CORPORATE GOVERNANCE

  

Corporate governance

Pick n Pay Stores Limited

Corporate governance report

Introduction

The Pick n Pay Group of companies (the Group) is committed to uphold the highest standards of ethics, transparency and good governance, while pursuing profitable growth. This report applies to Pick n Pay Stores Limited and, where applicable, to Pick n Pay Holdings Limited. Pick n Pay Holdings Limited and Pick n Pay Stores Limited are investment holding companies. Pick n Pay Holdings Limited’s sole purpose is the holding of the controlling shareholding in Pick n Pay Stores Limited. Pick n Pay Stores Limited, through its subsidiaries and associates, operates in the retail sector on the African continent. The Board takes overall responsibility for the Group, selecting the management team, overseeing corporate strategy and performance, and acting as a resource for management in matters of planning and policy. To ensure effective decision-making, directors are encouraged to ask difficult questions of management. With the aim of achieving balanced economic, social and environmental performance, the Board supports the long-term sustainability of the business. Legitimate stakeholder involvement is kept in mind at all times.

It is the responsibility of the Board to ensure the application of the principles contained in King III, while maintaining the Group’s focus on sustainable performance. Where the directors of the Board have deemed that recommended practices are not in the best interests of Pick n Pay, this report follows King III in explaining the reasons for an alternative approach to, and application of, governance.

Summary of the application of King III principles

The table below summarises Pick n Pay Stores’ application of the principles of King III:
Key      
Applied   ✓    
Not applied   ✗    
Partially applied   #    
Chapter and principle   Application Comments  
Chapter 1 – Ethical leadership and corporate citizenship      
The Board should provide effective leadership based on an ethical foundation.   ✓ Refer to the Pick n Pay mission statement and values here.  
The Board should ensure that the Company is and is seen to be a responsible corporate citizen.   ✓  
The Board should ensure that the Company’s ethics are managed effectively.   ✓  
Chapter 2 – Board and directors      
The Board should act as the focal point for and custodian of corporate governance.   ✓ The responsibilities of the Board are set out in the Board charter. The charter aligns with the recommendations of King III, and establishes the responsibilities and mandates of the Board and its directors, as well as the roles of the Board committees.

An updated charter was approved by the Board in October 2012. A copy of this document is to be found on our website, www.picknpay-ir.co.za.  
The Board should appreciate that strategy, risk, performance and sustainability are inseparable.   ✓ The Group recognises the importance of incorporating sustainability into our business strategy.  
The Board and its directors should act in the best interests of the Company.   ✓ All directors submit a list of all companies in which they hold directorships or positions of influence. These lists are updated regularly and are reviewed bi-annually. This assists in ensuring that disclosure is current, transparency is maintained, and potential conflicts of interest are avoided.  
The Board should consider business rescue proceedings or other turnaround mechanisms as soon as the Company is financially distressed as defined in the Companies Act 2008.   ✓ Not relevant during the 2013 annual financial period.   
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.   ✗ Refer to note 1.  
The Board should appoint the CEO and establish a framework for the delegation of authority.   # Refer to note 2.  
The Board should comprise a balance of power, with a majority of non-executive directors. The majority of non-executive directors should be independent.   # Refer to note 3.  
Directors should be appointed through a formal process.   ✓ Refer to the details on the nominations committee here.  
The induction and ongoing training and development of directors should be conducted through formal processes.   ✓ A copy of the Board charter is given to each director upon induction, as is the Memorandum of Incorporation, which also addresses certain responsibilities of the directors. In addition, directors are provided with relevant material regarding statutory and regulatory developments.  
The Board should be assisted by a competent, suitably qualified and experienced Company Secretary.   ✓ The Company Secretary of the Group ensures that all directors have full and timely access to the information that helps them to perform their duties and obligations properly, enabling the Board to function effectively. The Company Secretary is not a director of any of the Group’s operations and accordingly maintains an arm’s-length relationship with the Board and its directors. The Company Secretary reports to the Chief Finance Officer and has a direct channel of communication to the Chairman and the CEO.

The Company Secretary is responsible for the functions specified in section 88 of the Companies Act. Annual consideration is given by the Board to the competence, qualification and experience of the Company Secretary. At the Board meeting held in February 2013, following consideration, the appointment was affirmed.   
The evaluation of the Board, its committees and the individual directors should be performed every year.   # Refer to note 4.  
The Board should delegate certain functions to well-structured committees but without abdicating its own responsibilities.   ✓ The following committees were active during 2013:
  • Social and ethics committee
  • Audit committee
  • Remuneration committee
  • Nominations committee
  • Corporate governance committee
  • Corporate finance committee

Each committee has a formal charter which is reviewed annually by the Board. Information on each of the committees is available on www.picknpay-ir.co.za and here.  
A governance framework should be agreed between the Group and its subsidiary boards.   ✓ Refer to diagram here.  
Companies should remunerate directors and executives fairly and responsibly.   ✓ Non-executive directors have no fixed terms of appointment and no employment contracts with Pick n Pay. Their fees are not linked to the Group’s financial performance, nor do they receive share options or bonuses. Executives are remunerated in terms of the remuneration policy set out here.  
Companies should disclose the remuneration of each individual director and prescribed officer.   ✓ Refer to the remuneration committee report here.  
Shareholders should approve the Company’s remuneration policy.   ✓ Shareholders approved the policy at the AGM on 15 June 2012.  

View other reports

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Pick n Pay Stores Group:
Notice and proxy and summarised results

»

Pick n Pay Holdings Group:
Notice and proxy and summarised results

»

Pick n Pay Stores Limited & Pick n Pay Holdings Limited:
Sustainable Living Report

Integrated Annual Report 2013    |    www.picknpay.co.za    |    www.picknpay-ir.co.za