Corporate governance

The Grindrod group has maintained and enhanced its good corporate governance standards and continues to review current and emerging trends both locally and internationally.

The board subscribes to the principles and code of conduct incorporated in the King II Report and JSE Limited (JSE) Listings Requirements. The provisions of new corporate legislation and the introduction of King III are being closely monitored.

Grindrod is pleased to have maintained its “good” rating in the 2008 Ernst & Young survey of annual reports of the Top 100 Listed Companies and for re-qualifying on the SRI (Social Responsibility Investment) index of the JSE.

BOARD OF DIRECTORS

The Grindrod board comprises 13 directors, seven of whom serve as executive directors. The non-executive directors have a diversity of skills and commercial experience. Five of the six non-executive directors are independent. View details of the non-executive and the executive directors.

The board meets at least four times a year and additional meetings are held whenever it is considered necessary. The responsibilities of the board are set out in the charter and the board is required to annually review its operations against the charter framework. The charter is available on our website. In assuming ultimate responsibility for effective control and leadership of the group the board:

•	ensures that the group complies with all relevant laws, regulations and codes of business practice;
•	defines levels of materiality, reserving specific powers to itself and delegating other matters to executive management in terms of a limits of authority framework;
•	gives direction to all strategic matters and approves the group business plan developed by management;
•	monitors implementation of the business plan by management;
•	reviews performance of the various board committees established to assist in the discharge of its duties;
•	monitors the key risk and performance areas of the group and identifies the non-financial issues relevant to the group;
•	determines the policy and models applied to ensure the integrity of:
	–	risk management and internal controls;
	–	director selection, orientation and evaluation;
	–	executive and general remuneration; and
	–	external and internal communications;
	and
•	ensures that there is appropriate succession planning at senior management level.

The quorum for board meetings is eight directors.

The role and function of chairman and chief executive officer are separate in the Grindrod group. The chairman, I A J Clark is a non-executive director, but is not considered independent due to his recent role as chief executive officer.

The Grindrod executive committee is responsible for the operational and strategic management of the group. This team is led by the chief executive officer.

The board is supplied with all relevant information and has unrestricted access to all group information, records, documents and property, which enables the directors to adequately discharge their responsibilities. Information needs are well defined and non-executive directors have full access to management and the company secretary.

An induction programme is in place for new directors, which includes an induction book, consultation with each divisional executive and site visits. The cost of attending appropriate external training courses is paid by the company.

At each annual general meeting at least one third of the directors retire by rotation from the board. Directors retiring in this manner may offer themselves for reelection. By convention executive directors retire from the board at 60 or 63 years of age depending on their contracts, whilst non-executive directors retire at the annual general meeting following their 70th birthday. These may, however, be extended at the discretion of the board and in the current year has been done in respect of R A Norton.

The boards of directors of major local and offshore operating subsidiaries comprise executive directors and senior management. The boards of major offshore operating subsidiaries and of Grindrod Bank also include independent non-executive directors.

BOARD ATTENDANCE

The main board met four times during the year and attendance was as follows:

	20 Feb 2008	21 May 2008	20 Aug 2008	19 Nov 2008
H Adams
I A J Clark
W D Geach (Appointed 28 July 2008)
S M Gounden (Resigned 21 May 2008)
I M Groves
J G Jones
T J T McClure
R A Norton
A K Olivier
D A Polkinghorne
D A Rennie
N T Y Siwendu (Appointed 21 May 2008)
A F Stewart
L R Stuart-Hill

DIRECTORS’ AND OFFICERS’ SHARE DEALINGS

Directors and officers are not permitted to deal directly or indirectly in the shares of the company:

•	during the period from the end of the interim and annual reporting periods, to the announcement of the interim and annual results, or
•	during any period when they are aware of any negotiations or details which may affect the share price, or
•	during the time declared as a prohibited period in terms of the JSE Listings Requirements.

The company secretary communicates on a regular basis with the board on the status of dealing in the company’s shares.

In line with best practice and the JSE Listings Requirements, no group director or employee who has price sensitive inside information on the group may deal directly or indirectly in Grindrod securities.

Directors are required to notify the company secretary in writing immediately following any transaction involving the company’s shares. The trades are timeously disclosed to the JSE and they are tabled at the following board meeting.

BOARD COMMITTEES

The board has an audit committee and a remuneration/nomination committee. Members and the chairmen of these committees are appointed by the board. The board has no separate risk committee, as this function is dealt with by the board as a whole.

For the purposes of good governance and in compliance with South African Reserve Bank requirements, Grindrod Bank has its own board committees which include:

•	Audit and Compliance;
•	Remuneration;
•	Directors Affairs;
•	Risk and Capital Management;
•	Credit Risk; and
•	Asset and Liability.

Audit committee

The group audit committee performs the important function of reviewing internal controls, risk procedures and financial results. I M Groves, an independent non-executive of the group, serves as chairman of the committee. The audit committee fulfils its responsibility in line with specific terms of reference and is accountable to the board, which receives minutes of its meetings and a report on the proceedings. The internal and external auditors have full access to the committee.

The committee meets with management and the internal and external auditors at least three times a year to review the effectiveness of the management information systems and other systems of internal control, including the internal audit function, the scope of the internal and external audits and to assess the auditors’ findings. The committee reviews the accounting policies of the group, the interim and annual financial statements and results announcements made.

The committee also establishes the principles by which the external auditors are used for non-audit services.

An internal audit charter is in place which defines the function, responsibility and authority of the group’s internal audit activity.

The audit committee met three times during the year and attendance was as follows:

	18 Feb 2008	14 May 2008	19 Aug 2008
I M Groves (Chairman)
R A Norton

In line with the requirements of the Corporate Laws Amendment Act that came into effect at the end of 2007, the composition of the audit committee now comprises only of independent non-executive directors. The same committee has been appointed for 2009.

The chairman of the group, I A J Clark attends the meetings in an observer capacity only.

Remuneration/nomination committee

The board has a remuneration/nomination committee to assist in governance matters related to executive remuneration, succession planning and identification of suitable candidates to serve on the board. The chairman, R A Norton and members, who are all non-executive directors, are appointed by the board. The chief executive officer is not a member of the committee but attends meetings to provide feedback on individual performances and other relevant information.

The committee has formal terms of reference approved by the board and is responsible for the assessment and approval of a broad remuneration strategy for the group. In particular, it reviews and determines the remuneration packages of the Grindrod executive directors, the fees for the non-executive directors and recommends the granting of cash based notional share options to executive directors and senior employees. These details, together with an overview of remuneration/incentive philosophies, is set out in the remuneration report.

The committee is also responsible for making recommendations to the board on new director appointments and the composition of the board, taking skills/experience and demographics into account and for the evaluation of the performance of directors retiring by rotation.

The remuneration/nomination committee met three times during the year and attendance was as follows:

	19 Feb 2008	21 May 2008	20 Aug 2008
R A Norton (Chairman)
I A J Clark
I M Groves
S M Gounden*

* Resigned 21 May 2008

RISK MANAGEMENT

The board has not appointed a separate risk committee. The full board is responsible for risk management and for implementing an effective process to identify risk, measure its potential impact and activate whatever is necessary to proactively manage such risks. Besides the quarterly assessments of risk at board meetings, a separate annual meeting of the board is held which focuses on the review of the group risk management process and approves the group risk management plan for the following year.

INVESTOR RELATIONS AND SHAREHOLDER COMMUNICATION

The group communicates its strategy, performance and vision through regular presentations to investors, analysts, employees and other stakeholders. In addition, management regularly meet with investors on a one to one basis. The group website (www.grindrod.co.za) is also used for this purpose.

The 2008 presentation for the half year results was done live on Summit TV on 21 August 2008 and the 2008 final results were presented to the investment community in Johannesburg, Durban and Cape Town during February 2009.

Executive management regularly interact with major institutional shareholders. During the year an analyst tour of the group’s Mozambican operations at Maputo was undertaken.

CORPORATE SPONSOR

During the year Grindrod Bank sold its interest in Exchange Sponsors (Pty) Limited and the Bank assumed the direct role of sponsor to Grindrod Limited. In the case of major corporate actions the services of an independent sponsor group will be engaged.

COMPANY SECRETARY

The board considers the company secretary to be qualified to perform his duties in accordance with applicable legislation and to be fit and proper for the position. All directors have access to the advice and services of the company secretary who ensures compliance with applicable procedures and legislation. The removal of the company secretary is a matter for the board as a whole.

GOING CONCERN

The directors are responsible for overseeing the preparation and the final approval of the group interim and annual financial statements. The auditors are responsible for auditing the financial statements and giving their opinion thereon. The directors believe that suitable accounting policies, consistently applied and supported by reasonable and prudent judgements and estimates, have been used in the preparation of the financial statements, which fairly present the state of the group. Appropriate accounting standards have been applied and adequate accounting records maintained. The going concern basis was adopted in preparing the annual financial statements. The directors have no reason to believe that the group will not continue to be a going concern in the near future.

INTERNAL CONTROLS

The board is responsible for the group’s internal financial and operational control systems. The internal control systems are designed to provide reasonable assurance against material misstatement and loss.

The principal features of the group’s internal financial controls are covered in the financial director’s report.

INTERNAL AUDIT

The purpose, authority and responsibilities of the independent internal audit activity are defined by the Internal Audit Charter.

The primary objective of internal audit is to assist management and the board in the effective discharge of their responsibilities by providing assurance in regard to the effectiveness and adequacy of the controls in place to manage the risks facing the organisation within the overall corporate governance framework.

Internal audit coverage plans are prepared annually together with management and approved by the audit committee. The methodology and risk based approach used ensures that all businesses within the group receive adequate coverage and includes:

•	general coverage, consisting of the follow up of previous internal audit reports and management letters issued by the external auditors, the completion of taxation, fraud and internal control questionnaires designed to identify auditable risks and an assessment of compliance with the Group Standards policy document;
•	extensive coverage, based on a three-year cycle, approved by the audit committee, whereby all businesses are included at least once during a cycle. This incorporates, where applicable, non-current and leased assets, expenditure, disbursements and accounts payable, revenue and accounts receivable, owned and client inventory, human resources and payroll and any other specific and auditable risks identified;
•	taxation compliance reviews;
•	capital project reviews, where applicable, including the tendering process, expenditure, project management, financial reporting and compliance with group approval framework; and
•	IT governance and post implementation reviews, where there has been a change or revision of systems.

External service providers are used for certain specialist reviews, e.g. taxation, IT and capital projects.

The group’s internal audit and risk management processes are focused on the risks identified by management and provide a structured, consistent and co-ordinated approach to ensure that the many benefits of Enterprise Risk Management are achieved.

ETHICS

The group is committed to providing excellent services to customers and believes that a high standard of ethical behaviour is paramount to achieving this objective. The group’s Code of Ethics is endorsed by the Ethics Institute of South Africa, of which the company is an organisational member. The code is designed to raise ethical awareness, act as a guide in day-to-day decisions and to help assure customers and other stakeholders of the integrity of the group companies with which they deal.

An important element of the induction process is to communicate to new employees the group’s values, standards and compliance procedures. The group’s core values include respect for company assets and the environment, operating with integrity, acting with professionalism in our service delivery to our customers, being fair in the way we treat people and accountability, which requires people to take full ownership of actions taken.

A whistleblower facility has been introduced effective 1 April 2009.