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Integrated annual report 2011 to the shareholders of Phuthuma Nathi Investments Limited

MultiChoice South Africa Holdings (Proprietary) Limited
Governance

 



Introduction

The board of directors conducts the group’s business with integrity by applying appropriate corporate governance policies and practices in the group.

MultiChoice is a major subsidiary of Naspers Limited, a company listed on the JSE and the London Stock Exchange. It therefore aims to comply, where appropriate, with guidelines in the King Report on Corporate Governance for South Africa 2009 (King III). The implications of the new Companies Act, No 71 of 2008, in South Africa (signed into law on 8 April 2008 and effective 1 May 2011), are being analysed.

MultiChoice has an independent board of directors, which has established its own governance practices and subcommittees that comply in the main with the applicable governance and regulatory requirements. The board’s audit, risk and remuneration and equity committees fulfil key roles in ensuring good corporate governance in the group. The group uses independent external advisors to monitor regulatory developments, locally and internationally, to enable management to make recommendations to the board on matters of corporate governance.

Application of and approach to King III

The board and its subcommittees made good progress in embedding the appropriate principles and practices of King III. The board approved revised board and subcommittee charters. The responsibilities of the audit and risk committees were separated and a new risk committee formed.

The composition of subcommittees was reviewed and, where required, amended.

The formalisation of our risk management processes was a major focus. Details of the enterprise-wide risk management framework appear here.

In accordance with the overriding principle in King III of apply or explain, the board, to the best of its knowledge, believes the group has applied or is embedding processes in support of the relevant principles of King III.

King III provides that directors should have a working understanding of the effect of applicable laws, rules, codes and standards on the company and its business.

The company does not interpret these provisions to mean that the board should have legal expertise in all spheres in which the company operates or be familiar with all laws applicable to the company and its various businesses. However, the board does ensure adequate structures and systems are in place and populated with people of sufficient competence for compliance with the relevant laws. The board further manages corporate governance via its audit and risk committees, which monitor the proper operation of such structures and systems and report to the board.

Status: New Companies Act

The impact of the new South African Companies Act No 71 of 2008 (signed into law on 8 April 2008, and effective 1 May 2011) was a focus over the past year. To achieve compliance with the new act, shareholders will be asked to appoint the members of the audit committee and consider special resolutions on the provision of loans and other financial assistance. A new memorandum of incorporation is being drafted and will be brought to shareholders for consideration and approval at the appropriate time. The new act provides transitional arrangements in terms of which MultiChoice has until 1 May 2013 to adopt a new memorandum of incorporation.

Business ethics statement

MultiChoice is formalising its compliance and ethics management process. The code of ethics and business conduct was revised during the year. A copy of the code is available on www.multichoice.co.za.

This code applies to all directors and employees in the group. Ensuring group companies adopt appropriate processes and establish supporting policies and procedures is an ongoing process. Management focuses on policies and procedures that address key ethical risks, such as conflicts of interest, accepting inappropriate gifts and acceptable business conduct.

The remuneration and equity committee acts as the overall custodian of business ethics. The disciplinary codes and procedures of the various companies are used to ensure compliance with policies and practices that underpin the overall code of ethics and business conduct. Unethical behaviour in business by senior staff members is reported to this committee as well as the manner in which the company’s disciplinary code was applied in such instances.

MultiChoice is committed to conducting its business on the basis of complying with the law, with integrity and with proper regard for ethical business practices. It expects all directors and employees to comply with these principles and, in particular, to avoid conflicts of interest, illegal anticompetitive activities, bribery and corruption.

Whistle-blowing facilities are in place enabling employees to anonymously report unethical business conduct in the workplace.

Compliance framework

MultiChoice has established a legal compliance programme formalising practices that have been followed for some time. The programme involves preparing and maintaining inventories of material laws and regulations applicable to each business unit, implementing policies and procedures based on these laws and regulations, establishing processes to control and supervise compliance and mitigate risks, monitoring compliance, implementing effective training and awareness programmes and reporting to the board and management on the effectiveness of compliance efforts.

The compliance programme is under the control of legal counsel, Khululiwe Ntshangase, acting in this instance as compliance officer together with a compliance committee. The compliance committee reports on its compliance efforts to the compliance officer who, in turn, reports to the risk committee.

Litigation in the various business units is reported to the compliance officer who, in turn, reports regularly on material litigation matters to the board and risk and audit committees.

The board

Composition

Details of directors at 31 March 2011 are set out here

MultiChoice has a unitary board, which fulfils oversight and controlling functions. The board has a charter evidencing a clear division of responsibilities. The majority of board members are nonexecutive directors and independent of management, to ensure that no one individual has unfettered powers of decisionmaking and authority. The roles of chair and chief executive are separate.

During the year Mr Nolo Letele was appointed as executive chairman and Mr Imtiaz Patel was appointed as chief executive, and as a member of the board. Mr Khulu Sibiya, an independent non-executive director, fulfils the role of lead director in all matters not dealt with by the executive chair, including managing conflicts of interests.

At 31 March 2011 the board comprised five independent non-executive directors, four non-executive directors and two executive directors. Six directors (55%) are from previously disadvantaged groups and two directors (18%) are female.