17.09.2015

SOCIAL AND ETHICS COMMITTEES

Under the South African Companies Act

• BACKGROUND

• IMPLEMENTATION

• SECRETARIES ROLE IN FACILITATING AN EFFECTIVE COMMITTEE

PRACTICALITIES FOR IMPLEMENTING AN EFFECTIVE SOCIAL & ETHICS

COMMITTEE

• Requirements under the Companies Act

• King III

• Recommendations from influential bodies

Institute of Directors (IOD)

Ethics Institute

Ernst & Young

BACKGROUND

• Applies to Companies with PIS ≥ 500 in any 2 of the previous 5 years

• Calculated ito Reg 26(2)

• Effective from May 2011, on the anniversary of incorporation (May 2012)

REQUIREMENTS UNDER THE COMPANIES ACT, REGULATION 43

(a) Monitor the Company’s activities, having regard to relevant legislation and codes, relating to:

Social and economic development

Good corporate citizenship

Environment, health and public safety

Consumer relationships

Labour and employment

(b) Draw matters to the attention of the board

(c) Report through one of its members to the shareholders in AGM

REGULATION 43(5)

The Company has a responsibility to all stakeholders

• Considers legitimate interests of stakeholders when deciding in the best interest of the company;

• Principle 1.2:

Ensure company is a responsible corporate citizen

Ethical relationship between company and society / environment / economy

Collaborate with stakeholders to promote ethics

Develop and implement measurable corporate citizenship policies

• Principle 1.3:

• Ensure company ethics are managed effectively

KING III REQUIREMENTS

THE IOD on Running an Effective Social and Ethics Committee

• Legislation determines that the company appoints the Committee

• Board appoints the first members

Involve nominations committee selecting members with the best mix of skills and talent;

Board appoints the Committee & Members

AGM ratifies the Committee as a permanent statutory committee and committee of the board

• Members:

not less than 3 Directors or prescribed officers

at least one non-executive

CONSIDERATION :

are ADDITIONAL members required to be PO/ Directors

RECOMMENDATIONS FROM INFLUENCIAL BODIES

Considerations Raised by The Ethics Institute

• Managing duplication

May incorporate other committees ie transformation / ethics

Synergies and synchronisation between committees

Links between committees impacts meeting schedules

• Terms of Reference to facilitate appointment of additional members / ex-officio members

• Board delegations of other responsibilities (Direct / control / oversight)

• Minutes may play a crucial role to illustrate the company’s performance

Recommends minutes included in board papers

• Create a rolling agenda spread out through the year

More RECOMMENDATIONS FROM INFLUENCIAL BODIES

Considerations Raised at the Ernst & Young Trialogue Sustainability Forum

• Business finds it easier to deal with numbers, thus boards don’t effectively focus on sustainability

• Social capital needs to be identified and linked to economic value to give it more meaning

• It may appear the committee removes responsibility from the board

Line function, providing over-sight obo board

Committee has responsibility, board has accountability

Note that liabilities for Committee Members, Sections 76 and 77 of the Act applies

• Committee should link ethics, environmental & social issues to business strategies.

• Management should report and be excused, allowing committee to reflect independently;

more RECOMMENDATIONS FROM INFLUENCIAL BODIES

• Drafting the Terms of Reference

• Shaping the Agenda

• Reporting Framework

IMPLEMENTATION

• Constituted by board – ratified in AGM

• Role - monitor (may include: direct / oversight / advisory)

• Membership – First members appointed ito the Act

Termination of membership

Additional members & standing invitees

• Secretary – implications if not Secretary of the Company

• Meeting frequency and quorum – fit for company requirements

• Responsibilities / scope in line with the Act (may include Ethics, transformation, policies and other)

• Reporting : Guidelines for reports received, frequency and manner of reporting to Board, AGM and other

committees

• Authorities – to receive information, investigate activities, access to records and independent experts

DRAFTING THE TERMS OF REFERENCE

• Informed by the scope in ToR

• Consider application to the business affairs per division / operation

• Table of other committees with similar scope

• Apply risk matrix to determine frequency of deliberation per agenda item

• Consider reports flowing in / out

• Consider existing reporting timelines

• Develop a meeting plan that allows meaningful debate and aligns

SHAPING THE AGENDA

EXAMPLE ANNUAL ROLLING AGENDA

A. ITEMS FOR QUARTERLY CONSIDERATION Q1 Q3 Q4 MANDATE

1. Environment, Health and Safety review per Operation x x x Review

2. Sustainability Committee Feedback (or) Sustainability strategy & policy review x x x Review

3. Minerals Policy, Mining Charter and Legislative Compliance x x x Review

4. Internal audit report - by exception x x x Review

B. ITEMS FOR ANNUAL CONSIDERATION

1. Approve / review health, safety, environmental and climate change policies x Review

2. Receive Business Integrity Report

Ethical Conduct & Business Practices Competition Law Compliance Whistleblowing policy and report Fraud prevention and investigations United Nations Global Compact Principles (10);

OECD recommendations regarding corruption;

x Review

3.Receive report under anti-money laundering (AML/CFT) policy x Review

4.Review Good Corporate Citizenship

Policies on equality / discrimination / corruption Sponsorship, Donations, Charitable Giving's

Community Development Initiatives

x Review

5. Receive Report on Labour and Employment Compliance with EE Act Protocol on decent work and working conditions Employment relationships and educational development Compliance with B-BBEE Act Social & Labour Plan commitments

x Review

6. Report on Consumer Relationships Advertising practices Public Relations

Compliance with Consumer Protection Laws

x Review

7. Review Annual Report to board and AGM x Review

• Standard template for reports from divisions and operations

• Align reports with information provided to other committees

• Deliberate on an exceptions basis on matters to escalate to the board

• Key focus (High risk) areas inform the annual report

• Annual report considered by committee and provided to board and AGM

REPORTING FRAMEWORK

• Terms of reference

Facilitates meaningful deliberation

Results in meaningful reporting

• Agenda:

fit for purpose

logical flow of information

• Minutes:

Highlight deliberations, key risk areas and focused mitigating actions

Key issues to be raised at the board and added to board agenda

Meaningful evidence trail in response to social, economic or ethics incidents

SECRETARIES ROLE IN FACILITATING AN EFFECTIVE COMMITTEE

• Provided some background, including recommendations by influential bodies

• Proposed an approach to effective implementation

• Considered the role Secretaries play in facilitating the Committee

CLOSING