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Corporate governance

Introduction

The board of directors manages the group’s business with integrity and by applying appropriate corporate governance practices.

Media24 is a leading media group in Africa. It is a subsidiary of Naspers Limited, a company listed on the JSE Limited (JSE) and the London Stock Exchange (LSE). Media24 is therefore subject to the Listings Requirements of the JSE, as well as legislation applicable to publicly listed companies in South Africa (where applicable to a subsidiary of a company listed on the JSE) and the guidelines in the King Code and Report on Corporate Governance for South Africa 2009 (King III).

Compliance with the applicable JSE and LSE Listings Requirements is monitored by the audit committee of the board.The board’s audit, risk, human resources and remuneration, nomination, and safety, health and environment committees fulfil key roles in ensuring good corporate governance.The group uses independent external advisers to monitor regulatory developments to enable management to make recommendations to the Media24 board on matters of corporate governance.

Application of and approach to King III

The board and its committees must ensure that the principles and practices contained in King III are applied and embedded in the governance practices of companies in the group.

A disciplined reporting structure ensures that the Media24 Holdings board is fully apprised of subsidiary activities, risks and opportunities.All controlled entities in the group are required to subscribe to the relevant principles of King III. Business and governance structures have clear approval frameworks.Compliance, as well as progress, is monitored by the Media24 audit and risk committees and reported to the Media24 board.

The composition of board committees was reviewed and amended where required in the past year. Further disclosures and details of the enterprise-wide risk management framework are included in the integrated annual report.

In line with the overriding principle in King III of apply or explain, the board, to the best of its knowledge, believes that the group has applied, or is in the process of embedding, processes in support of the principles of King III that are appropriate to the group.

King III stipulates that directors should have a working understanding of the effect of laws, rules, codes and standards that are applicable to the company and its business.The company does not interpret these provisions to mean that the board should have legal expertise in all spheres in which the company operates or be familiar with all laws applicable to the company and its various businesses, nor is it practically possible to do so. However, the Media24 board ensures adequate structures and systems are in place and that competent people are in charge to ensure group compliance with relevant laws.The board further manages corporate governance through its audit and risk committees.These committees monitor the proper operation of relevant structures and systems and report on these to the board.

The board believes the current non-executive directors’ fee structure of a single annual fee is more appropriate for the board and its committees and better reflects member contribution. Directors do not receive additional fees for being directors of Media24 Holdings Proprietary Limited.They only receive fees as directors of Media24 Proprietary Limited.

Business ethics statement

The group’s code of ethics and business conduct was revised during the year and is available on www.media24.com.

This code applies to all directors and employees in the group. Ensuring that group companies adopt appropriate processes and establish supporting policies and procedures is an ongoing mandate. Management focuses on policies and procedures that address key ethical risks, such as conflicts of interest, accepting inappropriate gifts and acceptable business conduct.

The human resources and remuneration committee acts as the overall custodian of business ethics.The disciplinary codes and procedures of the various companies are used to ensure compliance with the policies and practices that underpin the overall code of ethics and business conduct. Unethical behaviour by senior staff members, as well as the manner in which the company’s disciplinary code was applied in such instances, is reported to this committee.

Media24 is committed to conducting its business on the basis of compliance with the law, with integrity and with proper regard for ethical business practices.All directors and employees are expected to comply with these principles and, in particular, to avoid conflicts of interest and to refrain from engaging in insider trading, illegal anti-competitive activities, and bribery and corruption.

Whistle-blowing facilities are in place, enabling all employees to anonymously report unethical conduct in the workplace.

Compliance framework

Media24 is part of its holding company’s group legal compliance programme which formalised practices that have been followed for some time. The programme involves preparing and maintaining inventories of material laws and regulations applicable to each business unit, implementing policies and procedures based on these laws and regulations, establishing processes to control and supervise compliance and mitigate risks, monitoring compliance, implementing effective training and awareness programmes and reporting to the various boards and management in the group on the effectiveness of compliance efforts.

Media24’s legal compliance committee oversees the legal compliance programme in the group by, inter alia:

  • tailoring the standards, codes and training strategies decided on by the holding company to ensure proper implementation at Media24
  • identifying and recording in a register the areas of risk in Media24
  • reviewing allegations of non-compliance and monitoring investigations
  • reviewing local company policies and procedures, and
  • monitoring compliance policies and procedures.

Media24’s manager of legal and regulatory affairs is the chair of the legal compliance committee and reports on the progress of this committee to the risk committee of the board.

The board

Composition

The details of directors as at 31 March 2014 are set out here.

Mr Koos Bekker resigned on 31 March 2014 and does not appear on this list of directors.

Media24 has a unitary board, which fulfils overseeing and controlling functions.The board has a charter evidencing a clear division of responsibilities. Most board members are non-executive directors and independent of management.To ensure no one individual has unfettered powers of decision-making and authority, the roles of chair and chief executive are separate, ensuring a clearly defined division of responsibilities.

Mrs Ruda Landman was appointed in the role of lead independent director on 21 November 2013 and deals with all matters not dealt with by the independent non-executive chair.

As at 31 March 2014 the board comprised nine independent non-executive directors, two non-executive directors and two executive directors. Six directors (46%) were from previously disadvantaged groups and five directors (38%) were female. Messrs Neil van Heerden and Lourens Jonker, and Prof HeinWillemse were appointed as directors on 21 November 2013. Mrs Jo-Ann Held and Mr Abduraghman (Manie) Mayman were appointed as directors on 1 January 2014. MessrsTonVosloo, Boetie van Zyl, Lambert Retief, Koos Pieterse and Koos Bekker resigned as directors during the year.

The chair

The chair is an independent non-executive director. She guides the board as a whole and ensures the board is efficient, focused and operates as a unit.The responsibilities of the chair include:

  • providing overall leadership to the board without limiting the principle of collective responsibility for board decisions, while being aware of the individual duties of board members
  • in conjunction with the chief executive, representing the board in communicating with shareholders, other stakeholders and, indirectly, the general public
  • assisted by the board and its committees, ensuring the integrity and effectiveness of the governance process
  • maintaining regular dialogue with the group’s chief executive on operational matters and continually consulting with other board members on any matter of concern to the chair, including managing conflicts of interest
  • in consultation with the chief executive and company secretary, ensuring appropriate content and order of the agendas of board meetings and that members of the board receive documentation promptly
  • ensuring board members are properly informed about issues arising from board meetings and that relevant information is submitted to the board
  • acting as a facilitator at board meetings to ensure a sound flow of opinions. The chair ensures adequate time is scheduled for discussions, and that they lead to logical and acceptable conclusions, and
  • monitoring how board members work together and how individual directors perform and interact at meetings. The chair meets with directors annually to evaluate their performance.

The chief executive

The chief executive reports to the board and is responsible for the day-to-day business of the group and the implementation of policies and strategies adopted by the board. Chief executives of the various businesses assist her in this task. Board authority conferred on management is delegated through the chief executive, in accordance with approved authority levels.The functions and responsibilities of the chief executive include:

  • developing the company’s strategy for consideration and approval by the board
  • developing and recommending to the board annual business plans and budgets that support the company’s long-term strategy
  • monitoring and reporting to the board on the performance of the company
  • establishing an appropriate organisational structure for the company, necessary to execute its strategic planning
  • recommending/appointing the executive team and ensuring proper succession planning and performance appraisals take place, and
  • ensuring the company complies with relevant laws, corporate governance principles, business ethics and appropriate best practice and, if not, that failure to do so is justifiably explained.

Orientation and development

An induction programme is held for new members of the board and key committees.This programme, tailored to the specific needs of individual appointees, involves industry and company-specific orientation and includes meetings with senior management.The company secretary supports the chair with the induction and orientation of directors and arranges specific training where required. The company will continue director development to build on expertise and develop an understanding of the operations of businesses in the group.

Conflicts of interest

Potential conflicts are appropriately managed to ensure that candidate and existing directors have no conflicting interests between their obligations to the company and their personal interests.Any interest in contracts with the company must be formally disclosed and documented. Directors must also adhere to a policy on trading in Naspers securities that was adopted by Media24.

Independent advice

Individual directors may, after consulting with the chair or the chief executive, seek independent professional advice, at the expense of the company, on any matter connected with discharging of their responsibilities as directors.

Role and function of the board

The board has adopted a charter setting out its responsibilities as follows:

  • determining the type of business the company is building and the services it provides to its users
  • determining the group’s values and incorporating them into the Media24 group’s code of ethics and business conduct; ensuring that compliance with this code is integrated into the operations of the group
  • providing strategic direction to the company, taking responsibility for the adoption of strategic plans (which originate from management)
  • monitoring the company’s social, environmental and financial performance
  • identifying and monitoring compliance with key laws, rules, codes and standards applicable to the company
  • identifying material stakeholders and monitoring management’s process of engagement with those stakeholders
  • approving the annual business plan and budget compiled by management for implementation by management, taking cognisance of sustainability aspects in long-term planning
  • retaining full and effective control over the company and monitoring management with the implementation of the approved annual budget and business plan, as amended from time to time
  • overseeing preparation of and approving the company’s financial statements (for adoption by shareholders) and interim, provisional and integrated reports (as reviewed by the audit committee) and ensuring its integrity and fair presentation
  • considering and, if appropriate, declaring the payment of dividends to shareholders
  • evaluating the viability of the company and the group as a going concern, and properly recording this evaluation
  • determining the selection and orientation of directors
  • appointing the chief executive, who reports to the board, and the director responsible for the finance function, and ensuring succession is planned
  • establishing board committees as appropriate, with clear terms of reference and responsibilities
  • appointing the chairs of the board and its committees
  • annually evaluating the performance and effectiveness of directors, the board as a whole and its committees
  • ensuring the company governs risk adequately through structured, appropriate and effective enterprise-wide risk management systems and processes, which allow the board to set risk tolerance levels from time to time
  • ensuring there is effective risk-based internal audit, which allows it to report on the effectiveness of the company’s system of internal controls in its integrated annual report
  • determining levels of delegation for specific matters, with appropriate authority delegated to board committees and management
  • determining the company’s communication policy
  • communicating with shareholders and relevant stakeholders openly and promptly, with substance prevailing over form
  • ensuring processes are in place to resolve disputes as efficiently and expeditiously as possible. Alternative dispute resolution will be considered where appropriate, and
  • reviewing annually the charters of board committees.

Board meetings and attendance

The board meets at least four times a year, and when required by circumstances.The executive committee attends to urgent matters that cannot be postponed until the next scheduled board meeting.The board held four meetings during the past financial year.The independent non-executive directors meet at least once annually without the chief executive, the director responsible for the finance function and the chair, to discuss the performance of these individuals.

The company secretary acts as secretary to the board and its committees and attends all meetings. Details of attendance at meetings appear here.

Evaluation

The nomination committee carries out the annual evaluation process. The performance of the board and its committees, as well as the chair of the board, with reference to their respective mandates in terms of the board charter and the charters of its committees, is appraised. The committees perform self-evaluations against their charters for consideration by the board.

In addition, the performance of each director is evaluated by the other board members, using an evaluation questionnaire.The chair of the nomination committee discusses the results of the evaluation with each director and agrees to any training needs or areas requiring attention by that director.Where a director’s performance is not considered satisfactory, the board will not recommend his/her re-election.

A consolidated summary of the evaluation is reported to and discussed by the board, including any actions required.The lead independent director leads the discussion of the performance of the chair, with reference to the results of the evaluation questionnaire, and provides feedback to the chair.

The annual board effectiveness evaluation process revealed that the board and its committees had functioned well and had discharged their duties in accordance with the mandates of the respective charters. Furthermore, the independence of each director was evaluated. The board determined that even though some directors had served on the board for nine years or longer, they all demonstrated that they were independent in character and judgement and there were no relationships or circumstances that were likely to affect or could appear to affect their independence.

Board committees

While the whole board remains accountable for the performance and affairs of the company, it delegates certain functions to board committees and management to assist in properly discharging its duties. Appropriate structures for these delegations are in place, accompanied by monitoring and reporting systems.

Each committee acts within agreed, written terms of reference. The chair of each committee reports at each scheduled board meeting. The chair of each committee is a non-executive director and is required to attend annual general meetings to answer questions raised by shareholders. The established board committees are detailed below.

Executive committee

This committee comprises a majority of non-executive directors, one being the chair of the board (who also serves as the chair of the executive committee), plus two executive directors.The executive committee acts on behalf of the board in managing urgent issues when the board is not in session, subject to statutory limits and the board’s limitations on delegation.This committee did not meet during the financial year. Refer to the section on attendance at meetings.

Audit committee

This committee, chaired by Mr Salie de Swardt, comprises only independent non-executive directors. Mr Lourens Jonker and Mrs Jo-Ann Held became members of the committee during the year. All members are financially literate and have substantial business and financial acumen.

The committee held five meetings during the past financial year. Details of attendance appear here. The chief executive and director responsible for the finance function attend committee meetings by invitation.

Both the internal and external auditors have unrestricted access to the committee through the chair.The internal and external auditors also report their findings to the committee with members of executive management not in attendance.

The chair of the board may not be a member of the audit committee, but may attend meetings by invitation.

This committee’s main responsibilities, in addition to its statutory responsibilities in terms of the Companies Act, are to:

  • review and approve for presentation to and approval by the board the company’s integrated annual report, annual financial statements, interim and provisional reports, and any other company press releases with a material financial or internal control impact
  • review the documented assessment of the viability of the company and the group on a going-concern basis, making relevant recommendations to the board
  • receive all the external auditor’s reports directly from the external auditor
  • annually review and report on the quality and effectiveness of the audit process, including assessing the external auditor’s independence, whether the auditor performed the audit as planned and established the reasons for any changes, obtaining feedback about the conduct of the audit from key members of the company’s management, including the director responsible for the finance function and chief audit executive
  • evaluate the lead partner of the external auditor, who will be subject to regular rotation as required by applicable regulations
  • present the committee’s conclusions on the external auditor to the board, preceding the annual request to shareholders to approve the appointment of the external auditor
  • approve the external auditor’s terms of engagement and remuneration. Evaluate and provide commentary on the external auditor’s audit plans, scope of findings, identified issues and reports
  • develop a policy for the board to approve non-audit services performed by the external auditor, approving non-audit services provided by the external auditor in accordance with this policy
  • receive notice of reportable irregularities (as defined in the Auditing Profession Act) that have been reported by the external auditor to the Independent Regulatory Board for Auditors
  • evaluate the effectiveness of the internal audit function, including its purpose, activities, scope, adequacy and costs, and approve the annual internal audit plan and any material changes
  • satisfy itself that it has appropriately addressed:
    financial reporting risks
    internal financial controls
    fraud risk as it relates to financial reporting, and
    IT risks as these relate to financial reporting
  • evaluate the nature and extent of the formal documented review of internal financial controls to be performed annually by internal audit on behalf of the board. Weaknesses in internal financial controls that are considered material (individually or in combination with other weaknesses) and that resulted in actual material financial loss, fraud or material errors, are to be reported to the board and in the integrated annual report
  • approve the internal audit charter, which must be reviewed annually
  • confirm the appointment or dismissal of the head of the group’s internal audit function and periodically review his/her performance
  • ensure the internal audit function is subject to an independent quality review from time to time
  • review internal audit and the risk committee’s reports
  • review procedures to ensure the requirements of relevant stock exchanges, where applicable to Media24, are complied with
  • review procedures in light of the Code on Corporate Governance (King III), as amended from time to time
  • monitor compliance with the board-approved group levels of authority
  • evaluate:
    legal matters that may affect the financial statements
    matters of significance reported by the internal auditors, external auditor and any other parties, including implied potential risks to the group and recommendations on appropriate improvements
    major unresolved accounting or auditing issues, and
    progress on completion of all unfinished matters reported by the internal and external auditors
  • establish procedures for the receipt, retention and treatment of complaints received by the company on accounting, internal control and auditing matters, risk management and management of other fraudulent activities, including procedures for confidential, anonymous reporting by employees on questionable matters
  • annually evaluate the performance and appropriateness of the finance function and the expertise and experience of the director responsible for the finance function. The results of the review are to be disclosed in the integrated annual report
  • ensure that a combined assurance model is applied to provide a coordinated approach to all assurance activities, monitoring the relationship between external providers and the company. Coordination between internal and external auditors is evaluated
  • report to shareholders at the annual general meeting on how it has fulfilled its duties in terms of the Companies Act during the financial year
  • execute assignments commissioned by the board
  • annually review and assess the committee’s charter and, if appropriate, recommend required amendments for approval by the board
  • perform an annual self-assessment of the effectiveness of the committee, reporting these findings to the board, and
  • monitor related party transactions within authority levels approved by the board.

Human resources and remuneration committee

The main objective of the human resources and remuneration committee is to fulfil the board’s responsibility for strategic human resources issues of the group, particularly focusing on the appointment, remuneration and succession of the most senior executives.The committee comprises a minimum of three independent non-executive directors.The responsibilities of this committee are outlined in the remuneration report.

Risk committee

The risk committee, chaired by Mr Salie de Swardt, comprises a minimum of three independent non-executive directors with risk management skills and experience, as well as the chief executive and director responsible for the finance function. Messrs Lourens Jonker and Manie Mayman and Mrs Jo-Ann Held became members of the committee during the year. Mr Steve Pacak joined the committee as a member on 4 April 2014.

The chair of the board may not serve as chair of this committee.As a whole, members of the committee are individuals with risk management competencies and experience.

The committee held five meetings during the past financial year with details of attendance appearing here.

The committee’s main responsibilities are to:

  • review and approve for recommendation to the board a risk management policy and plan developed by management. The risk management policy and plan must be reviewed annually
  • monitor implementation of the risk management policy and plan, ensuring an appropriate enterprise-wide risk management system is in place with adequate and effective processes that include strategy, ethics, operations, reporting, compliance, IT and sustainability
  • make recommendations to the board on risk indicators, levels of risk tolerance and appetite
  • monitor that risks are reviewed by management, and that management considers and implements appropriate responses to identified risks, so that these are managed within the levels of risk tolerance and appetite approved by the board
  • ensure risk management assessments are performed regularly by management
  • issue a formal opinion to the board on the effectiveness of the system and process of risk management
  • review reporting on risk management to be included in the integrated annual report, ensuring it is timely, comprehensive and relevant, and
  • perform an annual self-assessment of the effectiveness of the committee, reporting these findings to the board.

Safety, health and environment committee

The safety, health and environment committee, chaired by Mrs Ruda Landman, comprised five members, all independent non-executive directors on 31 March 2014. Prof Debra Meyer has been a member of the committee since 21 November 2013. Prof Russel Botman was a member of the committee until his passing on 28 June 2014.

The committee held two meetings in the past financial year. Details of attendance are provided here.The committee’s main responsibilities are to:

  • approve the framework, policy and guidelines for environmental, health and safety management
  • review and monitor implementation of the group’s policies on environmental, health and safety issues
  • monitor key indicators of accidents and incidents
  • review the company’s compliance with policies, guidelines and applicable local and international standards and relevant local laws on environmental, health and safety issues, and
  • review annual reporting on environmental, health and safety issues.

Internal control systems

The company has a system of internal controls in all material subsidiaries and joint ventures. For those entities in which Media24 does not have a controlling interest, the directors who represent Media24 on these boards seek assurance that significant risks are managed and systems of internal control are effective. Media24’s internal auditors monitor the functioning of internal control systems and make recommendations to management and to the audit and risk committees.The external auditor considers elements of the internal control systems as part of its audit and communicates deficiencies when identified.

All control systems do, however, have shortcomings, including the possibility of human error and evasion or flouting of control measures. Even the best internal control system may provide only partial assurance.The group’s internal control systems are designed to provide reasonable, and not absolute, assurance on the integrity and reliability of the annual financial statements; to safeguard, verify and maintain accountability of its assets; and to detect fraud, potential liability, loss and material misstatements, while complying with applicable laws and regulations.

The group evaluated its internal control systems for the year ended 31 March 2014. During the year nothing has come to the attention of the board, external or internal auditors to indicate any material breakdown in the functioning of the group’s internal controls and systems. On the whole, internal control is effective, except for deficiencies reported in the working capital management processes of the publishing and distribution units.

Internal audit

An internal audit function is in place throughout the group.This is an independent appraisal mechanism that examines and evaluates the group’s procedures and systems, including internal controls, disclosure procedures and information systems, ensuring these are functioning effectively.The head of internal audit reports to the chair of the Media24 audit committee, with administrative reporting to the director responsible for the finance function.

A large part of the internal audit fieldwork is outsourced.

Non-audit services

The group’s policy on non-audit services provides guidelines on dealing with audit, audit-related, tax and other non-audit services that may be provided by Media24’s independent external auditor to group entities. It also sets out services that may not be performed by the independent external auditor.

The audit committee preapproves audit and non-audit services to ensure these comply with relevant legislation and do not impair the independent external auditor’s independence. Three guiding principles govern this approval, namely that the independent external auditor’s independence will be deemed impaired if he provides a service where he:

  • functions in the role of management of the company, or
  • is in the position of auditing its own work, or
  • serves in an advocacy role for the company.

IT governance

Due to the pervasive nature of information technology and the pace of change of this technology, a reliable framework is required to adequately control the IT environment and to avoid control gaps that may expose the group to unacceptable risk.COBIT is the preferred framework for IT governance in terms of the Media24 group’s IT governance charter.

Company secretary

The company secretary is responsible for providing the board with guidance on discharging its responsibilities in terms of legislation and regulatory requirements. Directors have unlimited access to the advice and services of the company secretary.The company secretary plays an active role in the company’s corporate governance and ensures that in accordance with the pertinent laws, the proceedings and affairs of the board, the company itself and, where appropriate, shareholders are properly administered. She is also the company’s delegated information officer. The company secretary ensures adherence to closed periods for trading in Naspers shares by Media24 directors.The company secretary attends all board and committee meetings.

Shareholders

The board encourages shareholders to attend the annual general meeting, notice of which is contained in this integrated annual report, where shareholders have the opportunity to put questions to the board, management and the chairs of the various board committees.

The company’s website www.media24.com provides the latest and historical financial and other information, including financial reports.