Corporate governance

Corporate governance is the mechanisms, processes and relations by which corporations are controlled and
directed. Governance structures and principles identify the distribution of rights and responsibilities among
different participants in the corporation (such as the board of directors, managers, shareholders, creditors,
auditors, regulators, and other stakeholders) and includes the rules and procedures for making decisions in
corporate affairs. Corporate governance includes the processes through which corporations' objectives are
set and pursued in the context of the social, regulatory and market environment. Governance mechanisms
include monitoring the actions, policies, practices, and decisions of corporations, their agents, and affected
stakeholders. Corporate governance practices are affected by attempts to align the interests of stakeholders.

Corporate governance has also been more narrowly defined as "a system of law and sound approaches by
which corporations are directed and controlled focusing on the internal and external corporate structures
with the intention of monitoring the actions of management and directors and thereby, mitigating agency
risks which may stem from the misdeeds of corporate officers."

Corporate governance has also been defined as "Is the act of externally directing, controlling and evaluating
a corporation" and related to the definition of Governance as "The act of externally directing, controlling
and evaluating an entity, process or resource". In this sense, Governance and Corporate Governance are
different from management because governance must be EXTERNAL to the object being governed.
Governing agents do not have personal control over, and are not part of the object that they govern. For
example, it is not possible for a CIO to govern the IT function. They are personally accountable for the
strategy and management of the function. As such, they “manage” the IT function; they do not “govern” it.
At the same time, there may be a number of policies, authorized by the board that the CIO follows. When
the CIO is following these policies, they are performing “governance” activities because the primary
intention of the policy is to serve a governance purpose. The board is ultimately “governing” the IT function
because they stand outside of the function and are only able to externally direct, control and evaluate the IT
function by virtue of established policies, procedures and indicators. Without these policies, procedures and
indicators, the board has no way of governing, let alone affecting the IT function in any way.

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Principles

Contemporary discussions of corporate governance tend to refer to principles raised in three documents
released since 1990: The Cadbury Report (UK, 1992), the Principles of Corporate Governance (OECD,
1999, 2004 and 2015), the Sarbanes-Oxley Act of 2002 (US, 2002). The Cadbury and Organization for
Economic Co-operation and Development (OECD) reports present general principles around which
businesses are expected to operate to assure proper governance. The Sarbanes-Oxley Act, informally
referred to as Sarbox or Sox, is an attempt by the federal government in the United States to legislate
several of the principles recommended in the Cadbury and OECD reports.

 Rights and equitable treatment of shareholders: Organizations should respect the rights of
shareholders and help shareholders to exercise those rights. They can help shareholders exercise
their rights by openly and effectively communicating information and by encouraging
shareholders to participate in general meetings.
 Interests of other stakeholders: Organizations should recognize that they have legal,
contractual, social, and market driven obligations to non-shareholder stakeholders, including
employees, investors, creditors, suppliers, local communities, customers, and policy makers.
 Role and responsibilities of the board: The board needs sufficient relevant skills and
understanding to review and challenge management performance. It also needs adequate size and
appropriate levels of independence and commitment.
 Integrity and ethical behavior: Integrity should be a fundamental requirement in choosing
corporate officers and board members. Organizations should develop a code of conduct for their
directors and executives that promotes ethical and responsible decision making.
 Disclosure and transparency: Organizations should clarify and make publicly known the roles
and responsibilities of board and management to provide stakeholders with a level of
accountability. They should also implement procedures to independently verify and safeguard the
integrity of the company's financial reporting. Disclosure of material matters concerning the
organization should be timely and balanced to ensure that all investors have access to clear,
factual information.

List of countries by corporate governance

These are the top 10 countries by the rating of corporate governance.

Rank Country Companies Average Overall Rating

1 United Kingdom 395 7.60
2 Canada 132 7.36
3 Ireland 421 7.21
4 United States 1,761 7.16
5 New Zealand 100 6.70
6 Australia 194 6.65
7 Netherlands 30 6.45
8 Finland 28 6.38
9 South Africa 43 6.09
10 Sweden 40 5.88

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Responsibilities of the board of directors
Former Chairman of the Board of General Motors John G. Smale wrote in 1995: "The board is
responsible for the successful perpetuation of the corporation. That responsibility cannot be relegated to
management." A board of directors is expected to play a key role in corporate governance. The board has
responsibility for: CEO selection and succession; providing feedback to management on the
organization's strategy; compensating senior executives; monitoring financial health, performance and
risk; and ensuring accountability of the organization to its investors and authorities. Boards typically have
several committees (e.g., Compensation, Nominating and Audit) to perform their work.

The OECD Principles of Corporate Governance (2004) describe the responsibilities of the board; some of
these are summarized below:

 Board members should be informed and act ethically and in good faith, with due diligence and
care, in the best interest of the company and the shareholders.
 Review and guide corporate strategy, objective setting, major plans of action, risk policy, capital
plans, and annual budgets.
 Oversee major acquisitions and divestitures.
 Select, compensate, monitor and replace key executives and oversee succession planning.
 Align key executive and board remuneration (pay) with the longer-term interests of the company
and its shareholders.
 Ensure a formal and transparent board member nomination and election process.
 Ensure the integrity of the corporations accounting and financial reporting systems, including
their independent audit.
 Ensure appropriate systems of internal control are established.
 Oversee the process of disclosure and communications.
 Where committees of the board are established, their mandate, composition and working
procedures should be well-defined and disclosed.

Stakeholder interests
All parties to corporate governance have an interest, whether direct or indirect, in the financial
performance of the corporation. Directors, workers and management receive salaries, benefits and
reputation, while investors expect to receive financial returns. For lenders, it is specified interest
payments, while returns to equity investors arise from dividend distributions or capital gains on their
stock. Customers are concerned with the certainty of the provision of goods and services of an appropriate
quality; suppliers are concerned with compensation for their goods or services, and possible continued
trading relationships. These parties provide value to the corporation in the form of financial, physical,
human and other forms of capital. Many parties may also be concerned with corporate social
performance.

A key factor in a party's decision to participate in or engage with a corporation is their confidence that the
corporation will deliver the party's expected outcomes. When categories of parties (stakeholders) do not
have sufficient confidence that a corporation is being controlled and directed in a manner consistent with
their desired outcomes, they are less likely to engage with the corporation. When this becomes an
endemic system feature, the loss of confidence and participation in markets may affect many other
stakeholders, and increases the likelihood of political action. There is substantial interest in how external
systems and institutions, including markets, influence corporate governance.

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 Corporate Governance in South Africa
The history of South Africa includes several centuries of colonization by Dutch and English settlers,
followed by more than four decades of apartheid, all of which was characterized by continual conflict
between settlers of European descent and indigenous Africans. By 1994, when the first non-racial
democratic elections were held, South African society was consequently split along racial and economic
lines. Unsurprisingly, the corporate landscape in South Africa reflects
the centuries of colonialism and apartheid. Corporate law and corporate practice have been
adopted mainly from the UK, and control over companies’ remains largely within the hands of the
minority white population1. Applying Reed’s characteristics of the Anglo-American model
outlined above, it is apparent that South Africa’s corporate structures fit this model. Firstly, a
single-tiered board structure is standard, without any representation for stakeholders such as
employees. Secondly, South Africa has an active stock exchange (the JSE Securities Exchange)
which is rated as ‘advanced emerging’ by the FTSE (2004) Provisional Quality of Markets
Criteria (the only factor preventing it being rated ‘developed’ is the GNI per capita figure for the
country, which, it can be argued, is unrelated to the quality of the financial market). Rossouw et
al. (2002, p.291), however, draw attention to the concentrated ownership of companies on the
JSE securities exchange2 as well as the “subdued” growth in mergers and acquisitions activity.
Despite these concerns, the prevailing attitude amongst business leaders and government is that a
free market system must be upheld – in 1997 President Nelson Mandela declared that it would be
“impossible … to decide national economic policy without regard for the likely response of the
markets” and two months later that the ruling African National Congress’ (ANC) market-led
policies were the only path to sustainable development (in Marais, 2002, p.91). Thirdly, banks do
not maintain control over South African companies and maintain arms-length relationships with
clients (Rossouw et al., 2002, p.294). Lastly, in terms of industrial policy the evidence is less
clear. The government has committed itself to the privatization of state assets, and endeavors to
promote competition in some industries (such as telecommunications) by issuing additional
licenses; however there has been significant intervention in the labor market with the
Employment Equity Act of 1998, aimed at rectifying racial imbalances in the workplace by
requiring firms to adopt and implement affirmative action policies3, as well as the Broad-Based
Black Economic Empowerment Act of 2003, which is aimed at increasing ownership of South
African companies by the ‘black’4 population5. These acts represent a significant intervention and
reveal the ANC’s belief in the ability and efficiency of the market except when it comes to issues
of ‘transformation’. Nevertheless it is submitted that on the whole South Africa’s corporate
structures correspond substantially with the Anglo-American model.
Having considered the corporate environment it is necessary to examine the attempts at corporate
governance reform in South Africa, and place these within a theoretical framework. Developing
countries face a larger context when dealing with corporate governance in that they have to not
only consider the issues of corporate collapse and creative accounting that have been the driving
force behind corporate governance reforms in developed countries, but they must also consider
the effects on economic development and of economic globalization (Reed, 2002, p.223) and
balance a locally acceptable and relevant corporate governance strategy with the need to meet
international expectations. In this context, retired judge Mervyn King was appointed in 1994 to
form a commission to establish a code on corporate governance in South Africa. South Africa’s
corporate governance reforms now center around two reports - the King Report on Corporate

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Governance (King I) issued in November 1994 and the King Report on Corporate Governance
for South Africa – 2002 (King II) issued in March 2002 (Institute of Directors, 2002). The
second report was commissioned partly as a result of changes in corporate governance
worldwide, and after taking into account the political and economic uncertainty in the country
which was prevalent when the first report was issued. Due to its currency, this paper will refer
primarily to King II. King II begins with a quote by Sir Adrian Cadbury, responsible for the Cadbury reports
on corporate governance in the UK, which refers to the goal of “align[ing] as nearly as possible the interests
of individuals, corporations and society”. In line with corporate governance reports worldwide, King II
refers to the “four primary pillars of fairness, accountability, responsibility and transparency” (Introduction,
para. 23). A review of the topics covered by King II and corporate governance reports issued in the UK (the
Combined Code, the Turnbull Guidance, the Smith Guidance and the Higgs report) reveals that very similar
issues are addressed. Topics dealt with include boards of directors, directors’ remuneration, internal control
and risk management, and accounting and audit. The only area of significant difference is the section on
Integrated Sustainability Reporting in King II for which there is no counterpart in the UK reports.

The King III Report

Principles of good governance are not only regulated in terms of legislation and the common law. Important
recommendations are contained in Codes of Best Practice. The King II Report on Corporate Governance
of 2002 (hereafter referred to as 'King II') was applicable to South African enterprises until the end of
February 2010. In view of the anticipated new Companies Act 2008, it became necessary to draft a new
King Report on Corporate Governance. The King III Committee consisted of 11 subcommittees, namely:

 boards and directors

 accounting and auditing
 risk management
 internal audit
 integrated sustainability reporting
 compliance and stakeholder relationships
 business rescue
 fundamental and affected transactions
 IT governance
 alternative dispute resolutions
 Editing.

The King III Report deals with more or less the same issues as dealt with in King II. It provides general
principles regarding ethical leadership and corporate governance (chapter 1), as well as principles of good
governance relating to the board and directors (chapter 2), audit committees (chapter 3), the governance of
risk and information technology (chapter 4 and 5), compliance with laws, codes, rules and standards
(chapter 6), internal audit (chapter 7), governing stakeholder relationships (chapter 8) and integrated
reporting and disclosure (chapter 9).

The King III Report applies to all entities regardless of the manner and form of incorporation or
establishment and whether in the public, private or non-profit sectors (para 13 of the introduction and
background part in the report). Chapter 5 contains principles that were not part of King II (4).
Recommendations were also added dealing with fundamental transactions as directors need to be aware of
their duties in regard to mergers, acquisitions and amalgamations (this is dealt with in the practice notes).
King III also refers to business rescue proceedings (principle 2.15) as provided for in the new Companies
Act 2008 (5). This is, however, not dealt with in detail in King III. The King III Report operates on an

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'apply and explain' basis. This is similar to the 'comply and explain' basis that King II operated on. The
King III committee found the word 'apply' more appropriate than 'comply'. The key principles of the King
III Report are leadership, sustainability and corporate citizenship. Good governance is essentially about
effective leadership. It is stated that effective leaders are characterized by the values of responsibility,
accountability, fairness and transparency Sustainability is also very important as nature, society and
business are interrelated and directors need to understand this. Sustainability reporting is one of the core
aspects of good corporate governance, but has to be cost effective. Corporate citizenship refers to the fact
that a company is a person that has to operate in a sustainable manner. The responsibilities placed on
individuals and juristic persons in terms of the constitution are relevant in this regard. The report once again
opted for the inclusive stakeholder value approach. The board should consider the interests of all legitimate
stakeholders and not just those of the shareholders. Two approaches are referred to – namely the enlightened
shareholder value approach, where stakeholders are only considered in so far as it would benefit the
shareholders collectively, and the stakeholder inclusive approach, where the board would consider the
interest of the stakeholders on the basis that it is in the best interests of the company. In the stakeholder
inclusive model, recognized in the report, the legitimate interests of all stakeholders are considered when
determining what is in the best interest of the company. The various interests of different stakeholders are
determined on a case-by-case basis to act in the best interests of the company. A certain stakeholder may
receive preferential treatment if that serves the interests of the company best. Integrated sustainability
performance and integrated reporting is also recommended in the report to enable stakeholders to make
informed assessments on the economic value of a company. Emerging governance trends like alternative
dispute resolutions, risk-based internal auditing and policies on remuneration were also included in the
report. In short, the board should ensure that disputes are resolved effectively, efficiently and expeditiously
as possible. Internal audit should be risk-based and the auditors should provide the board with an assessment
on an annual basis regarding the systems of internal control and also to the audit committee on the
effectiveness of internal financial controls. Companies should remunerate directors and executives fairly
and responsibly.

The Companies Act 71 of 2008

When reading the Companies Act 2008, it is clear that corporate governance issues are not just regulated
in Codes of Best Practice, it is now also dealt with in legislation. Corporate social responsibility issues
enjoy more prominence in the Companies Act 2008 than in any previous company legislation in South
Africa. Section 7(d) confirms that one of the purposes of the new Act is to reaffirm the concept of the
company as a means of achieving economic and social benefits. Stakeholder protection is addressed in
section 76(3) (b). Section 72(4) furthermore provides for the establishment of a social and ethics committee.
Various other sections also deal with corporate governance issues. See, for example:

 Chapter 2, Part C dealing with general transparency and accountability requirements. Enhanced
requirements are furthermore listed in chapter 3. This is, however, only applicable to certain
companies.
 Chapter 2, Part 7 concerns general governance of companies. Directors’ duties are, for example,
partially codified in sections 75 and 76. This includes the business judgment rule.

These sections will not be discussed here, but it is important to note that some issues are no longer just dealt
with in King III, which is self-regulatory as explained above, but are now part of South African legislation.

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 Corporate Governance in Three Major Companies in
South Africa
South Africa is the southernmost country in Africa. It is the 25th-largest country in the world by land
area, and with close to 56 million people, is the world's 24th-most populous nation.

The World Bank classifies South Africa as an upper-middle-income economy, and a newly industrialized
country. Its economy is the second-largest in Africa, and the 34th-largest in the world. In terms of
purchasing power parity, South Africa has the seventh-highest per capita income in Africa. However,
poverty and inequality remain widespread, with about a quarter of the population unemployed and living
on less than US$1.25 a day. Nevertheless, South Africa has been identified as a middle power in
international affairs, and maintains significant regional influence.

List of largest companies of South Africa

Rank Name Industry Revenue Headquarters

1 Sasol Chemicals $11.8 billion Sandton

2 MTN Group Telecommunications $10.1 billion Johannesburg

3 Shoprite Holdings Food Retail $9.4 billion Brackenfell

4 Bidvest Investment Services $9.4 billion Sandton

5 Standard Bank Group Banking $8.6 billion Johannesburg

6 FirstRand Banking $8.4 billion Johannesburg

7 Naspers Broadcasting $5.9 billion Cape Town

8 Sanlam Life & Health Insurance $5.8 billion Cape Town

9 MMI Holdings Limited Life & Health Insurance $3.7 billion Centurion

10 Remgro Conglomerates $1.9 billion Stellenbosch

Here we will discuss about the corporate governance of Sasol MTN Group and Standard Bank Group.

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Corporate Governance of
Sasol is an international integrated chemicals and energy company that leverages technologies and the
expertise of our 30 300 people working in 33 countries. Sasol develop and commercialize technologies, and
build and operate world-scale facilities to produce a range of high-value product stream, including liquid
fuels, chemicals and low-carbon electricity.

Sasol’s new value chain-based operating model came into effect in 2014. Towards this end, the Sasol Group
is now organized into two upstream business units, three regional operating hubs, and four customer-facing
strategic business units, supported by fit-for-purpose functions as reflected in the new Sasol website.

By combining the talent of people and technological advantage, Sasol has been a pioneer in innovation for
over six decades. As market needs and stakeholder expectations have changed, so too have their methods,
facilities and products, driving progress to deliver long-term shareholder value sustainably. The growth and
enhancement of their foundation businesses in Southern Africa is complemented by the significant chapter
of growth, Sasol has entered in its history. Sasol recognize the growing need for countries to secure supply
of energy and chemicals. For many countries, specifically those with abundant hydrocarbons, in-country
conversion of these resources into liquid fuels and chemicals goes a long way to boost national economies.

Sasol’s focused and strong project pipeline means we are actively capitalizing on the growth opportunities
that play to the strengths in Southern Africa and North America and creating value sustainably.

Sasol was established in 1950 in South Africa and remain one of the country’s largest investors in capital
projects, skills development and technological research and development. The company is listed on the
JSE in South Africa and on the New York Stock Exchange in the United States.

GOVERNANCE FRAMEWORK of
Sasol is a values-based organization, committed to high standards of business integrity and ethics. The
Board steers and sets the direction of the Group and brings independent, informed and effective judgment
and leadership to bear on material decisions reserved for the Board, while ensuring that strategy, risk,
performance and sustainable development considerations are effectively integrated and appropriately
balanced. The Board is satisfied that it fulfilled all its duties and obligations in the 2017 financial year.
As a company listed on the Johannesburg Stock Exchange (JSE) and the New York Stock Exchange
(NYSE), Sasol is subject to, and has implemented controls to provide reasonable assurance of compliance
with all relevant requirements in respect of these listings. The Board confirms that Sasol's corporate
governance practices do not in any significant way differ from those required of domestic companies under
NYSE listing standards. We apply all the principles of the King Report on Corporate Governance for South
Africa 2016 (King IV).
The Board and its committees continue to closely monitor the implementation of Sasol’s legal compliance
policy and processes and improve upon them, to mitigate the risk of non-compliance with the laws in the
various jurisdictions in which we do business. Competition laws, anti-bribery and anti-corruption laws,
sanction laws and safety, health and environmental laws, identified as key group legal compliance risk
areas, remain our focus. We have implemented risk mitigation controls for each of these areas, aiming to

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achieve a balanced approach on compliance, by taking into consideration Sasol’s obligations as well as
Sasol’s rights.
SASOL regularly review and benchmark the Group’s governance structures and processes to ensure they
support effective and ethical leadership, good corporate citizenship and sustainable development and ensure
that they are applied in the best interests of Sasol and our stakeholders. Sasol has the necessary policies and
processes in place to ensure that all entities in the Sasol Group adhere to essential Group requirements and
minimum governance standards. As ma direct or indirect shareholder, Sasol exercises its rights and is
involved in the decision-making of its subsidiaries on material matters and is satisfied that its delegation of
authority framework contributes to role clarity and effective exercise of authority and responsibilities.

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SASOL’s directors and the composition of the Board and committees

Independent non-executive directors Executive directors

MSV Gantsho NNA Matyumza S Westwell B Nqwababa
(Chairman) IN Mkhize GMB Kennealy SR Cornell
C Beggs ZM Mkhize ME Nkeli VN Fakude
MJ Cuambe MJN Njeke P Victor
HG Dijkgraaf PJ Robertson

1. In terms of our memorandum of incorporation, the Board shall consist of a maximum of 16

directors. Up to five may be executive directors. One-third of directors must retire at every Annual
General Meeting and are eligible for re-election.
2. Lead independent director.
3. Appointed as independent non-executive director on 1 March 2017.
4. Appointed as executive director and Joint President and CEO with effect from 1 July 2016.
5. Resigned as executive director and Executive Vice President, Strategy and Sustainability with
effect from 31 December 2016.
6. Appointed as executive director and CFO with effect from 1 July 2016.
7. The Joint Presidents and Chief Executive Officers are not members of these committees but attend
meetings by invitation. They are requested to leave the meeting, where appropriate, before any
decisions are made that relate to them personally.
8. Appointed as a member with effect from 1 July 2017.
9. Appointed as a member with effect from 9 September 2016.

Target 2017 2016

30% 26.7% 21.4%

The Board determined a target of 30% representation of women on the Board by 30 June 2019.

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Development
The development of industry and group knowledge is a continuous process and Sasol briefs directors on
legal developments and changes in the risk and general business environment on an on-going basis. Sasol
apprise newly appointed directors of Sasol’s business and their duties and responsibilities as directors and
give them the opportunity to visit Sasol’s plants and operations. The Board, its committees as well as any
director are entitled to seek independent professional advice concerning the company’s affairs and to gain
access to any information they may require in discharging their duties as directors.

Performance
The evaluation of the effectiveness and performance of the Board, its committees, individual directors and
the Chairman was externally assessed this financial year. It is satisfactory that the evaluation process is
improving the Board’s performance and effectiveness.
• Reliable and effective reporting remains the greatest enabler to empower the Board to execute its
responsibilities and focus on appropriate matters.
• With a few exceptions indicated below, the Board is working well; the structure, mandate and decision
roles are appropriate for the size/complexity of Sasol and the Chairman’s performance is satisfactory.
• The Board will focus on allocating more time to top talent discussions and restructuring Board
committees – the social and ethics aspect of the Nomination, Governance, Social and Ethics
Committee has been carved out as a separate committee going forward. The Risk and SHE Committee has
been disbanded, with the Board assuming direct responsibility for the governance of risk, supported by all
the Board Committees, responsible for ensuring the effective monitoring of risks within the ambit of the
Committees’ scope.

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Corporate Governance of
MTN Group
MTN Group Limited, formerly M-Cell, is a South Africa-based multinational mobile telecommunications
company, operating in many African, European and Asian countries. Its head office is in Johannesburg. As
of 30 June 2016, MTN recorded 232.6 million subscribers across its operations. Although MTN operates
in over 20 countries, one-third of its revenues come from Nigeria, where it holds about 35% market share.

The company sponsored the CAF Champions League football competition as well as APOEL FC, winners
of the Cypriot First Division in 2009, 2011, 2013, 2014 and participants in the 2009–10 and 2011–12 UEFA
Champions League. Beginning in 2017, they are the primary sponsors of the South Africa national rugby
union team. On 18 March 2010, it was announced that MTN signed a sponsorship deal with English football
club Manchester United F.C. In March 2016, MTN Group, LTD appointed Rob Shuter as Chief Executive
Officer.

On 22 October 2015, MTN emerged as the Most Admired and the Most Valuable African brand, valued at
US$4,672m, its second award in two years. Brand Africa announced at the 4th Annual Brand Africa 100:
Africa's Best Brands gala event in Johannesburg, that MTN is the overall best brand on the continent and
reclaims the No. 1 spot as the Most Admired Brand in Africa.

MTN has won a number of brand awards in recent years. These include being named the only African brand
in the 2014 BrandZ Top 100 Most Valuable Global Brand ranking, the only South African company on the
World Champions list and the Most Admired and Most Valuable Brand in Africa, in the 2014 Brand Africa
100 ranking of the most admired and most valuable brands in Sub-Saharan Africa.

Corporate Governance
MTN is committed to good corporate governance, which is the overarching framework of its operations. In
2016 it continued to work to ensure that their policies and practices promoted good governance and ethics
in all areas of their business. This assists in ensuring that they deliver on their strategy and address their
material issues.

Commitment to ethical and effective governance

The board remains committed to good governance and international best practice standards. It is committed
to ensuring an unequivocal tone from the top that requires a commitment by all directors and employees to
the values of integrity, transparency and uninterrupted oversight over the company. This is to ensure that
MTN monitors and addresses all governance issues within its operating units.
In 2017, the company focused on reviewing its application and adherence to the 17 King IV principles. In
2018, there will be a continued focus on addressing any gaps identified in terms of King IV. The board is
satisfied, however, that MTN has substantially applied the King IV principles.

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Governance structure

Role of the board

The board is responsible for the adoption of strategic plans, the monitoring of operational performance and
management, and the development of appropriate and effective risk management policies and processes. It
fulfilled all these responsibilities in the year.

Diversity and composition of the board

MTN acknowledges that diversity gives the board the benefit of different perspectives and ideas. MTN
have a unitary board, consisting of an appropriate mix of knowledge and skills. The board has executive
and non-executive directors (including independent non-executive directors) who represent a broad
spectrum of demographic attributes and characteristics. In the year, MTN adopted a diversity component
which is included in the directors’ appointment policy. The revised policy takes into consideration various
categories of diversity as shown in the graphics that follow. The diverse perspectives of directors allow for
proper strategic oversight as well as robust deliberation during board meetings.

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Since race and gender are important attributes that contribute to a balanced composition of the board, the
board recognizes the need to improve the representation of women on the board and ensuring that an
appropriate mix of races is represented on the board.

Board committees
The board has delegated its authority to various board committees with the mandate to deal with governance
issues and report to the board on their activities on a quarterly basis. Each committee operates under terms
of reference which set out roles and responsibilities, composition and scope of authority. These are reviewed
on an annual basis.
The board is satisfied that in 2017 the committees effectively discharged their responsibilities, in
accordance with their respective terms of reference.

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Risk management, compliance and corporate governance committee
Key activities in 2017
 Reviewed MTN’s risk management structures, policies and methodologies
 Focused attention on cyber security risks and vulnerabilities and assessed the potential impact of
cybercrime on the organization and MTN’s readiness to manage such eventualities
 Introduced new risk appetite and tolerance methodology
 Monitored among others, the corporate governance framework, including regulatory and listings
requirements and business practices, with the objective of strengthening risk management
processes
 Continued to evaluate and monitor MTN’s business continuity approach and processes across the
group as well as the group’s insurance program
 Ensured that all opcos have compliance processes in place to keep abreast of local standards and
procedures pursuant to any changes in laws applicable to MTN’s markets
 Ensured appropriate risk management practices are in place to support the group’s growth agenda.
 Assessed the risks of key strategic projects.

Key focus areas for 2018

 Embed risk appetite and tolerance methodology
 Continue to benchmark our risks and exposure to both industry-specific risks and those emanating
from the socio-political and economic environment
 Continue to review and align MTN’s top risks to industry guidance, as well as those impacting our
strategy and functions, while remaining sensitive to the dynamics of MTN markets
 Identify some of the best demonstrated operational risk management processes in particular
markets and embed these across the group
 Continue to focus on addressing any gaps identified in MTN’s application of King IV
 Oversee the implementation of a revised risk and compliance operating model.

Social and ethics committee

Key activities in 2017
 Oversaw the implementation of the ethics management program, including the revision of key
ethics structures and policies and a new supplier code of conduct as well as carrying out ethics
training
 Considered a revised stakeholder, issues and reputation management approach
 Took responsibility for the sustainability framework and sustainability reporting
 Identified two significant sustainability projects, including a solar energy flagship project, to
implement
in 2018
 Reviewed the activities of the MTN foundations and other CSI initiatives as we prepare to introduce
a
more integrated approach
 Oversaw progress by South African businesses under the amended BEE ICT sector code, which
has significantly higher recognition levels

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Key focus areas for 2018
 Continue to evolve MTN’s CSI approach in pursuit of shared value by making better use of MTN’s
institutional capabilities, and ensure that this work is integrated into initiatives to deliver on
BRIGHT
 Oversee MTN’s work to bring households solar energy boxes with connectivity functionality
 Oversee the implementation of a more structured and inclusive approach to stakeholder
management, which is in line with the principles of King IV and monitors the health of our
relationships
 Oversee MTN South Africa’s efforts to develop an enterprise and supplier development policy to
transform the supply chain by introducing 51% black-owned entities, 30% black-women-owned
entities as well as exempt micro enterprises and qualifying small enterprises
 Ensure the primacy of ethics at MTN: business must be done in an ethical, safe and responsible
way.

CORPORATE GOVERNANCE OF STANDARD

BANK
Corporate governance is integrated across the group’s operations. Through the group’s governance
framework, the board fulfils an oversight role and deliberates with executive management over strategic
direction, financial goals, resource allocation and risk appetite. Management applies the tone set by the
board and the governance philosophy, based on the group’s values, as a set of principles and structures
that enable the group to create shared value for all our stakeholders.
Standard Bank’s approach to corporate governance extends beyond compliance. They see governance as
an enabler that creates competitive advantage through enhanced accountability, effective risk management,
clear performance management, greater transparency and effective leadership.
In line with this ambition, the King Report on Corporate Governance (King Code) has formed the
cornerstone of the approach to governance of Standard Bank. Standard Bank supports the overarching goals
of King IV, being the creation of:

GOVERNANCE FRAMEWORK
The group operates within a clearly defined board-approved governance framework, which outlines
mechanisms for the group to implement robust governance practices and provides clear direction for
decision-making across all disciplines. Through this framework, the board has delegated the day-to-day
management of the group, to the group chief executive without abdicating the board’s responsibility.

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The delegation of authority framework is reviewed annually in consultation with the group finance function
to ensure that financial limits remain appropriate, taking into account the size of the group and its specific
operational context.
The group secretary monitors the effective implementation of the authority delegated to the group chief
executive and has confirmed that in the year under review, the group chief executive acted within the
authority delegated to him by the board. The board is satisfied that the delegation of authority framework
contributes to role clarity and the effective exercise of authority.
The group chief executive engages the board on all critical decisions of the group. These engagements take
place with mutual respect and candor. All board decisions are consistently based on ethical foundations.

BOARD OF DIRECTORS
The board serves as the focal point for and custodian of the group’s corporate governance. It is responsible
for providing ethical and effective leadership to the group. It agrees the strategic direction and approves the
policy frameworks used to measure organizational performance. This is achieved through transparent
reporting on the part of management and active board oversight. The group chief executive and the
executive team deliver against agreed performance targets aligned to the group strategy and in the best
interests of the group and its material stakeholders.
The board mandate details the board’s role and responsibilities. It reflects the principles incorporated in the
Companies Act, Banks Act, the company’s memorandum of incorporation (MOI), King IV, Basel
Corporate Governance for Banks, JSE Listings Requirements, and any applicable law or binding regulatory
provisions. The mandate, which also specifies matters reserved for board decision, is reviewed at least
annually together with an assessment of the board performance against its said provisions. Board members
are bound by the code of ethics and fiduciary duties owed to the company. Directors have the necessary
competence and ethical character to discharge their duties, to provide strategic direction and control the
group, as set out in the board mandate and the MOI.

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The board monitors and holds the relevant executive accountable for the group’s operational and financial
performance. Management is open and transparent with the board and escalates concerns to its attention in
the appropriate forums and in a timeous manner. The role of chairman is separate from that of the group
chief executive. There is a clear division of responsibilities. In addition to strengthening the independence
of the board, and in line with governance best practice, Peter Sullivan was appointed as the group’s lead
independent director during the year.

CULTURE, ETHICS AND VALUES

The chairman and the board set the ethical tone for the group. The group chief executive and the chief ethics
officer are responsible for entrenching the group’s values and code of ethics across the group. The board,
through the relevant board committees, requests and considers compliance reports by executive
management, internal auditors and external auditors on measures implemented to ensure compliance with
regulatory and other legislative requirements. At an absolute minimum, we adhere to and comply with all
the legal obligations of the jurisdictions in which we operate. Our subsidiary governance framework and
the relevant group policies establish a common standard of corporate governance and conduct across the
group.

DIVERSITY
The board adopted a gender diversity policy in 2016 and set a target of 33% female representation on the
board by 2020. The board has four women non-executive directors, making up 22% of the board. The board
continues to evaluate its implementation of its diversity policy and in line with the amended JSE Listings
Requirements and King Code, it will approve the race diversity policy for its composition. Efforts are
underway to ensure that the board achieves its set targets by 2020.

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BOARD REVIEW
The effectiveness of the board and its committees is assessed regularly. Externally facilitated board and
board committee evaluations are performed every two years and internal self-evaluations performed every
alternate year. The 2017 board effectiveness review was facilitated internally by the group secretary and
the chairman conducted individual director performance assessments. The board’s effectiveness was
assessed against the following areas:

•Group strategy and execution.

•Board composition.
•Ethics management and conduct.
•Executive management and succession.
•Risk, IT, data and compliance.
•Assurance functions.
•Transformation.
•Oversight over subsidiaries.
•Stakeholder engagement.
•Effectiveness of board committees.

The review concluded that the performance of the board and its committees, evaluated against these areas,
is considered effective. The board is satisfied that the evaluation process is improving its performance and
effectiveness.

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Comparisons of Corporate Governance between the Companies:

South Africa’s system of corporate governance is derived from the British common law model and strongly
influenced by developments in the global areas like Europe and western areas. While corporate governance
practices in the United Kingdom and the United States are similar in many respects, where there are
differences South African practice usually falls somewhere in between. There are some similarities and
differences of corporate governance practice between the three chosen companies of South Africa. Those
are described below-

i) Similarities:
a) All of the companies follow a group of similar system belong to Europe, United Kingdom
and Australia. These systems are called the principle-based approach.
b) The companies are only required to disclose information to the extent to suggested best
practices.
c) All of them follows the rules and regulations of corporate governance of South Africa.
d) Their board of director’s mainly manage the same tasks like-, succession planning, capital
structure and finance matters, risk management activities, compliance matters, internal
control over financial reporting, disclosure controls and procedures, and information
systems.
e) Sasol, Standard Bank and MTN are committed to making all required disclosures of
material information on a timely and broadly.
f) All three companies follow the King code properly.

ii) Dissimilarities:
a) Sasol, Standard Bank and MTN have different number of board members.
b) Each of the organization hold its meetings in different times.
c) Their succession plan differs from one another.
d) The criteria’s of choosing different committee members differ from each other’s in
these three companies.
e) Though Sasol and Standard Bank follow the King IV MTN is still implementing the
guidelines from King III.

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Conclusion:
Corporate governance is regulated in South Africa. Most of the companies that had corporate governance
failures did subscribe to principles of good corporate governance and had certain measures in place. This
raises the question: does the drafting of codes of good governance really make companies healthier and
more sustainable, and will they reduce the likelihood of corporate collapses? This question is linked to the
concept of 'box-ticking', referring to the practice of ticking off certain areas/boxes to indicate that there
was compliance with specific aspects. To merely tick boxes is clearly not ideal as there must be compliance
with the rule and not just with the form.

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