The Board continues to be committed to applying best practice in terms of the principles of corporate governance. The Board confirms its commitment to the principles of fairness, accountability, responsibility and transparency as advocated in the second and third King Reports on Corporate Governance and has recently embraced the recommendations of the King III report. Through this process, shareholders and other stakeholders may derive assurance that the Group is being ethically managed according to prudently determined risk parameters and in compliance with generally accepted corporate practices. In addition to a good corporate governance framework, the Group is committed to complying with all legislation and regulation relevant to our business. The Board has implemented improved processes, additional controls, an Internal Audit and Risk function and appointed two independent non-executive Directors, one of whom has been appointed as non-executive Chairman and Chairman of the Nominations Committee and the other as Chairman of the Audit and Remuneration Committee. Risk measurement procedures and assessment of parameters have been enhanced in the current year with the introduction of the Internal Audit and Risk Committee.
Furthermore, a Management Risk Committee has been established to enhance the Risk Committee function. The Management Risk Committee must meet at least twice a year in which risks are identified in the Group and measures implemented to mitigate the risks. The Internal Audit Function processes the information captured in these meetings and includes these risks in the risk database.
COMPOSITION OF THE BOARD
The Board consists of three executive and five non-executive Directors. Of these, there are two independent non-executive Directors being the non-executive Chairman and an independent non-executive Director who has been appointed as chairman of the Audit and Remuneration Committee. The Board sits at least four times per annum and more frequently if necessary. The Directors bring a wide range of diverse experience, diversity, insight and independence of judgment on issues of strategy, performance, resources and standards of conduct to the board. The non-executive Directors are of sufficient calibre for their views to carry significant weight in the Board’s decisions.
The constitution of the Board during the 2010 financial year was follows:
Independent non-executive Directors:
- V Cuba (Chairman)
- D Wallace
Non-executive Directors:
- RT Dalais
- P Joubert
- E Röth
- D van Zyl (alternate to RT Dalais)
Executive Directors:
- AP van Marken (Chief executive Officer)
- DG Reed (Group Managing Director)
- CM von Holdt (Chief Financial Officer) *
- GJ Koen (Chief Financial Officer) #
* CM von Holdt resigned effective 31 March 2010
# GJ Koen joined the board effective 1 April 2010
** D van Zyl joined the board effective 28 January 2010
The Audit, Risk, Remuneration and Nominations Committees have not changed since 2009 and are comprised as follows:
Audit and Risk Committee:
- D Wallace (Chairman)
- V Cuba
Remuneration Committee:
- D Wallace (Chairman)
- V Cuba
- RT Dalais
Nominations Committee:
- V Cuba (Chairman)
- D Wallace
- P Joubert
INDEPENDENCE OF THE BOARD
The role of the Chairperson and the Chief executive Officer is separated and the Board is chaired by an independent non-executive Chairman. The two independent non-executive Directors are appointed under service contracts and their remuneration is not tied to Vox Telecom’s financial performance. Directors are entitled to ask questions of any personnel and have unrestricted access to all company documentation, information and property.
ROLE AND FUNCTION OF THE BOARD
The Board’s main responsibilities include strategy, acquisition and disinvestment policies, risk management, financing and corporate governance. In addition, the Board is accountable for relations with stakeholders and is responsible for creating, protecting and enhancing the company’s wealth and resources, timely and transparent reporting and for acting at all times in the best interests of the company and its shareholders. It is the responsibility of the Board to ensure a sound system of internal control to safeguard stakeholders’ interests and the company’s assets.
Full transparency of the committee’s deliberation is encouraged and the minutes of all meetings are included in the formal Board papers at the ensuing Board meeting. Directors have unrestricted access to any executive Manager or employee in the Group. There is a balance of power and authority at board level to ensure that no one director has unfettered powers of decision making.
Directors are appointed through a formal process. The Remuneration and Nominations Committee assists the Board with the assessment, recruitment and nomination of new directors, but the Board must approve these appointments and Board members are invited to interview any potential appointees. The Committee thoroughly assesses potential new directors prior to appointment.
The Board believes that all directors’, but particularly non-executive Directors represent the Company’s shareholders and so it should be the shareholder body that finally approves a director’s appointment or dismissal from the Board.
BOARD COMMITTEES
APPOINTMENT OF AUDIT, RISK AND REMUNERATION COMMITTEE
In addition to the Audit Committee, the Board has established an Internal Audit and Risk Committee comprised of the non-executive Chairman, the Chairman of the Audit Committee and the Group Internal Auditor. The Group Internal Auditor reports directly to this committee. All the relevant Board charters for these committees are in place and are reviewed annually to ensure relevance.
AUDIT COMMITTEE
The company’s Audit Committee, which meets at least twice per year, consists of two independent non-executive Directors and by invitation a representative of the designated advisor, the External Auditors and the Group Internal Auditor. The Company Secretary is in attendance at the meetings.
The committee’s responsibilities include reviewing the scope, quality, independence and objectivity of the statutory audit, ensuring the integrity of the company’s accounting and financial reporting system, evaluating the effectiveness of the management functions of the company and ensuring that appropriate systems are in place for monitoring risk, financial control, compliance with the law and codes of conduct and promoting the overall effectiveness of corporate governance within the group. The Group Internal Auditor and the External Auditors who are invited to attend meetings have unrestricted access to both the Committee and its chairperson. The Committee advises on the appointment of the External Auditors, the handling of non-audit functions by the auditors and fees in respect of non-audit services. The current auditors of the Company are Deloitte & Touche.
The Audit Committee has explicit authority to investigate any matter under its terms of reference and has access to all resources and information it requires in order to act on this authority. The Audit Committee is also responsible for monitoring all contracts entered into by the company in which any of the directors are either directly or indirectly beneficially interested so as to ensure that all such contracts are fair and reasonable and in the best interests of the company. Further responsibilities of the committee include reviewing and reporting on King III, overseeing the quality and integrity of the annual financial statements and ensuring that the Group Internal Auditor is considered independent, applies King III,, approves Internal Audit’s plan and ensures that internal audit function is sufficiently resourced and skilled to effectively perform its function.
The Audit Committee, in response to King III and its own charter, also reports on the following:
- The committee has reviewed the scope and effectiveness of the external auditors and is satisfied with both of these areas. The committee is also satisfied with the Group’s accounting policies and that these have been consistently applied throughout the 2010 financial year;
- The committee has considered that the expertise and experience of the Chief Financial Officer is appropriate and sufficient to perform the task according to the responsibilities and requirements of the position; and
- The use of the external auditors for non- audit service fees are reviewed annually to ensure that the independence of the external auditors are not compromised.
The Audit Committee in conjunction with the Internal Audit and Risk Committee are responsible for ensuring that all risks associated with the Group’s operations are effectively managed in support of the creation and preservation of stakeholder value.
INTERNAL AUDIT AND RISK COMMITTEE
This committee which meets at least twice a year consists of two independent non-executive Directors. To ensure independence, the Group Internal Auditor reports to the Audit Committee. The Group Internal Auditor has unrestricted access to anyone in the organisation. The responsibilities of the Internal Audit are defined and governed by the charter approved by the Audit Committee and the Board.
The Internal Audit and Risk function as an integral part of the Group’s system of governance. The purpose of this independent assurance function is to evaluate whether the nature and extent of business risks are being managed effectively within the context of business objectives. A system of internal control is one of the primary means of managing risk and consequently the evaluation of its effectiveness is central to the internal audit responsibilities. Internal Audit has the complete support of the Board and the Audit Committee. Internal Audit is considered independent and will be subject to quality reviews.
The annual internal audit plan is determined through a continuous assessment and understanding of risks facing the Group. As the Internal Audit function matures it intends performing risk based auditing and developing a comprehensive risk database in conjunction with the Sub Risk Committee. The purpose of this is to ensure that all major risks are identified and mitigating controls are implemented effectively and efficiently.
The Group’s system of internal control comprises the policies, procedures and practices, as well as organisational culture that collectively support the Group’s effective operation in the pursuit of its objectives. This system of internal control enables the Group to respond to significant business risks, be they of an operational, financial, compliance or other nature, and is the direct responsibility of the board and executive management within the Group.
The Group’s Internal Audit function is required to report to the group Audit Committee on the effectiveness of the company’s risk management process, systems of internal controls and risks that may materialise or have materialised as a result of weaknesses in the systems of controls. Any restriction on the scope of internal audit activities must be reported to the Audit Committee.
The assurance provided by the Group’s Internal Audit and Risk function serves to assist the Board in fulfilling its obligations to report annually to shareholders on the effectiveness of the Group’s system of internal control.
A Management Risk Committee has also been established for the group and comprises of all the Managing Directors of the subsidiaries, relevant executives and the Group Internal Auditor.
This Committee reports directly to the Audit and Risk Committee. The purpose of this function is to ensure operational, financial and strategic risks are clearly communicated to the Audit and Risk Committee and measures are implemented to minimise the risks.
The day to day responsibilities for risk management, including maintaining an appropriate loss prevention and internal control framework remains with the senior management of the Group and each business unit. The risk register will be updated regularly to keep up with the changes in the environment.
REMUNERATION COMMITTEE
The AltX Listing requirements do not require a Remuneration Committee to be established. However, given the size of the business, this committee’s importance has been identified and has therefore been appointed. This committee has been in place for the last few years. The Remuneration Committee makes recommendations to the Board, within agreed terms of reference, on the company’s framework of executive remuneration and its costs. The committee strives to ensure that levels of remuneration are sufficient to attract and retain directors and senior management of the calibre required to ensure the successful running of the Company and for their contribution to Vox Telecom’s operating and financial performance.
COMPLIANCE WITH KING III
For the 2010 financial year, the Board confirms that the Group complies with the Code of Corporate Practices and Conduct as set out in the King III report, however, deviations do exist as listed below:
- The Board is aware that they are responsible for Information Technology (IT) governance, however, due to the decentralised nature of the operations and the diversity of applications used within the operations this responsibility is delegated to the respective operational IT managers. The Board will continue to monitor IT developments and to the extent that the operational governance processes need to be supplemented by a centralised formal process the relevant action will be taken.
- Vox Telecom discloses the remuneration of key staff members in aggregate and not individually for the protection of those individuals.
- Vox Telecom’s Remuneration Policy is still to be approved by shareholders.
- The Board should monitor and evaluate significant IT investments and expenditure. The current nature of the assets and the complexity of the calculation require a person with appropriate and specific telecommunications infrastructure experience to judge the expected return on investment. A collective Board decision will not add value to this process, however, there are senior officials within Vox Telecom that are able to provide assurance to the Board on the IT environment.
- The Board and each individual director should have a working understanding of the effect of the applicable laws, rules, codes and standards of the company and its business. This, however, is an iterative process and while the Board have a basic understanding of the relevant legislation a legal due diligence is in the process of being completed which will form the basis of a continual education process.
- Vox Telecom’s Internal Audit function is still at an early stage of development and has been focussed on internal processes and procedures. As the function matures the Board expects the process to evolve into an effective risk-based audit process. ,
- The Board evaluation charter is being formalised and the evaluations are planned for early 2011.
- The Group is still in the process of establishing the appropriate level of integrated reporting. Management are compiling the relevant information relating to economic and social impacts and look forward to presenting a detailed integrated report in 2011.
ATTENDANCE
The following board meetings were held during the period under review.
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ACCOUNTING AND INTERNAL CONTROLS
The Board has established controls and procedures to ensure the accuracy and integrity of the accounting records and to provide reasonable assurance that assets are safeguarded from loss or unauthorised use and that the financial statements may be relied upon for maintaining accountability for assets and liabilities and preparing the financial statements. The Board acknowledges the continued growth of the company over the past years and the need to rigorously review the adequacy of the accounting and internal controls and continues to implement the recommendations of the External and Internal Auditors.
EMPLOYMENT DEVELOPMENT AND EMPLOYMENT EQUITY
The company strives to promote a culture that provides all employees with opportunities to advance to their optimal levels of career development. The company upholds and supports the objectives of the Employment Equity Act and has an established Employment Equity Plan through its main operating subsidiaries. The company furthermore strives to provide a secure, healthy and participative social and working environment for its staff and associates. The Group upholds and supports the objectives of the Employment Equity Act No 55 of 1993. Vox Telecom has implemented various initiatives that provide opportunities for all levels of staff, and in so doing continues to strengthen its positioning as an employer of choice, whilst at the same time enhancing its participation in making South Africa more internationally competitive. The Group’s employment policies are designed to provide equal opportunities, without discrimination, to all employees.
In addition, the key operating subsidiaries of DataPro (Proprietary) Limited, Amvia (Proprietary) Limited and Orion Telecom (Proprietary) Limited have all achieved Black Economic Empowerment (BEE) ratings of Level 7, Level 3 and Level 5, respectively.
COMMUNICATION WITH SHAREHOLDERS
Vox Telecom is committed to ongoing and effective communication with its stakeholders. It subscribes to a policy of open and timeous communication in line with the requirements and guidelines of the JSE and the principles of good corporate governance and manages these through its in-house investor relations programme.
INSIDER TRADING
The Company enforces a restricted period for dealing in its shares, in terms of which any dealings in shares by all directors and senior personnel is disallowed by the board from the time that the reporting period has elapsed to the time that results are released and at any time that such individuals are aware of un-published price sensitive information, whether the Company is trading under cautionary announcement as a result of such information or not.
LITIGATION AND LEGAL
In the normal course of business, Vox Telecom is subjected to a minimum number of legal proceedings. These matters are subject to risks and uncertainties that cannot be reliably predictable. There are legal and arbitration proceedings which could have a material effect on the Group's financial position. The Board believes they have made sufficient provision for any potential successful claim against the Company.
COMPANY SECRETARY
The Company Secretary is required to provide the members of the Board with guidance and advice regarding their responsibilities, duties and powers and to ensure that the Board is aware of all legislation relevant to or affecting the affairs of the company. The Company Secretary is required to ensure that the company complies with all applicable legislation regarding the affairs of the company, including the necessary recording of meetings of the Board, Board Committees and shareholders of the company and ensuring that proper procedures are followed in all board matters. The directors have unfettered access to the Company Secretary. It requires a decision of the Board as a whole to remove the Company Secretary, should this become necessary.
ANNUAL GENERAL MEETING
All directors are encouraged to attend the Annual General Meeting.
The notice for any general meeting of shareholders includes an explanation of the reason for, and the effects of any proposed special resolutions. The Company Secretary attends every general meeting of shareholders to assist with the recording of shareholders attendance and to tally the votes.
CODE OF ETHICS
The Board subscribes to the highest level of professionalism and integrity in conducting its business and dealing with all its stakeholders.
In adhering to its code of ethics, the Board is guided by the following broad principles:
- Businesses should operate and compete in accordance with the principles of free enterprise;
- Free enterprise is constrained by the observance of relevant legislation and generally accepted principles regarding ethical behaviour in business;
- Ethical behaviour is predicated on the concept of utmost good faith and characterised by integrity, reliability and a commitment to avoid harm;
- Business activities will benefit all participants through a fair exchange of value or satisfaction of need; and
- Equivalent standards of ethical behaviour are expected from individuals and companies with whom business is conducted.
Vox Telecom is in the process of implementing an independent fraud and ethics line to enhance the ethical environment within the Group.