The board of directors and senior management are committed to the highest standards of corporate governance and take pride in our high moral and ethical business standards. The Group is committed to sound and transparent business practices. The board is committed to complying, in all material respects, with the principles contained in the King Code of Corporate Practices and Conduct (King II), as well as to the additional requirements for good corporate governance stipulated in the JSE SRI Index. An overview of the Group’s corporate governance framework is provided in this section.

A more comprehensive review – with details of all board and committee charters, and on the roles and responsibilities of the Chairman, CEO and Managing Directors – is available in the Investor Relations section of our website.

GROUP STRUCTURE

The Group has a flat organisational structure. Overall responsibility lies with the Pick n Pay Stores Limited board. Operational responsibility for the Group is vested in three divisions: the Retail Division, the Group Enterprises Division and Franklins Australia. Each division has its own management board, with each Managing Director of those boards reporting directly to the CEO. This flat Group structure enables local operations to take ownership of decisionmaking and to assume individual responsibility for their actions and success. The structure encourages personal growth and achievement, ensuring that initiative is enabled, identified and rewarded.

THE BOARD

The board comprises six non-executive directors and four executive directors. It is responsible for selecting a successful management team, approving corporate strategy, monitoring and assessing performance, and acting as a resource for management in matters of planning and policy. The board is responsible for setting the governance policy and practices for the Group, and for appointing the Chairman and CEO, whose roles are separate.

The board meets four times a year to monitor the performance of the Group, its executive directors and senior management. The board performs an annual self-assessment of its performance and the results of this review are made available to the external auditors.

ENDURING PRINCIPLES OF PICK N PAY

The board has a responsibility to ensure that the CEO and management do not depart from the following enduring principles that were applied by Raymond Ackerman while building the Group and which ensure that the spirit of Pick n Pay remains intact:

• Consumer sovereignty
• Striving for a flat organisational structure
• Where appropriate, maximising decentralisation of authority to enable local control
• Promoting from within, recruiting from outside only as an exception when specialist skills are required
• Maintaining a discount image
• Fighting collusion amongst suppliers, and rejecting collusion between retailers
• Maintaining strong cash balances for buying forward on a rising market

LEADERSHIP DEVELOPMENT

The Chairman evaluates the performance of the CEO annually, which is then discussed with the non-executive directors. The evaluation is based on objective criteria including performance of the business, accomplishment of long-term strategic objectives and management development. The CEO reports to the board on succession planning, with a defined succession plan in place should the CEO, MDs or any of the senior management personnel need to be replaced. Succession planning is also performed across the Group to ensure continuity of the business. The CEO reports annually to the board on the Group’s programme and performance in respect of management development and employment equity.

BOARD COMMITTEES

The board is assisted by the following specialised committees: Audit, Risk and Compliance; Remuneration; Nominations; and Corporate Governance. Each committee has a formal charter which is reviewed annually by the board. Detailed information on each of the committees is available for download from our website. A brief outline of the role and responsibility of each committee is provided below:

Audit, Risk and Compliance committee

This committee is chaired by and comprises only independent non-executive directors. In accordance with the requirements of the Corporate Laws Amendment Act 24 of 2006 we confirm:

Members of the committee are appointed annually by the board for the ensuing financial year.

The committee’s responsibilities carried out during the year are varied and include:

• performing certain risk management responsibilities on behalf of the board;
• ensuring that necessary risk management strategies and internal controls are in place (through consultation with internal and external auditors);
• establishing that management is adhering to and continually improving these controls;
• acting as a liaison between the external auditors and the board
• the annual nomination of the external auditor, who in the opinion of the committee, is independent of the Company, for approval at the AGM
• the annual determination of the scope of audit and non-audit services which the external auditors may provide to the Company;
• the approval of the remuneration of the external auditors and assessment of their performance;
• an annual assessment of the independence of the external auditors. The committee confirms that it is satisfied with the independence of the Group’s external auditors and the respective audit partners;
• receive and deal appropriately with any complaints relating to the accounting practices and internal audit of the company or to the content or auditing of its financial statements, or to any related matter; and
• perform other functions as determined by the board.

In respect of internal control and internal audit, the committee:

• reviews and approves the internal audit charter and audit plans and evaluates the independence, effectiveness and performance of the internal audit function and compliance with its mandate;
• reviews the Company’s systems of internal control including financial controls;
• reviews significant issues raised by the internal audit process; and
• reviews policies and procedures for preventing and detecting fraud.

In respect of risk management, the committee:

• ensures that its processes and procedures are adequate to identify, assess, manage and monitor enterprise-wide risks; and
• reviews tax and technology risks, in particular how they are managed.

The committee discharges its board responsibilities by:

• meeting at least twice a year to review the Group’s financial results, to receive and review reports from both the internal and external auditors, and to meet with management to review their progress on identifying and addressing key risk areas within the business;
• reporting its findings to the board at the next meeting, which is always held within a week of the respective committee meeting;
• meeting separately with the internal and external auditors to confirm that they are receiving the full cooperation of management; and
• the committee chairman meeting regularly with key executives to keep abreast of emerging issues.

The committee discharges all Audit committee responsibilities of all the subsidiary companies within the Group. To help it discharge this responsibility a financial review committee, chaired by the CFO, reviews in detail the results of all material operating subsidiary companies with the external auditors and management of the respective subsidiary. This review committee reports its findings to the Audit, Risk and Compliance committee.

The external and internal auditors have unrestricted access to the committee and all of its members throughout the year.

Per the JSE listing requirements, the committee must consider and be satisfied, on an annual basis, of the appropriateness of the expertise and experience of the Financial Director and the Company must confirm this by reporting to the shareholders in its annual report that the Audit committee has executed this responsibility.

In respect of the above, we believe that Dennis Cope, the CFO, possesses the appropriate expertise and experience to meet his responsibilities in that position.