Corporate governance

 

audit risk committee
Board
Two executive directors and seven non-executive directors(1)
Responsibility for the overall conduct and control of the business and the strategic direction of the company
Audit and risk committee
Three independent non-executive directors(2)(3)
Provides effective governance over reporting, the effectiveness of the internal financial controls and the external and internal audit functions and ensures that there is an effective risk management process that identifies and monitors the management of the key risks.
Remuneration committee
Four non-executive directors of whom two are independent(2)(3)
Ensures the adoption of remuneration policies that attract and retain top talent, are aligned to the company's strategy, are market related and drive performance in the short and long term.
Social and ethics committee
Three non-executive directors of whom two are independent(2)(3)
Assists the board to ensure that the transformation strategy is appropriate and integrated into the business. It performs the social and ethics functions required by the Companies Act, 2008, as amended.
Chief Executive Officer
Marcel von Aulock
Responsible for the development and implementation of board strategy and policy and management of the business.
Group executive committee
Thirteen members including the executive directors, divisional managing and financial directors and certain group function heads
Responsible for the day-today management of the operations of the group.
(1) In terms of the MOI the board consists of between four and 15 directors. Three of the non-executive directors are independent.
(2) As at 31 March 2016, Post-year end on 11 August 2016, the remuneration committee was expanded to five non-executive directors of whom three are independent and the social and ethics committee was expanded to four non-executive directors of whom three are independent
(3) The committee meetings are also attended voluntarily by other directors
Pure risk committee
Chief Financial Officer, Director of Risk, risk managers, divisional finance, security and development directors
Responsible for the identification and management of insurable risks.
Compliance committee
Executive directors and gaming managing, finance, operations, human resources, security, legal and compliance directors
Responsible for compliance, mainly in gaming division.
IT steering committees
Chief Information Officer and management committees for the gaming and hotel divisions
Responsible for the technology roadmap and IT project portfolio for the division
Management committee
Managing director and divisional function heads for gaming division
Responsible for the day-today management of the operations of the divisions
Ethical conduct
Corporate governance
Risk governance
Fair remuneration

The board and board committees

The board maintains full and effective control over the company and is accountable and responsible for its performance and compliance. The board reviews the strategic priorities of the group, determines the investment policies and delegates to management the detailed planning and implementation of the objectives and policies in accordance with appropriate risk parameters. The board monitors compliance with policies and achievement against objectives by holding management accountable for its activities through quarterly performance reporting and budget updates.

The board charter codifies the board's composition, appointment, authorities, responsibilities and processes and sets out the fiduciary duties of the directors of the company. It provides the board with a mandate to exercise leadership, determine the group's vision and strategy and monitors operational performance.

The board governs through clearly mandated board committees. Each committee has specific written terms of reference approved by the board and adopted by the committee. All committee chairmen report orally on the proceedings of their committees at the board meetings. Evaluation of the board is entrenched in the board charter and terms of reference and is carried out annually.

Our board

Executive directors


  • MN VON AULOCK
    MN VON AULOCK (42)

    CA(SA)

    Executive Director – Chief Executive Officer
    Date appointed: 1 April 2009(1)

    Marcel von Aulock served his articles at PwC and joined Tsogo Sun as Group Financial Manager in 1999. In 2004 he was promoted to Group Strategic Planning Director. In 2009 he was appointed Chief Financial Officer and on 30 September 2011 he assumed the role of Chief Executive Officer.

    (1) Date appointed to the holding company board pre-reverse listing into Gold Reef on 14 February 2011

  • JA COPELYN (66)
    RB HUDDY (47)

    CA(SA)

    Executive Director – Chief Financial Officer
    Date appointed: 31 October 2011

    Rob Huddy served his articles at PwC and joined Tsogo Sun in 1997. He held various management positions prior to being appointed Financial Director – Hotels Offshore in 2006 and Financial Director – Hotels South Africa in 2009. On 30 September 2011 he assumed the role of Chief Financial Officer.

 

Non-executive directors


  • Petrus Cornelis (Nelis) Swart
    JA COPELYN (66)

    BA(Hons), BProc

    Non-executive Chairman and member of the remuneration committee
    Date appointed: 13 August 2003(1)

    John Copelyn joined HCI as Chief Executive Officer in 1997. He was previously General Secretary of the Southern African Clothing and Textile Workers Union from 1974 before becoming a member of parliament in 1994. He currently holds various directorships and is Non-executive Chairman of e.tv.

    (1) Date appointed to the holding company board pre-reverse listing into Gold Reef on 14 February 2011

  • Anthony Mark Sher
    MA GOLDING (56)

    BA(Hons)

    Non-executive Director
    Date appointed: 30 April 2004(1)

    Marcel Golding runs a family investment office. Prior to this he was Chairman of HCI and Chief Executive Officer of e.tv. He was a member of parliament and Deputy General Secretary of the National Union of Mineworkers. He is Chairman of KWV Holdings.

    (1) Date appointed to the holding company board pre-reverse listing into Gold Reef on 14 February 2011

  • Bhabhalazi Enock Bulunga
    VE MPHANDE (58)

    Elec Eng (Dip)

    Non-executive Director
    Date appointed: 3 February 2005(1)

    Elias Mphande has served as the National Organising Secretary of the Southern African Clothing and Textile Workers Union, Marketing Director of Viamax Fleet Solutions, Chief Executive Officer of AUTA and the Vukani Group and Chairman of Golden Arrow Bus Services. He was appointed to the HCI board in 2010 as a non-executive Director and as non-executive Chairman in 2015 and serves on the board of Vukani Gaming Corporation and e.tv.

    (1) Date appointed to the holding company board pre-reverse listing into Gold Reef on 14 February 2011

  • Bhabhalazi Enock Bulunga
    Y SHAIK (58)

    BA(Law), BProc

    Non-executive Director, member of the social and ethics committee and Chairman of the remuneration committee
    Date appointed: 15 June 2011

    Yunis Shaik is an admitted attorney of the High Court of South Africa. He is a former Deputy General Secretary of the Southern African Clothing and Textile Workers Union and a director of Workers' College. He has served as a Senior Commissioner to the KwaZulu-Natal CCMA. He was appointed to the board of HCI in 2005 as lead independent non-executive director of HCI in 2010 and as an Executive Director in 2014.

Independent non-executive directors


  • Petrus Cornelis (Nelis) Swart
    BA MABUZA (52)

    BA MBA

    Lead Independent Non-executive Director, member of the audit and risk committee, the social and ethics committee and remuneration committee
    Date appointed: 1 June 2014

    Busi Mabuza has held various positions in the financial services and energy sectors and is currently a non-executive director at Development Bank of Southern Africa, Industrial Development Corporation and Nehawu Investment Holdings.

  • Anthony Mark Sher
    MSI GANI (63)

    CA(SA)

    Independent Non-executive Director, Chairman of the audit and risk committee and the social and ethics committee and member of the remuneration committee
    Date appointed: 11 August 2016

    Mac Gani is a Chartered Accountant with over 30 years' experience in the accounting and audit profession. He was a founding partner of MSGM Masuku Jeena Inc., a partner of Saboor Gani & Co and a partner of PwC until 2013. He is a non-executive director on a number of boards including Basil Read Holdings Limited and is on the investigating committee of the Independent Regulatory Board of Auditors.

  • Bhabhalazi Enock Bulunga
    JG NGCOBO (65)
    Independent Non-executive Director, member of the audit and risk committee, the social and ethics committee and remuneration committee
    Date appointed: 24 February 2011

    Jabu Ngcobo held the positions of General Secretary of the Southern African Clothing and Textile Workers Union from 1994 to 1999 and the Regional Secretary for Africa of the International Textile Garment and Leather Workers Federation from 1999 to 2006. He was appointed to the board of HCI in 2004 and serves as a director of HCI Coal.

Segregation of duties

The roles of the Chairman and the Chief Executive Officer are separate, with responsibilities divided between them to ensure a balance of power and authority. The Chairman is responsible for providing overall leadership of the board and ensuring that the board performs effectively. The Chief Executive Officer is responsible for the execution of the strategic direction, which is approved by the board, through the delegation of authority.

The lead independent director during the 2016 financial year was Rex Tomlinson who chaired or served on all of the committees of the board and was therefore well placed to influence the governance of the company and meet his obligations as Lead Independent Director. Rex Tomlinson resigned as Lead Independent Director and was replaced on 11 August 2016 by Busi Mabuza who will fulfil this role.

The Company Secretary ensures that board procedures and relevant regulations are fully adhered to. The Company Secretary is not a director of the company. The directors have unlimited access to the advice and services of the Company Secretary. The board is satisfied that the Company Secretary is competent and has the appropriate qualifications and experience required by the group. The Company Secretary also acts as secretary for the committees of the board.

All directors have unrestricted access to company records, information, documents and property and unfettered access to management at any time. All directors are entitled, at Tsogo Sun's expense, to seek independent professional advice on any matters pertaining to the group where they deem this to be necessary.

Board composition and attendance

The composition of the board and of the audit and risk, remuneration and the social and ethics committees is determined by the major shareholder. No independent director has served for more than nine years and the average length of service of independent directors is less than three years. The board considers that there is an appropriate balance of skills, experience, independence and knowledge among the independent directors. One-third of the directors retire by rotation each year in line with the memorandum of incorporation.

During the year there were five board meetings. Individual directors' attendance at the board and board committee meetings and at the AGM is set out in the table below:

  Board     Audit
and risk
committee
  Remuneration
committee
  Social
and ethics
committee
  AGM  
Executive directors                        
  Marcel von Aulock   5/5                  
  Rob Huddy   5/5                  
Non-executive directors                        
 Chairman                        
  John Copelyn   5/5         2/2        
Lead independent                        
  Rex Tomlinson   5/5     3/3   2/2   2/2    
Independent                        
  Busi Mabuza   5/5     3/3              
  Jabu Ngcobo   5/5     3/3   2/2   2/2      
Non-independent                        
  Marcel Golding   5/5                    
  Elias Mphande   5/5                  
  Yunis Shaik   4/5         2/2   2/2      

In addition, the divisional managing directors and the group Human Resources Director attend board meetings, enabling the board to explore specific issues and developments in greater detail.

Audit and risk committee

audit risk committee
Chairman
Rex Tomlinson(1)
Lead independent
non-executive director
Jabu Ngcobo
Independent
non-executive director
Busi Mabuza
Independent
non-executive director
Key objective:
The provision of effective governance over the appropriateness of the group’s financial and integrated reporting including the adequacy of related disclosures, the performance of both the internal audit function and the external auditor, and the management of the group’s systems of internal control, business risks and related compliance activities.

Notes:
(1) Rex Tomlinson resigned and was replaced as Chairman of the audit and risk committee by Mac Gani on 11 August 2016

The committee met three times during the year. The Chief Executive Officer, the Chief Financial Officer, the group's Director of Risk, the Chief Information Officer and directors from the majority shareholder attend the meetings as permanent invitees, along with external audit and the outsourced internal audit. Other directors and members of management attend as required.

The work of the audit and risk committee during the year focused on:
  • review of the risk landscapes to which the group is exposed in relation to the group's risk tolerance and risk appetite levels and evaluation of the appropriateness of management's responses to the risks;
  • review of insurance, treasury and taxation matters;
  • review of operational risk management including fraud and theft, whistle-blowing systems and organisational resilience;
  • oversight of the implementation of the combined assurance framework and plan;
  • review of IT risks in relation to core operational systems, systems projects and security initiatives;
  • review of material legal, legislation and regulatory developments;
  • review of and recommendation to the board for approval of the preliminary and annual results announcements and the annual financial statements and integrated annual report;
  • approval of the external audit and internal audit plans;
  • evaluation of the independence and effectiveness of, and the fees and terms of engagement of the external auditors;
  • evaluation of the effectiveness of the outsourced internal audit function; and
  • assessment of the internal control environment, particularly in relation to the group's system on internal financial controls.
risk committee Refer to the report of the audit and risk committee on page 3 of the consolidated financial statements for the year ended 31 March 2016.

Remuneration committee


remuneration committee
Chairman
Yunis Shaik
Non-executive
director
Rex Tomlinson(2)
Lead independent
non-executive director
John Copelyn
Non-executive
director
Jabu Ngcobo
Independent
non-executive director
Key objective:
The committee is empowered by the board to assess and approve the broad remuneration strategy for the group, the operation of the company's short-term and long-term incentives for executives across the group, and sets short-term and long-term remuneration for the executive directors and members of the executive committee.

Notes:
(1) Rex Tomlinson resigned and was replaced as a member of the remuneration committee by Mac Gani and Busi Mabuza on 11 August 2016

The committee met twice during the year. The Chief Executive Officer and the group's Human Resources Director attend the meetings as permanent invitees, except when issues relating to their own compensation are discussed.

The scope of the remuneration committee's work during the year included the following matters:
  • monitoring executive appointments, terminations and retirements;
  • determining the general policy on remuneration to ensure fair, competitive and responsible reward;
  • determining the specific remuneration packages for the executive directors and other senior executives and management;
  • approving the rules, criteria, targets and allocations for performance-related pay schemes; and
  • proposing non-executive director remuneration.

Further details of the group's remuneration policy and the work of the remuneration committee can be found in the remuneration section on pages 71 to 76.

Social and ethics committee


Social and ethics committee
Chairman
Rex Tomlinson(1)
Lead independent
non-executive director
Jabu Ngcobo
Independent
non-executive director
Yunis Shaik
Non-executive
director
Key objective:
The purpose of the committee is to regularly monitor the company's activities, having regard to any relevant legislation, other legal requirements or prevailing codes of best practice and, in particular, to monitor the group's compliance with the applicable requirements of Regulation 43 of the South African Companies Act in relation to matters pertaining to social and economic development, good corporate citizenship, environment, occupational health and public safety, labour and employment and the group's code of ethics and sustainable business practice.

Notes:
(1) Rex Tomlinson resigned and was replaced as Chairman of the social and ethics committee by Mac Gani on 11 August 2016. Busi Mabuza was appointed as amember of the committee on 11 August 2016

The committee met twice during the year. The Chief Executive Officer, the Chief Financial Officer, the group's Director of Risk, the group's Human Resources Director and directors from the majority shareholders attend the meetings as permanent invitees, along with other directors and members of management who attend as required.

The work of the social and ethics committee during the year focused on:

  • progress in the alignment of the group's practices to the requirements of the revised BBBEE codes;
  • disputes with government or regulators;
  • compliance with regulations;
  • preferential procurement, socio-economic development and enterprise development;
  • environmental management and certification;
  • customer satisfaction, loyalty and health and safety and consumer protection; and
  • job creation, employee health and safety, employee development and management diversity and employment equity.

The matters considered during the year are included in the deliver to our beneficiaries section on pages 39 to 47, the product relevance to customer experience section on pages 49 to 51, the regulatory compliance section on page 52 and the human resources section on pages 53 to 55.

The main area of focus during the year was on the potential impact of the revisions to the BBBEE codes on the group's practices and potentially on casino licences. Refer to the transformation section on page 41 for more information. There were no other significant matters of concern raised during the year.

Ethics

The group has an ethics policy and a code of conduct which guides its business practices. It provides guidance on matters such as conflicts of interests, acceptance and giving of donations and gifts, compliance with laws and the dissemination of confidential information.

Internal control

The directors are responsible for the group's systems of internal control. The systems of internal control are designed to manage rather than eliminate risk, and provide reasonable but not absolute assurance as to the integrity and reliability of the financial statements, the compliance with statutory laws and regulations, and to safeguard and maintain accountability of the group's assets.

The directors have satisfied themselves that adequate systems of internal control are in place to mitigate significant risks identified to an acceptable level. Nothing has come to their attention to indicate that a material breakdown in the functioning of these systems within the group has occurred during the year.

King III/IV application

The King III gap analysis, to review the company's application of the various principles of King III, was updated during the year. A copy of the full gap analysis is available on the company's website. A King IV draft was released during March 2016 with anticipated publication of the final document during November 2016. No material issues are anticipated in the application of King IV once it becomes effective.

The principles required by King III where application is 'applied differently' are as follows:
  • The board should elect a Chairman of the board who is an independent non-executive director. The CEO of the company should not also fulfil the role of Chairman of the board.
  The board exercised their prerogative to appoint John Copelyn as the Chairman.
As a compensating control, a lead independent director was appointed.
  • The board should comprise a balance of power, with a majority of non-executive directors. The majority of non-executive directors should be independent.
  The major shareholder exercised its prerogative to appoint the directors representing their interests. The majority of the directors are non-executive with three of the non-executive directors being independent.
  • Directors should be appointed through a formal process.
  Directors are nominated by the board and appointed at the Annual General Meeting. Formal letters of appointment including the required roles and responsibilities are, however, not issued.


Group executive committee

The board delegates responsibility for determining and implementing the group's strategy and managing the group to the Chief Executive Officer who is supported by the GEC. The committee meets monthly, participates in the determination of the strategy, coordinates operational execution of the strategy, ensures effective internal controls are functioning and that there is an effective risk management process in operation throughout the group. The members of the GEC at 31 March 2016 were:


group executive committee
Marcel von Aulock
Chief Executive Officer
Jacques Booysen
Managing Director – gaming
Jaco Boshoff
Financial Director – hotel
Noeleen Bruton
Marketing Director
Vusi Dlamini
Group Human Resources
Director
Laurelle McDonald
Corporate Finance and Treasury Manager
Rob Huddy
Chief Financial Officer
Zibusiso Kganyago
Development Director – gaming
Greg Lunga
Financial Director – gaming
Kevin Page
Director of Development
Henry Parrymore
Chief Information Officer
Graham Tyrrell
Group Legal Director and Company Secretary
Richard Weilers
Chief Operating Officer and Managing Director hotels offshore

IT governance

The board of directors is accountable for IT governance. An IT governance charter has been adopted and approved by the board and takes into account the requirements of King III, globally accepted standards and good practice, together with the performance and sustainability objectives of the group. This charter outlines the decision-making rights and accountability framework for IT. The Chief Information Officer reports directly to the Chief Executive Officer and has responsibility for the ownership and execution of IT governance.

An IT risk assessment was performed during the year, the assessment indicates that the only areas requiring priority attention are cyber threats and the quality of customer information in the hotels OCIS system and both of these areas continue to receive ongoing attention.

Risk management process

The Tsogo Sun board recognises that the management of business risk is crucial to our continued growth and success and this can only be achieved if all three elements of risk – namely threat, uncertainty and opportunity – are recognised and managed in an integrated fashion.

The audit and risk committee is mandated by the board to establish, coordinate and drive the risk process throughout the group. It has overseen the establishment of a comprehensive risk management system to identify and manage significant risks in the operational divisions, business units and subsidiaries. Internal financial and other controls ensure a focus on critical risk areas, are closely monitored and are subject to management oversight and internal audit reviews.

The systems of internal control are designed to manage rather than eliminate risk, and provide reasonable but not absolute assurance as to the integrity and reliability of the financial statements, the compliance with statutory laws and regulations, and to safeguard and maintain accountability of the group's assets. The board and executive management acknowledge that an integrated approach to the total process of assurance improves the assurance coverage and quality in addition to being more cost-effective and the combined assurance framework is as follows:

Tsogo Sun combined assurance framework

Tsogo Sun assurance framework

 

In addition to the risk management processes embedded within the group, the group executive committee identifies, quantifies and evaluates the group's risks annually utilising a facilitated risk assessment workshop. The severity of risks is measured in qualitative as well as quantitative terms, guided by the board's risk tolerance and risk appetite measures. The scope of the risk assessment includes risks that impact shareholder value or that may lead to a significant loss, or loss of opportunity. Appropriate risk responses to each individual risk are designed, implemented and monitored.

The risk profiles, with the risk responses, are reviewed by the audit and risk committee at least once every six months. In addition to the group risk assessment, risk matrices are prepared and presented to the audit and risk committee for each operational division. This methodology ensures that identified risks and opportunities are prioritised according to the potential impact on the group and cost-effective responses are designed and implemented to counter the effects of risks and take advantage of opportunities.

Notes:

(1) Rex Tomlinson resigned and was replaced as Chairman of the audit and risk committee by Mac Gani on 11 August 2016
(2) Rex Tomlinson resigned and was replaced as a member of the remuneration committee by Mac Gani and Busi Mabuza on 11 August 2016