The board is the custodian of corporate governance within the Northam group. Both the board and management are committed to transparency and accountability and regard these as the fundamentals that safeguard the group’s assets and protect value for all stakeholders, including shareholders.

The King IV Report on Corporate Governance for South Africa 2016 was released on 1 November 2016. The application of King IV is on an ‘apply and explain’ basis and the effective date for disclosure on the application is for the year ending 30 June 2018.

The board is cognisant of the shift in King IV towards integrated thinking. King IV advocates an outcomes-based approach and defines corporate governance as the exercise of ethical and effective leadership towards the achievement of the following governance outcomes:

• 

  ethical culture

• 

  good performance

• 

  effective control

• 

  legitimacy

In February 2017 an independent firm was appointed to conduct a King IV gap analysis on Northam’s corporate governance landscape. Key documentation gaps have been identified between King III and King IV and the necessary updating and/or implementation of the group’s applicable frameworks, policies, board charter and committees’ terms of references are in progress, scheduled for completion before year-end 30 June 2018.

GROUP GOVERNANCE STRUCTURE

Board of directors

Board committees

Other

BOARD LEADERSHIP

At 30 June 2017, the board comprised 10 (ten) directors, the majority of whom are independent, 20% are women and 60% are historically disadvantaged South Africans (HDSAs).

Mr PL Zim, non-executive chairman, represents Zambezi Platinum (RF) Limited (Zambezi Platinum) on the board, and Mr R Havenstein is the lead independent director. Mr KB Mosehla, a non-executive director, also represents Zambezi Platinum. The board chairman and lead independent director were both re-elected at the November 2016 board meeting.

In line with the JSE listings requirements, the roles of chairman and CEO are separate. The chairman is responsible for leading the board, while the CEO is responsible for the operational management of the group.

The board’s role and responsibilities include setting the group’s strategic direction and reviewing the strategy on an annual basis. The executive committee implements and executes the strategy in line with the group’s governance structures.

The board, through the nomination committee, ensures that its composition is appropriate in terms of skills, knowledge, experience, independence and gender. The board has considered the need for two new independent directors in terms of the company’s strategy and board succession plan. The recommendation for the appointment of Mr DH Brown at the annual general meeting (AGM) is on page 114. In terms of the board gender diversity policy, an independent firm has been appointed to seek an additional independent HDSA woman director, with the requisite skills. The board has evaluated the performance of the CEO and CFO and is satisfied with the outcome of their evaluations.

Changes to the board

During the year under review:

• Mr JG Smithies was appointed as an independent non- executive director on 1 January 2017.
• Mr AR Martin retired from the board at the conclusion of the AGM on 9 November 2016.
• Ms HH Hickey replaced Mr Martin as chairman of the audit and risk committee on 9 November 2016.

Retirement, re-election and election of directors

In terms of clause 33.5.1 of the memorandum of incorporation (MOI), one third of the non-executive directors, being those longest in office, shall retire from office at each AGM. A retiring director who is eligible and available may offer himself or herself for re-election and appointment.

Ms Kgosi, Messrs Havenstein and Mosehla retire from office in terms of clause 33.5.1 and, being eligible and available, have offered themselves for re-election and appointment at the AGM on 7 November 2017.

In terms of the company’s MOI, directors appointed to the board during the year shall hold office until the next AGM and shall then retire and be eligible for re-election.

Mr Smithies was appointed as a director on 1 January 2017 and in accordance with the provisions of clause 33.5.4, he retires from office and being eligible and available, has offered himself for re-election and appointment at the AGM.

In terms of clause 33.5.7 of the MOI, the board recommends the appointment of Mr Brown as an independent non- executive director, on condition of special resolution number 1 being approved, to increase the maximum number of directors from 10 (ten) to 12 (twelve), effective from the date on which the amendment of the MOI envisaged in special resolution number 1 becomes effective. The full text of the ordinary and special resolutions are contained in the Notice of AGM and summarised annual report 2017, available on this website or from the company’s registered office on written request to the company.

At the AGM on 7 November 2017 members will be requested to consider resolutions providing for the election and re- appointment of Ms Kgosi, Messrs Havenstein, Mosehla, Smithies and Brown as directors.

Brief summaries of their curricula vitae appear under Focus on leadership.

Attendance at board and board committee meetings

The board and its committees meet at least once a quarter and ad hoc meetings may also be called to consider specific issues. The investment committee and the nomination committee meet as and when required.

The table below records the attendance of members at board and committee meetings during the financial year under review:

	Board	Audit and risk committee	HS&E committee	Investment committee	Nomination committee	SE&HR committee
Number of meetings	6	5	4	2	2	6
PL Zim (chairman)	5	–	–	–	1	–
R Havenstein (lead independent)	6	5	4	2	2	–
PA Dunne (CEO)	6	–	4	–	–	–
AZ Khumalo (CFO)	6	–	–	–	–	–
CK Chabedi	6	–	4	2	–	6
HH Hickey	5	4	–	–	–	–
TE Kgosi	6	5	–	–	2	6
AR Martin*	2	3	–	–	1	–
BK Mosehla	6	–	–	2	–	6
TI Mvusi	5	–	–	–	–	–
JG Smithies **	3	–	–	–	–	–

• – Not applicable
• *Retired 9 November 2016
• **Appointed 1 January 2017

Disclosure of personal financial interests

Disclosure of personal financial interests is a standing board and committee agenda item and a register of all directors’ company shareholdings, other directorships and information regarding any potential conflict of interest is updated by directors at each meeting. Directors recuse themselves from discussion on any matters in which they may have a conflict of interest. Furthermore, before dealing in the company’s shares, directors are required to obtain approval from the chief executive or the chief financial officer and are to inform the company secretary.

Board charter and committees’ terms of reference

The board of directors’ charter articulates the objectives and responsibilities of the board which include:

• Oversight of the group’s strategic direction;
• Approving the major capital projects and acquisitions;
• Ensuring the appropriate governance structures, policies and procedures are in place;
• Reviewing and evaluating the group’s risks;
• Approving the annual group business plan and budget;
• Approving the annual and interim financial results;
• Reviewing the group’s performance with the elements of the Mining Charter;
• Information and technology governance; and
• Stakeholder relationships.

Each of the board committees operates in accordance with written terms of reference. These are available on the Northam website www.northam.co.za but are currently being reviewed and updated in terms of King IV, as indicated above.

Ethical leadership and the code of ethics

The board accepts collective responsibility for defining how ethics and ethical behaviour should be implemented in Northam. The group’s code of ethics is reviewed by the executive committee and any changes required are approved by the board. The code of ethics applies to both directors and employees of the group. It governs the interaction between the group and its suppliers, contracting companies and customers. It also covers the use of group assets and confidential information. A breach of the code of ethics could result in disciplinary action and/or civil or criminal action being taken against a perpetrator. The code of ethics is available on the Northam website at www.northam.co.za.

Group procurement policy

Also governing Northam’s supply chain is the comprehensive group procurement policy. The policy addresses all aspects of supply chain management such as tender procedures, contract management, preferential procurement, vendor management, inventory management and provides an approval framework. A full audit trail exists for all supply chain procedures and independent audits are conducted annually. Information on vendor applications is also independently verified before any business is conducted with new suppliers.

Executive committee

The group’s CEO, Mr PA Dunne chairs the executive committee that comprises six members, namely Messrs AZ Khumalo, CFO; LC van Schalkwyk, CCO; CA Smith, EHR; DG Duma, HS; and Ms PB Beale, company secretary. Mr FR Rautenbach, manager – projects and strategy retired as a member on 30 September 2016 and Mr Duma was appointed on 29 March 2017.

Exco is responsible for the execution of the company’s strategy and the CEO and CFO report to the board on the committee’s deliberations. The members meet on a monthly basis to discuss and deal with stakeholder relationships, operational matters, recommend strategies and monitor implementation of capital programmes.

BOARD COMMITTEES

Audit and risk committee

The committee’s members are three independent directors, Ms Hickey - chairman; Mr Havenstein and Ms Kgosi. Mr Martin retired as a member and chairman on 9 November 2016 and Ms Hickey replaced him as chairman on the same date. The members are elected at each AGM in line with the Companies Act. To this end, shareholders will be required at the forthcoming AGM to approve the necessary resolutions for re-election and appointment of Ms Hickey, Mr Havenstein and Ms Kgosi as members of the audit and risk committee.

The board is satisfied that the members of the committee have the appropriate mix of qualifications and experience in order to fulfil their duties adequately. Such qualifications and skills include expertise and/or experience in the following fields: financial, legal, risk management, sustainability issues and reporting, internal financial control, external and internal audit processes, information technology (IT) governance, corporate governance, ethics and integrated reporting. Members of the committee are required to ensure they are fully appraised of the latest developments in the mining industry and in commerce generally. Important attributes of the members are an independent and enquiring mind-set, a reasonable understanding of the complexities involved and an appreciation of the business and the mining industry.

The report of the audit and risk committee may be found in the annual financial statements.

For attendance at meetings refer to the table above.

HS&E committee

The committee comprises three directors, Messrs Havenstein - chairman; Chabedi; and Dunne.

The committee is charged with ensuring the group’s performance on sustainability issues such as safety, health and the environment at the mines, especially as they affect employees and communities in the areas in which the group operates. This committee has oversight of policies, records and reporting systems pertaining to typical occupational safety and other endemic health issues associated with the mining industry.

For key features on Northam’s health and safety structures and systems, refer to Human capital.

For attendance at meetings refer to the table above.

Investment committee

This committee’s members are Messrs Havenstein – chairman; Chabedi; and Mosehla. Mr Martin retired as a member on 9 November 2016.

The committee’s key focus areas during the year were evaluating transactions and recommending approval to the board, which include the:

• Acquisition of contiguous additional resources at Zondereinde mine from Anglo American Platinum Limited for a cash consideration of R1.0 billion, announced on 11 October 2016.
• Entering into a long-term chrome marketing agreement with Glencore International AG to exclusively market and sell chrome produced at Zondereinde and Booysendal mines, announced on 24 February 2017.
• Acquisition of Eland Platinum mine from Glencore Operations South Africa Proprietary Limited for a cash consideration of R175.0 million, announced on 24 February 2017.
• Disposal of Northam’s 7.5% interest in the Pandora Joint Venture to Lonmin Plc for R45.6 million, announced on 15 May 2017.
• Subsequent to year end, the acquisition of PGM recycling equipment and associated premises from A-1 Specialized Services Inc., a recycler of PGM’s located in Pennsylvania, United States of America, for a cash consideration of USD10.7 million, announced on 28 July 2017.

The committee evaluates and advises the board on all acquisitions and investment-related opportunities. It meets as and when required. The main functions of the committee are to consider the suitability and compatibility of potential investments and their returns, weighted against the interests of shareholders.

For attendance at meetings refer to the table above.

Nomination committee

The committee comprises three non-executive directors, Mr Havenstein – chairman; Ms Kgosi; and Mr Zim. Mr Martin retired as a member on 9 November 2016. The chairman of the board is not independent and therefore the lead independent director is chairman of the committee in terms of the JSE listings requirements and King IV.

The committee’s key focus areas are to consider the composition of the board committees and in terms of the board’s succession plan, recommend director nominees to the board for approval by Northam shareholders. The committee also ensures that the interests of shareholders are properly protected in relation to the leadership and management of the company.

For attendance at meetings refer to the table above.

SE&HR committee

This committee’s members are three directors, Ms Kgosi – chairperson; Messrs Chabedi and Mosehla.

The key responsibilities of the committee are to assist the board with transformation and labour matters in terms of the Mining Charter and, as set out in the Companies Act, the monitoring of the group’s performance with social and ethics statutory requirements. The committee is also responsible for the group’s remuneration matters and the remuneration policy and implementation report may be found on page 119 of this annual integrated report.

The committee, together with the board, monitor the group’s performance against the elements of the Mining Charter on a quarterly basis. Further details may be found in the Human capital section of this annual integrated report.

For attendance at meetings refer to the table above.

Performance evaluations

The board and committees normally undertake a series of annual performance evaluations in order to monitor performance and identify areas for improvement. The board and committees conducted evaluations in 2016 but in terms of the current review on Northam’s overall corporate governance with King IV, evaluations will be done in 2018. Furthermore, King IV recommends that formal evaluations should be conducted at least every two years.

King IV independence definition and evaluation

In terms of King IV, independence generally means the exercise of objective, unfettered judgement. When used as the measure by which to judge the appearance of independence, or to categorise a non-executive member of the board or its committees as independent, it means the absence of an interest, position, association or relationship which, when judged from the perspective of a reasonable and informed third party, is likely to influence unduly or cause bias in decision-making.

In terms of the above, annual independence evaluations were conducted for the independent directors Messrs Chabedi, Havenstein, Mvusi, Smithies, Ms Hickey and Ms Kgosi. The board considered the minority beneficial interests held by Mr Chabedi and Ms Kgosi in Zambezi Platinum, which they had acquired in terms of the BEE transaction in May 2015. It also considered the tenure of those directors who have been on the board beyond nine years. The board was satisfied that there are no relationships or circumstances which affect, or appear to affect, the independence of the abovementioned directors.

Company secretary

In compliance with the JSE, the board has evaluated the performance of the company secretary and is satisfied that she is competent, suitably qualified and experienced. Furthermore, since she is not a director, nor is she related to or connected to any of the directors, this precludes a potential conflict of interest, and she maintains an arm’s length relationship with the board.

The company secretary oversees corporate governance matters within the group and new directors undergo an appropriate induction process. The company secretary seeks to ensure compliance with all statutory and listing requirements relating to the group and ensures that minutes of meetings are kept for shareholder, board and committee meetings in terms of the Companies Act.

Approval framework

The approval framework governs the delegation of authority and value limits within the group and is necessary to ensure that all transactions are approved appropriately. This enables management to limit the potential damage that any unauthorised expenditure or corruption could inflict on the group.

Donations

The company has a long-standing policy that employees may not accept gifts, hospitality or favours from suppliers or contractors of more than a nominal value. All gifts and entertainment details are recorded in a gift register for record purposes.

Ethics 24-hour whistle-blowing hotline

Northam’s ethics hotline number 0800 15 25 39 is available on the website and became effective in 2011. The hotline is monitored by an external party (KPMG), 24 hours a day in all the official languages of South Africa. Anyone (whistle-blower) can anonymously report corruption, fraudulent activity or other problems for investigation. All whistle-blowers are protected against any form of victimisation provided disclosures are made in accordance with the provisions of the Protected Disclosures Act, No 26 of 2000.

Insider trading

The company has clear rules and guidelines in place which seek to ensure that employees do not contravene the JSE’s rules on insider trading. Neither directors nor employees are allowed to deal in Northam shares or Zambezi Platinum preference shares if they are in possession of non-public information or during closed periods. These rules also extend to close relatives of directors and employees. Directors and employees are required to obtain prior approval for dealing in the company’s shares and are routinely advised of the company’s closed periods.

JSE listings requirements

As a listed entity, Northam is required to comply with the JSE’s listings requirements and certification of this is submitted to the JSE. Northam’s submissions are currently up to date.

Reporting to stakeholders

The board is aware of the requirements for the group to engage with analysts, shareholders and stakeholders alike about the group’s financial performance, operational developments and sustainability indicators.

Along with the print and electronic publication and dissemination of results on a half-yearly basis, the company regularly hosts visits, presentations, briefings and meetings with interested shareholders, institutions and other stakeholders. Feedback is a critical element of such engagement processes and is communicated through the executive committee for discussion at board level.