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Corporate governance

Pick n Pay Stores Limited

Corporate governance report

Notes to King III principles

Note 1
Chairman

King III acknowledges that there may be sound reasons for a company to appoint a Chairman who does not meet all the criteria for independence, but requires such a company to justify this decision and to put further checks in place to ensure no real or perceived conflicts of interest arise.

The Ackerman family currently owns 51% of the shares in the holding company, Pick n Pay Holdings Limited, giving them a holding of 27.3% in the Group. Chairman, Gareth Ackerman, is not independent by virtue of his indirect shareholding. Perceptions of conflicts of interest may arise regarding his decisions relating to Pick n Pay and its shareholders. Due to the resignation of the previous CEO of the Group in February 2012, Gareth Ackerman adopted a temporary executive role while the search for a new CEO was undertaken.

Hugh Herman has been appointed as lead independent director (LID) (see note 3 in relation to independence of non-executive directors). The main function of the LID is to provide leadership and advice to the Board when the Chairman has a conflict of interest, without detracting from the authority of the Chairman. The LID provides an important point of contact for the broader investment and stakeholder community should they have concerns with the running of the Company or potential conflicts of interest. All members of the Board have unfettered access to the LID when required. With the executive role of acting CEO being temporarily fulfilled by Gareth Ackerman in the 2013 annual financial period, the Board relied on the guidance of the LID to ensure that it fulfilled its mandate.

• Is not a member of the audit committee;
• Does not chair the remuneration committee, but is a member; and
• Is not a member of the social and ethics committee.

Note 2
Chief Executive Officer

The 2013 financial period was unusual for Pick n Pay in that Gareth Ackerman, previously non-executive Chairman of Pick n Pay Stores Limited, assumed the role of executive Chairman. He ran the day-to-day administration of the Group together with Richard van Rensburg, deputy CEO, until the CEO position was filled. The CEO vacancy arose as a result of the resignation of Nick Badminton at the end of the 2012 annual financial period. After a worldwide search, Richard Brasher was appointed CEO to the Group, effective 23 January 2013. Accordingly, Gareth has reverted to his position as non-executive Chairman.

Note 3
Board composition

The Board consists of 11 directors. Of the 6 non-executive directors, 5 are independent. The remaining 5 directors are executive. Full curricula vitae of all directors are set out here.

The Company has appointed independent, tough-minded non-executive directors, all of whom are successful and experienced professionals in their respective fields, have personal integrity, do not depend financially on the directors’ fees they receive from the Company, and strive to preserve their reputation for independence and governance in corporate South Africa.

The composition of the Board is continually reviewed to ensure the correct balance is achieved. The nominations committee is looking for a suitable candidate to replace Alex Mathole as an independent non-executive director. Alex resigned in order to avoid a possible conflict of interest arising as a result of her new executive position with a major supplier to the Group. In addition, to promote succession planning on the Board, the nominations committee is considering additional candidates. Consideration is given to candidates who will ensure a balance of skills and experience on the Board. Strength of character is a key consideration, to negate any perception that the controlling shareholder dominates any decision making, to promote rigorous debate, to reduce the possibility of conflicts of interest and to promote objectivity.

Board function

The Board debates issues vigorously and decisions are usually made by consensus. All Board members, including those who are not independent, are well aware of corporate governance requirements, and are conscious of their obligation to act with integrity as representatives of all stakeholders in the Group.

Controlling shareholder representation on the Board

As representatives of the controlling shareholder, Gareth Ackerman, Suzanne Ackerman-Berman, Jonathan Ackerman and David Robins were nominated and elected by the shareholders at the AGM to the Board. Between them they have 59 years’ executive experience in the Group. Suzanne and Jonathan are executive directors, while David was an executive for 14 years and has been a non-executive director since 2008. The Chairman, Gareth Ackerman, has been with the Group for 20 years, the last 14 (other than an 11-month period during the last financial period) in a non-executive capacity. Their experience, as well as their strategic overview, assists the Group in making long-term decisions for the benefit of all stakeholders in the Group.

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