As corporate governance is essential to the interests of DigiCore’s stakeholders, the board of directors strives to conduct the group’s business with integrity. The directors agree with the spirit and principles of generally accepted corporate governance set out in the King Committee Report on Corporate Governance in South Africa (2002) (King II), and believe the group complies substantially with the principles of that report. The group maintains a listing on the JSE Limited which mandates certain disclosure requirements on corporate governance and complies in all material aspects to the regulations and codes of the exchange.
The board comprises six executive and four non-executive directors, which ensures a balance of power and authority.The group will appoint more non-executive directors, of the right calibre and mix of skills, at the appropriate time.
The board collectively determines the major policies and strategic direction of the group and retains full and effective control of the group. The implementation of these strategies is delegated to the executive committee, which oversees part of the day-to-day running of the group, and is monitored by the board. The board has also delegated some duties to sub-committees that report to the board regularly. Various charters have been drawn up detailing responsibilities within which the board and sub-committees operate. Non-executive directors ensure the group’s interests are served by bringing impartial views that are separate from management.
The functions of the chairperson and chief executive officer are separate, with segregated duties. The chairperson is an independent, non-executive director. He provides guidance to the board as a whole and ensures that the board is efficient, focused and operates as a unit. He acts as facilitator at board meetings to ensure a flow of opinions and lead discussions to optimal outcomes in the interests of good governance. The appraisal of the chief executive officer’s performance has been delegated to the remuneration committee.
The company secretary is empowered to properly fulfil his duties. He assists the chairperson and Chief executive officer in the administration of board proceedings and gives guidance on good governance. All directors have access to the services of the company secretary as well as access to company records and management. They may also seek professional advice with any related cost borne by the company.
The nomination of new directors is discussed between nonexecutive directors and the CEO before the candidate is put forward to the board. A résumé is circulated to the board to consider the appropriateness of the nominee and the board, as a whole, appoints the director. Newly appointed directors must resign and stand for election at the first annual general meeting following their appointment. Non-executive directors do not hold service contracts with the company.
Newly appointed directors are inducted in an orientation programme to understand the group’s operations and the business environment in which it operates.
Training on fiduciary duties and responsibilities is left up to the individual director, but any changes in legislation or regulations are brought to each director’s attention.
Directors are encouraged to become members of professional bodies to gain knowledge and interact with peers. All executive directors are members of the Institute of Directors. The group is also registered with SACOB, the South African Chamber of Business.
Directors resign every three years by rotation and are re-elected by shareholders at the annual general meeting to facilitate board continuity.
The board meets approximately eight times a year. Board packs, including an agenda, are distributed prior to the meeting and include relevant information so that directors can be prepared and make informed decisions. Directors may add additional items to the agenda.
Directors are encouraged to attend all meetings and a schedule is circulated on proposed dates at the beginning of the year. The number of meetings held, and attendance by each director since the last annual report, is detailed on the next page.
Certain duties of the board have been delegated to subcommittees to give more detailed attention to specific areas and to better channel the board’s expertise.
The committee currently comprises one executive and one non-executive director who chairs the meeting. The CEO and other executive directors attend committee meetings by invitation. The external auditors also attend by invitation.
The committee meets at least three times a year during interim and year end reporting periods to review results that will be presented to the board for approval, as well as prior to the start of the annual audit to discuss risk areas to be covered in the scope of the fieldwork. Other duties include the review of internal control functions, addressing accounting or auditing concerns identified, assessing the accuracy and reliability of accounting information and reviewing the company’s compliance with regulations.
The committee currently comprises one executive and two non-executive directors. A non-executive director chairs the meeting. The CEO is a member of the committee, but does not attend the meeting when his remuneration is discussed.
The committee advises the board on executive remuneration policies and the annual review of remuneration packages, profit share paid and issuing of share options to executive directors and senior management.
The committee comprises two executive directors and senior management from various areas in the group. The committee reviews risk management processes and analyses where potential risk areas lie. Areas of concern are reported to the board. The risk committee also ensures that procedures are practically incorporated into day-today operations.
DigiCore has adopted a formal code on managing potential conflicts to ensure directors are free of conflicts of interest between the obligations they have to the company and their private interests. Any interests in contracts with the company must be formally disclosed and documented.
It is the responsibility of the board to review the effectiveness of the group’s systems of internal control. This covers all material controls, including financial controls, operational controls, compliance with laws and regulations and risk management.
The group’s controls and systems are designed to provide reasonable, but not absolute, assurance against misstatement of financial information or loss.
Recommendations made by the group’s external auditors to improve internal controls in their report to management have been reviewed by the audit committee, and changes to internal controls made where necessary.
Internal audit reports also highlight areas of weakness and changes are made where deemed appropriate. Any major issues identified are referred to the audit committee for attention.
An internal auditor reports directly to the financial director. His function is to review the internal controls of various areas of the business, particularly where new divisions or billing structures have been put in place. The established areas of the business are reviewed periodically to ensure control systems are still working correctly.
The internal auditor has direct access to the audit committee and written reports are presented to the committee for review once the internal audit process is completed.
The board is of the opinion that the group has adequate resources to continue its business as a going concern for the year ahead. The financial statements have therefore been prepared on the going-concern basis as detailed in the directors’ report.
No director or employee with access to price-sensitive information may trade in company shares between the date of the end of a reporting period and the date of publication of the results for that period, or in periods where the company is trading under a cautionary announcement. Procedures have been implemented to prohibit such share dealings from taking place during closed periods.
The group is committed to the highest standards of honesty, organisational integrity and ethical behaviour in all its dealings. The group’s directors and employees are required to maintain the highest ethical standards which, in all reasonable circumstances, are above reproach. Conduct that violates these principles may constitute grounds for disciplinary action or even dismissal.
Staff members dealing with security matters of customers in the group are regularly required to take polygraph tests.
A whistle-blowing policy has been drawn up.
We emphasise the development and training of our people so they will be empowered to take part in our decision making processes. The Employees for Life programme has been implemented involving all employees of the group.
Employees are encouraged to study further and attend short courses or conferences to stay abreast of industry standards and best practice in their areas of involvement. The group sponsors formal education based on certain criteria.
All employees are remunerated on an equal basis with a guaranteed cash package and company benefits. Benefits paid to salaried employees include company contributions to medical aid, retirement funding and a group life scheme.
Benefits paid to wage earners are regulated by the Metal and Engineering Industries Bargaining Council. A nonguaranteed 13th cheque, payable in December, has been paid to staff over the last number of years. Profit-share performance bonuses are paid to all levels of staff based on company performance and other criteria. Key employees have ownership in the company by being allocated options in the share incentive trust.
DigiCore believes that to sustain our business performance into the future, the profile of the company’s employees at all levels should more accurately reflect the demographics of our country. The group has therefore adopted a black economic empowerment policy that contains an employment equity programme and various guidelines on the development of previously disadvantaged individuals.
Equal employment opportunities are offered to all prospective employees without discrimination. These policies are designed to attract, motivate and retain quality staff at all levels.
The health and safety of all employees, as well as the well-being of the communities in which we operate, is an important component endorsed by the group.
The group’s direct activities do not pose any threat to the environment in which it operates. The manufacturing division adheres to ISO 9001:2000 standards, which ensures that the work environment is healthy and safe.
During the past year, DigiCore was involved in several community projects and charitable causes:
Communication with investors and shareholders takes various forms, primarily via the annual and interim reports and circulars published to shareholders.
The board encourages shareholders to attend the annual general meeting, details of which are contained in this report, and shareholders’ meetings which may take place from time to time.
Regular investor road shows and meetings are held with analysts and institutional shareholders following the release of financial results. Press releases are also sent out regularly on the release of important information as well as a quarterly newsletter.
Further details on the group appear on our website, on the JSE Securities Exchange News Service and in the press from time to time.