied with the performance of the Board and sub-Committee respectively. An assessment of further conducted on the Chairman, Mr Dlamini and the results indicated that Mr Dlamini was a strong chairman who was not conflicted on any decisions made during the year. Some of the key focus areas highlighted during the 2018 assessments, is diversity both on the Board and within the Group and secondly, the roll-out of the Group’s Africa strategy. The Board and its sub-Committees were positive about the impact of the annual self-assessment and its purpose in improving and contributing to effectiveness.
There is a formal Delegation of Authority framework in place, which is reviewed and updated by the Board, and which sets the direction and parameters for the powers which are to be reserved for the Board and those that are to be delegated to management via the CEO, Mr Guy Hayward. The framework defines the Board’s level of materiality thresholds and is clear in instances in which the Board’s authority is reserved. The Board, assisted by the Nominations Committee, ensures that adequate succession planning is in place for the CEO, CFO and key executives of Massmart’s major subsidiaries and oversees that key management functions are adequately resourced in relation to the Group’s strategic, operating and financial objectives.
The Nominations Committee, on behalf of the Board, oversees that key management functions are headed by an individual with the necessary competence and authority, being the CEO of the Group. Mr Hayward is responsible for the leadership of the Company and he is accountable to, and reports to, the Board, who set the terms of his employment contract.
The task of the CEO is to lead the Company and to implement the policies and strategies adopted by the Board. He is not a member of the Audit, Nominations and Remuneration Committees and attends these sub-Committee meetings in his capacity as an invitee only. Mr Guy Hayward chairs the Massmart Executive Committee and the Group’s four divisional Management operating Committees thereby serving as the chief link between management and the Board. Whilst he does not have a fixed-term contract, Mr Hayward is contractually bound by a notice period of twelve months. Mr Hayward is chairman of the Hilton College Endowment Foundation and he does not have any other professional commitments outside of the organisation.
The Board is assisted by a competent, suitably qualified and experienced Company Secretary, Mr Ralebepa, who is appointed by the Board as the Group General Counsel and Company Secretary of the Massmart Group, on a full-time basis, and who is empowered to properly fulfil his duties as, inter alia, set out in section 88 of the Companies Act 71 of 2008. Mr Ralebepa has legal and commercial experience in excess of 15 years and is duly equipped to provide professional corporate governance advice to the Board and its sub-Committees. Whilst Mr Ralebepa has unfettered access to the Board, in its annual assessment of the Company Secretary, the Board confirmed that it was comfortable that it has an arm’s length relationship with him, and the Board confirmed that it had assessed and is satisfied with the qualification, competence and expertise of the Mr Ralebepa.
Through its risk framework, the Board takes responsibility for ensuring that the Group implements an effective process to anticipate and identify risk, measure its potential impact and implement steps it believes are necessary to proactively manage associated risks and identify opportunities. When approving Massmart’s strategy, the Board takes into consideration the strategic opportunities available and the related risks associated with its strategy.
The risk policy includes all of the following: Massmart’s definitions of probabilities and risk management; risk management objectives; the risk approach and philosophy; and the various responsibilities and ownership for risk management within Massmart, which enable the achievement of organisational objectives.
Massmart’s risk framework encompasses both the potential positive and negative effects of identified risks on the achievement of the organisational objectives; this is documented in the risks and opportunities framework. The Board considers operational; strategic; regulatory; financial and reputational risks in executing its duties and considers risk as an integral part of its decision-making. In considering the potential loss appetite of the organisation, the Board is mindful of the following factors: the cause of the risk; the amount of the loss; the impact and management response; any current or envisaged risks threatening Massmart’s sustainability, and the effectiveness of its risk management controls.
The significant opportunities available to Massmart are determined by taking the following qualitative elements into consideration: Massmart’s definition of purpose; the internal and external risks affecting Massmart; how Massmart streamlines its processes and behaviours to be more responsive to customer demands; and opportunities to maximise stakeholder value in the most efficient manner.
The Board, through the Massmart Technology, Information and Process (TIP) Forum, ensures that adequate contingency plans are in place to ensure business continuity in the event of the destruction of major assets, head offices, IT sites, and/or loss of executive teams. These include, but are not limited to formal Divisional Business Continuity Plans; significant focus on IT back-up and redundancies; off-site documentation storage & retention, and a focus on Health & Safety.
The Board, through the Risk and Audit Committees, is ultimately accountable for the governance of information and technology. The Massmart Technology, Information and Processes (TIP) Forum has been established to support it with this role. The TIP Forum is accountable to the Group Chief Information Officer, who also acts as chairman of the Forum. The TIP Forum is a monthly sitting of Divisional IT directors & executives and its purpose is defined by the Massmart TIP Governance Framework. The TIP Forum is concerned with strategy; governance; peer review; compliance with standards and legislation; and seeking opportunities for shared learning and synergy. The Forum is responsible for facilitating the sharing of intellectual capital relating to systems and processes across the Divisions and to enforce common system standards and methodologies where required.
Massmart aligns its IT teams with best practice frameworks including the Information Technology Information Library (ITIL) and Control Objectives for Information Technology (COBIT). Measures are in place to ensure compliance with all relevant laws, information security and the protection of personal information. The TIP Forum is tasked with ensuring proper system security, data integrity and business continuity. Through its link into Walmart Security and Information Security Departments, Massmart receives daily and weekly updates regarding any concerns that are identified internationally.
This information is shared with Massmart’s Divisions through the Divisional IT Operations Managers. Active network monitoring and profiling is managed through industry best-practice tools and firewall traffic is submitted real-time to Walmart’s Security Operations Centre for interrogation.
As a responsible retailer, Massmart is committed to ensuring that all internal e-waste is discarded in a safe, responsible and secure manner, whereby the risk to human health and the environment is minimised and the security of public and private information is maintained. The Board, through the Risk Committee and Massmart’s Compliance department, oversees the protection of privacy and personal information. To ensure that management keeps abreast of changing regulation, regular Protection of Personal Information (“POPI”) meetings are held by management and advanced POPI training is scheduled for high-risk departments.
The Board receives independent assurance on the effectiveness of technology and information internal controls from MAS and external auditors. MAS not only assess the processes and controls around large projects, but also assess the control environment within existing systems and the Group’s general computer control environment. MAS adopted the COBIT methodology for technology auditing several years ago.
Massmart is committed to the highest level of information and technology governance, as managed by the Group Chief Information Officer (CIO). The board is satisfied that Massmart complies with the significant governance principles in King IV, and has identified Information and cyber security as an area for future focus.
Massmart has a Delegation of Authority Framework which delegates responsibility for implementation and execution of effective compliance management to senior members of Management and/or members of the Massmart Executive Committee. In terms of the Board charter and Massmart’s Memorandum of Incorporation, the Board ensures compliance with laws and regulations by the Group and the Group’s own governing documents, codes of conduct and legal standards. Massmart have an Ethics and Compliance management committee comprising some of Massmart’s Executive Committee members and senior management and they are responsible for embedding compliance within the Group on behalf the Board and this is reported to the Massmart Social and Ethics Committee. The Board approves a legal compliance policy which is implemented by Management. By reviewing and approving this policy, the Board sets the direction on the adoption of the Group’s compliance philosophy.
The Board has oversight over ensuring the Group’s commitment to the principles of good corporate governance and ensuring that compliance is reviewed regularly. This ensures that there is a general understanding of the rights and protections afforded by the compliance measures implemented. Massmart’s Compliance and Ethics sub-committee are responsible for ensuring that the Group embeds its compliance philosophy and approach, as directed by the Board.
The Board has an overview of the arrangements for governing and managing compliance and the key areas of focus during the reporting period. Through the Risk Committee, the Board determine, from time to time, what independent assurance is needed to manage the effectiveness of compliance management. The Group’s combined assurance model is one of the tools utilised to regularly assess compliance and risk management. The combined assurance model is applied internally and externally. The Board, through its Risk Committee monitors the tracking of risks and the outcomes thereof. This is the manner in which the Board ensures effective compliance management.
We track environmental regulatory inspections, findings and environmental fines received across our facilities. No material issues of environmental non-compliance were noted during the period.
We are committed to having an ethics and compliance program that is effective, sustainable, and tailored to our business risks to continuously improve our business. The focus going forward will be to continue to emphasize anti-corruption. Through our anti-corruption initiatives we strive to achieve the highest standards of integrity with our associates and stakeholders. As food retail and wholesale is a large component of our business, maintaining a progressive and effective food safety management system is a critical part of our continued success, we will continue investing to ensure food quality and safety in the year ahead. As we expand our store footprint, we will continue to provide Compliance support to the business.
The Remuneration Committee assists the Board to oversee a formal and transparent procedure for developing and implementing a fair and responsible policy on remuneration that enables the Group to recruit, retain and motivate talent in order to create value for the Company over the long term.
Massmart’s total reward offering is clearly described and defined in the Remuneration Policy, including an explanation of: base salary, and financial and non-financial benefits; sign-on, retention and restraint payments; termination and severance payments; any commissions and allowances; and a description of the fees paid to the non-Executive Directors. Massmart’s Remuneration Policy defines the Group’s short- and long-term incentives, both of which are aligned to the strategic objectives of the Group. Massmart’s incentive schemes are aligned to the achievement of Group financial and strategic objectives, directly linking this remuneration component to Company financial performance and the sustained creation of shareholder value. The Remuneration Policy sets out the use of performance measures that support positive outcomes across the economic, social and environmental context in which the Group operates. The purpose of Massmart’s remuneration philosophy is to establish fair and equitable reward levels that will attract, motivate and retain high calibre employees. This is in line with the Group’s culture and values, whilst aligning remuneration with stakeholder interests and best practice in the retail environment.
Massmart’s Remuneration report is presented in the following three sections: Section one serves as a background statement with the Remuneration Committee Chairman’s letter to the shareholders; Section two provides an overview of Massmart’s remuneration philosophy and policy; and Section three reports on Massmart’s implementation of the Remuneration Policy during the year under review.
The Remuneration Policy sets out arrangements for ensuring that the remuneration of Executive Management is fair and responsible in the context of overall employee remuneration in the Group. In 2017 increases awarded to Massmart’s Executive Directors, the Executive Committee and Divisional management teams averaged 6.2%, in line with the average percentage of increases to salaries across the Group. Commencing in 2014, with the assistance of an external party, Massmart formally and extensively reviewed remuneration within and across the Group, with specific emphasis on an analysis of fairness across race and gender. Although no evidence of intentional discrimination was found, there are outliers and these are being addressed. Most disparities could be justified by qualification, years of experience and tenure differences. The process of managing and addressing existing outliers is ongoing.
Massmart will table its Remuneration Policy and the implementation thereof for two separate non-binding advisory votes at all of its Annual General Meetings going forward. If 25% or more of the shareholders vote against either resolution at the Annual General Meeting, the Board will invite dissenting shareholders to engage with the Remuneration Committee on their concerns.
Identified risks and how assurance is achieved over those risks are reported to the Board through the Massmart Audit and Risk Committees, who assume responsibility for the oversight thereof, on an annual basis. Massmart’s combined assurance model incorporates and optimises all assurance services and functions so that, taken as a whole, they enable an effective control environment; support the integrity of information used for internal decision making by Management and the Board; and support the integrity of the Group’s external reports.
Massmart adopts a collaborative approach to risk identification, mitigation and assurance activities between the management of the various Divisions, Head Office support functions and internal and external assurance providers. The Divisional risk committees give feedback on their significant risks and material matters to the Risk Committee, who ultimately own and manage risks, and in turn give feedback to the Board thereon.
The Board, through the Risk Committee, objectively reviews the Group’s combined assurance model bi-annually, forming an opinion on the integrity of information and reports, and the degree to which an effective control environment has been achieved. An important role of Massmart’s Audit Committee, as delegated by the Board, is to monitor and supervise the effective function of MAS to provide an objective overview of the operational effectiveness of the Group’s systems of internal control and reporting. The Board, through Massmart’s Audit Committee, reviews and approves the internal audit charter, internal audit coverage plan and budgets and satisfies itself that the coverage plan makes provision for effectively addressing, the critical risk areas of the business, including addressing its role within combined assurance and the internal audit standards to be adopted.
It further ensures that the arrangements for MAS provide for the necessary skills and resources to address the complexity and volume of risk faced by the Group, and that MAS is supplemented as required by specialist services such as those provided by forensic fraud examiners and auditors, safety and process assessors, and statutory actuaries. The Chief Audit Executive has unrestricted access to anyone in the Group, has frequent and independent discussions and updates with the Audit and Risk Committee Chairmen and Massmart Executive Directors.
MAS apply the standards of the International Standards for the Professional Practise of Internal Auditor and the recommendations of King IV. In accordance with the International Standards for the Professional Practise of Internal Audit standards, it has been determined that MAS will be subjected to an independent external quality assessment review at least once in five years.
Massmart is committed to saving customer’s money so they can live better. Our ability to fulfil this commitment is dependent on the transparent trust-based relationships we build with our customers, employees, shareholders, suppliers, regulators and the communities in which we operate.
The Board, through the Social and Ethics Committee, is responsible for the governance of stakeholder relationships by providing guidance on stakeholder engagement policies and monitoring the quality of stakeholder relationships.
Management develops a strategy and formulates policies and mechanisms for the management of relationships with each stakeholder grouping. Through regular reporting by management to the Social and Ethics Committee and the Chairman of that Committee to the Board, the Board is equipped with the necessary information to enable it to take the legitimate interests and expectations of our material stakeholders.
Stakeholder engagement activities occur on an ongoing basis throughout the year. We participate in numerous one-on-one meetings with key stakeholders and undertake regular engagements and themed discussions with subject matter experts. We seek opinion from customers and suppliers through our intercept and advocacy surveys. Engagement however occurs as needed throughout the year. Engagement with our employees occurs through regular interactions, performance review and career planning discussions, CEO road-shows and employee engagement surveys. We are involved in public policy discussions with government and civil society representatives, and engage consumer interest groups. We engage with shareholders through investor presentations, meetings and road-shows, and the Annual General Meeting.
In the course of doing business we engage with a wide variety of people and organisations on a range of topics. To help us identify relevant issues we use the following forms of engagement: we conduct desktop research to identify topics of interest in the broader public discourse; we track media coverage to understand leading public viewpoints; we assess the materiality of these issues to the Group through workshops and engagement with subject matter experts and interested parties; and we review alignment to broader Walmart objectives and priorities.