Pick n Pay Stores Limited
Corporate governance report continued

Board composition

The Board consists of 14 directors. Of the nine non-executive directors, six are independent. The remaining five directors are executive. Curricula vitae of all directors are set out here.

The Company undertook a rigorous review of the composition of the Board during 2013. Consideration was given to the balance of skills and experience of directors on the Board. Three new non-executive directors were appointed, all of whom were elected by shareholders at the general meeting held by the Company on 12 February 2014. All our non-executive directors are independent, tough-minded individuals of integrity, who are successful and experienced professionals in their respective fields. They do not depend financially on the directors’ fees they receive from the Company, and strive to preserve their reputation for independence and governance in the corporate world.

The Company is confident that a balanced Board has been achieved, with directors who exercise leadership, enterprise, integrity and judgement in directing the business of the Company, so that it can thrive.

Board function

Directors are encouraged to promote rigorous debate with the aim of promoting active direction, governance and effective control of the Company. 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 elected by shareholders to the Board. Between them they have 62 years’ executive experience in the Group. Suzanne Ackerman-Berman and Jonathan Ackerman are executive directors, while David Robins was executive for 14 years and has been a non-executive director since 2008. The Chairman, Gareth Ackerman, has been with the Group for 21 years, the last 15 years (other than an 11-month period during the 2013 financial year) 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.

Executive representation on the Board

The executive function of the Group is performed by the executive team, comprising Richard Brasher (CEO), Richard van Rensburg (deputy CEO) and Bakar Jakoet (CFO), all of whom are executive directors on the Board.

Non-executive representation on the Board

Of the nine non-executive directors on the Board during the 2014 annual financial period, six are independent. Hugh Herman has been appointed as LID (see note 1).

Annual assessment of independence

• The directors’ involvement with other companies;
• External directorships;
• Relationships with material suppliers and rival companies; and
• Material contracts with the Group, if any.

Given the recent appointment of three non-executive directors to the Board, it has been resolved that an external assessment of the Board will be conducted during the 2015 financial year, as the accuracy of any assessment requires a period of time over which the contributions of each director can be assessed.

An internal assessment of the independence of non-executive directors is conducted by the Chairman, who conducts individual interviews. Findings are presented to each non-executive director for them to either confirm, or to revert with further evidence supporting their independence. If required, the Company Secretary will solicit external legal opinion regarding the status of a non-executive director. Following this assessment, the Chairman makes a recommendation to the Board as to independence. The Board interrogates the recommendations before a final decision is made.

All directors submit a list of their directorships and commercial interests to the Company Secretary, which are regularly updated, and distributed quarterly to the Board. Transparency of commercial interests ensures that directors can be seen to be free from any business or other relationship that may interfere materially with any director’s capacity to act in an independent manner.

Length of service

The Board has found that length of service does not automatically preclude a director from exercising independence in decision-making. Our long-serving non-executive directors are aware of, and exercise, their duty to act in the best interests of all the stakeholders of the Company. The Company values the balance achieved between the fresh insights from new directors and the experienced insights from long-serving directors.

Conclusion as to independence

At the time of the last assessment, all Pick n Pay’s independent non-executive directors met the criteria for independence as established by King III, the Companies Act and the JSE Listings Requirements. The Chairman and the Board are satisfied that, while Hugh Herman and Ben van der Ross have long-running relationships with the Company, their contributions remain unbiased and objective.

In order to ensure that shareholder perceptions are aligned with the Board’s view of the independence of long-serving directors, all non-executive directors who have served on the Board for more than nine years will serve one-year terms of office, instead of the standard three-year terms. At the end of each term, the director and the Chairman will jointly evaluate the director’s contribution and independence. By mutual consent the director may be considered for re-election. If so agreed, such director will be put forward for election by shareholders at the Company’s annual general meeting for a further period of one year.

Governance structure and models

The Board governs decision-making and gives leadership through its committee structure. The committees operate within Board mandates, ensuring that strategy is implemented through the operations of the Group. Progress is reported to the Board.

The diagram below is a summary of the current governance structure in Pick n Pay:

Directors’ attendance at Board meetings

The Board convenes a minimum of four times per year for formal meetings, with additional meetings scheduled when necessary. The table below details each director’s Board meeting attendance during the past annual financial period: