Our approach to the governance | Barloworld | Report Suite 2021

Leadership and governance

Chair's review Our board Leadership Our approach to governance Remuneration review Social, ethics and transformation committee review

Our approach to governance

The good governance that we aim to achieve by applying the King IV Code protects and creates sustainable value and ensures effective control, an ethical culture and legitimacy through our stakeholder relations. It also contributes to effective and responsible leadership at board and executive levels and throughout the group. It promotes strategic decision-making that balances short, medium and long-term outcomes, integrity and robust risk and performance management. Effective governance supports the embedding of an ethical culture and a response to our role as a responsible corporate citizen that goes well beyond compliance. During the year under review the board approved a corporate governance framework, which consolidates all our corporate governance practices and provides an end-to-end view of the company’s corporate governance. The board also approved a group diversity policy.

Our approach to governance

The diagram that follows sets out our governance structures at board, executive management and operational levels. During the year under review the previously separate audit committee and risk and sustainability committee were combined into one committee – the audit and risk committee.

Our approach to governance

Our board, which is a unitary board, serves as the focal point and custodian of corporate governance in Barloworld.

Our governance framework provides the board with effective control of the business. By effectively governing the group and taking into consideration our stakeholders’ interests, our board and executive management contribute value to both the business and our stakeholders. The board uses its quarterly meetings to discharge its duties in terms of the Companies Act, the JSE Listings Requirements, King IV, and any legislation regulating the industries in which we operate. We consider quarterly reports on operating and non-financial performance, risks, opportunities and compliance; the results of efforts to embed an ethical culture in Barloworld and combat fraud and corruption; safety, health and environmental performance, including our climate change mitigation; and our social performance. We also monitor the macro environment and its potential impact on our business.

K1, K2, K3, K4, K11, K16

Leadership and governance - management of the legal and regulatory framework

Evaluating its performance in terms of applying the King IV principles and outcomes provides the board with a mechanism to assess its governance performance and make improvements where necessary. The board oversees the board evaluation process through the remuneration and nomination committees.

External and internal evaluations are conducted every two years to assess the effectiveness of the board, its committees and individual members and support the continued improvement in the board’s performance and effectiveness. An independent external party facilitated an external evaluation during 2021. During the year under review, an external service provider conducted the evaluation. Overall the evaluation concluded that governance is sound, ESG is taken seriously and there is enough transparency and deep dives in the operations. The external evaluation conducted in 2021 identified the need to focus more on regulatory compliance and digital transformation. Board members are continually briefed on legal developments and changes to risks and the business environment, and training is always available to directors at the company’s expense. Directors are also able to seek independent professional advice on the company’s affairs should they wish to.

Our board’s governance oversight, which is guided by its commitment to its responsibilities and governance objectives, supports good governance practices.

Our application of the 16 King IV principles relevant to our business is explained in the section that follows:

Leading ethically, effectively and responsibly

K1, K2, K3, K6, K7,and JSE 3.84(i)
The board sets the tone and leads the group ethically, effectively and responsibly. When making decisions, individual board members ensure they are well informed and act independently, with courage, awareness and insight. The board ensures that the group plays a key role in society as a major employer, taxpayer, contributor to transformation and economic growth, and as a responsible corporate citizen. Information on the progress we have made in embedding an ethical culture in the group is provided in the section Governance that establishes an ethical culture.

Conflicts of interest are monitored throughout the company. Declarations of interest are made prior to commencement of all meetings. For the year under review, there were no conflicts of interest declared in meetings.

During the year under review, the board actively engaged with key stakeholders on the impact of Covid-19 on health and safety, society and the economy, and provided responsible stewardship. Adjustments were made to allow Barloworld to be more agile, take swift decisions and adhere to government regulations. The decision to transition to virtual meetings, digital signatures and remote working was taken to protect our stakeholders.

The balance of knowledge, skills, experience, diversity and independence that the board requires in order to discharge its governance role and responsibilities objectively and effectively are set out in the Leadership section of this report. Our nomination committee monitors and provides oversight of our board diversity policy, which includes gender and racial targets. The board’s diversity policy also takes into account diversity attributes of culture, age, field of knowledge, skills and experience, in line with the JSE Listings Requirements.

K4, K5

The board is accountable for the performance of Barloworld. It considers all the elements of the value creation process when steering and setting Barloworld’s strategic direction. It approves short, medium and long-term strategies and business plans.

The board also assumes responsibility for Barloworld’s integrated report and annual financial statements, and also makes every effort to ensure that our reporting meets the needs of our stakeholders and complies with all appropriate legal requirements.

The directors confirm that Barloworld is in compliance with the provisions of the Companies Act or laws of establishment, specifically relating to its incorporation and is operating in conformity with its Memorandum of Incorporation and/or relevant constitutional documents.

Information on required disclosures can be found in this report, our annual financial statements and in the summary of our financial performance.

K8, K10 JSE 3.84 (a and b) JSE 3.84 (h)

The board ensures that its arrangements for delegation within its own structures promote independent judgement and assist with the balance of power and the effective discharge of its duties.

Through the appointment of strong independent directors and the separation and clear definition of the roles and responsibilities of the non-executive Chair and Group Chief Executive Officer (GCEO), Barloworld has established a clear balance of power and authority at board level. The (GCEO) in turn delegates responsibilities in accordance with the company’s delegation of authority framework. The board has delegated certain functions to its committees, which allows it to allocate sufficient time and attention to decision making on material matters. This also allows for the delegated matters to receive in-depth focus at committee level. Through the committees, the board provides guidance and monitors our corporate functions to ensure that Barloworlds’ governance policies and processes are being applied.

The board performs its duties within a board-approved governance framework of policies and controls that provides for effective risk assessment and management of our economic, environmental and social performance. Our board charter, which is closely aligned with the recommendations of King IV, details the responsibilities of the board, while the MOI also addresses certain of the directors’ responsibilities and powers.

In accordance with the JSE Listings Requirements, the board has considered and satisfied itself that our Finance Director, Nopasika Lila, has appropriate expertise and experience to meet the responsibilities of her appointed position. The board has also considered and satisfied itself of the appropriateness of the expertise and adequacy of resources of the finance function.

Relebohile Malahleha, in her capacity as Executive Strategic Finance and Treasury of the company, was appointed as debt officer of Barloworld during the period. The board is satisfied with the competence, qualifications and experience of the debt officer.

During the year under review, the nomination committee, on behalf of the board, appointed Vasta Mhlongo as Group Company Secretary. The committee found that she demonstrates the requisite level of knowledge, experience and independence to fulfil her role. She is neither a director nor a prescribed officer of the company or any related businesses.

K2, K16

The board and the executive committee are committed to doing business ethically, while also building a sustainable company that recognises the short and long-term impact of its activities on the economy, society and the environment.

The board is ultimately responsible for the company’s ethics performance. The social, ethics and transformation committee supported by the executive committee ensures that the relevant policies are embedded and that governance around policies is measured. In turn, executive management is responsible for embedding an ethical culture that protects the interests of the group and its stakeholders. A well-designed and properly implemented ethics management process has been introduced to achieve this.

The group is governed by the Barloworld Worldwide Code of Conduct and Code of Ethics. The Code of Ethics requires Barloworld directors, management and employees to obey the law, respect others, be fair and honest, and to protect the environment.

These documents are well-publicised both internally and externally and are shared with our suppliers and service providers.

Our ethics and compliance programme is designed to further entrench and integrate good corporate governance throughout the group. We continue to perform assessments of ethical risks and opportunities and integrate these into the risk management processes.

As our internal auditors, KPMG conducts a formal review of the group’s governance of ethics and risk.

Board members declare their interests before every board or committee meeting. Should a conflict of interest be identified, the director is recused from the meeting and does not participate in the decision-making process regarding the matter. As an additional safeguard, all non-executive directors are assessed for potential conflicts of interest and independence annually.

K3, K13

As a multifunctional group, Barloworld needs to adhere to a wide range of legislative requirements. The board has confirmed that sufficient management capacity and controls are in place to ensure compliance with all relevant laws and industry practices.

Legal compliance at business unit level is regularly reported on to management and the audit and risk committee, and is also reported on every quarter to the group audit and risk committee. The administration of our legal compliance system is vested in a member of senior management who has the appropriate legal qualifications. Members of senior management are informed on a regular basis of all relevant new legislation and amendments.

Our board is committed to full compliance with all applicable laws and regulations and it supports the application of certain non-binding codes and standards. Our Combined Assurance Framework and our regulatory risk management ensure that the effectiveness of the key internal controls to mitigate our compliance risks are continually monitored and that risk management plans are in place to ensure compliance with new legislation or amendments to current legislation.

Barloworld is subject to, and remains compliant with its Memorandum of Incorporation, the Listings Requirements of the JSE as amended, and has complied with the Companies Act, 2008 as amended during the year under review.

The social, ethics and transformation committee advises and provides guidance to the board on the effectiveness of management’s efforts in respect of social, ethics and sustainable development-related matters and transformation. It also carries out its duties in terms of the Companies Act and reports on its fulfilment of its mandate in this regard to the board and stakeholders. The committee has confirmed that there were no instances of material non-compliance requiring disclosure in FY2021.

K14

Barloworld understands that it is essential that our strategy, risks, performance and rewards are aligned if we are to create shareholder value. The remuneration committee is charged with ensuring that:

executive directors and senior management are fairly rewarded for their individual contributions to the company’s overall performance
our remuneration policies and practices are designed to align performance with reward and to attract and retain the right talent
our remuneration policies and practices take into account the interests of stakeholders and the financial position of Barloworld.

	K12

	The audit and risk committee’s mandate includes the monitoring of IT governance, information security, cyber risk and risks facing the business with regard to technology renewal and remote working. It regularly considers the technology and information risk register and promotes the awareness of an ethical IT governance and management culture and provides transparency through regular reporting to the board of directors. The board and executive management are well informed regarding the role of technology and information and its impact on the business. It is the role of all the committees to ensure that a focus is placed on both technology and information, elevating the importance of its governance and ensuring that it forms an integral part of our overall corporate governance and group strategy. The audit function provides independent assurance on implemented IT-related frameworks, strategy, policy, procedures and standards. Our IT governance warrants that it adds value by enabling the improvement of the company’s performance and sustainability through utilising the efficient and effective use of IT resources.

	K16

	By identifying our stakeholders through engagement and taking into consideration their interests, needs and expectations, our board and management achieve stakeholder inclusivity and contribute value to both the business and its stakeholders. Our board and management contribute value to both Barloworld and our stakeholders by effectively governing our performance and taking into consideration our stakeholders’ interests

K15 JSE 3.84 (g)

To ensure Barloworld has adequate structures in place to provide assurance across the group and to prevent gaps or duplication in assurance efforts, we have adopted a combined assurance approach.

The audit and risk committee obtained assurance on the financial statements and internal financial controls and carried out its statutory duties set out in section 94 of the Companies Act. It satisfied itself as to the expertise and experience of the Group Finance Director and the finance function and assessed the independence and performance of the internal and external audit functions (see the Audit and risk committee report on pages 16 to 19 of the annual financial statements for 2021).

The social, ethics and transformation committee advises and provides guidance to the board on the effectiveness of management’s efforts in respect of social, ethics, sustainable development-related matters and transformation. It also carries out its duties in terms of the Companies Act and reports on the fulfilment of its mandate in this regard to the board and stakeholders (see its report page 82). The committee has confirmed that there were no instances of material non-compliance requiring disclosure in FY2021.

JSE 3.84(g) JSE 3.84(g)(iii)

In accordance with paragraph 3.84(g)(iii) and 22.15(h) of the JSE Listings Requirements, the audit and risk committee requested and received information from EY and SNG Grant Thornton (joint auditors) that allowed it to assess their internal governance processes. The information also supported and demonstrated its claim of independence; the findings by the Independent Regulatory Board for Auditors with regard to its monitoring of the firms in respect of their independence, quality control and any corrective action by the firm; and any legal claims against the firms. Similarly, information was obtained and discussed in respect of the designated auditors. The committee concluded that it was satisfied with the independence and audit quality of joint auditors EY and SNG-GT and the designated auditors, S Sithebe and C Mashishi.

External audit fees are disclosed on page 55 within note 3 to the annual financial statements. All the non-audit services (disclosed on page 55, note 3 of our annual financial statements) provided by the auditors were approved by the committee in accordance with the policy for the provision of non-audit services. JSE 7.F.5

The board, with the support of the audit and risk committee, is ultimately responsible for Barloworld’s system of internal control, which is designed to identify, evaluate, manage and provide reasonable assurance against material misstatement and loss. We apply a combined assurance model, which seeks to optimise the assurance obtained from management as well as internal and external assurance providers while fostering a strong ethical climate and mechanisms to ensure compliance. The process is monitored and evaluated under the direction of internal audit, while external audit teams cover key controls and accounting matters in the course of their audits. Other levels of external assurance are obtained as and when required. The board and the audit and risk committee assessed the effectiveness of controls for the year ended 30 September 2021 as satisfactory, primarily through a process of management self-assessment, including formal confirmation from executive management and also considered reports from internal audit, external audit and other assurance providers. JSE 3.84(g)



	An effective risk-based internal audit function has been established. The purpose, authority and responsibilities of the internal audit function are defined in the board-approved internal audit charter, which is consistent with the Institute of Internal Auditors’ definition of internal auditing and the principles of King IV. The head of the internal audit function has unrestricted access to members of the audit committee and executives of the organisation and attends the audit and risk committee meetings. KPMG report directly to the Chair of the audit and risk committee.

AUDIT AND RISK COMMITTEE

	Governance roles and responsibilities fulfilled and outcomes		What the committee focused on in FY2021
			Assisted the board in its responsibilities covering the internal and external audit process for the group; considered the significant risks, the adequacy and functioning of the group’s internal controls and integrity of financial reporting
			Oversaw the smooth integration of the audit committee and the risk and sustainability committee into the audit and risk committee
			Ensured alignment of the combined assurance process, internal audit plan and external audit plan in terms of the risk-based approach
			Recommended to the board resumption of payment of dividend
			Reviewed the dividend policy
			Satisfied itself as to the independence, JSE accreditation and performance of the external auditors
			Approved insurance cover against hardened market and with reduced capacity
			Periodically reviewed the group and divisional top risks
			Reviewed and considered change in technology risk posture on Covid-19 impact and mitigation plans
			Approved revised risk management philosophy
			Monitored the quality control environment for business adherence to the risk-bearing capacity