Integrated Annual Report 2014

The style. The passion
menu

Underpinning the Group's mission to be a sustainable, ascendant organisation are our key disciplines which centre on best practice benchmarks and controls across the business and our belief in fairness, integrity and transparency in all business dealings.

Corporate governance

Board of directors

A formal Board charter, as recommended by King III, has been adopted. The charter includes a code of ethics to which all directors subscribe. Procedures exist in terms of which unethical business practices can be brought to the attention of the Board by directors.

Composition of the Board

The Board comprises four executive directors, a non-executive chairman and six non-executive directors of which four are independent.

The directors are iniduals of a high calibre with erse backgrounds and expertise, facilitating independent judgement and broad deliberations in the decision-making process.

Classification of directors

The basis on which directors have been classified in terms of their independence in this report is as follows:

  • Executive directors are employed in a full-time capacity by Italtile;
  • Non-executive directors are those who have been nominated by a shareholder owning more than 20% of the Group, or who were in the employ of the Group in the preceding financial year; and
  • ndependent non-executive directors are all other directors irrespective of the period during which they have been members of the Board.

No director has an automatic right to a position on the Board. All directors are required to be elected by the shareholders at an annual general meeting on a rotational basis.

Board responsibilities

The Board is responsible to shareholders for the conduct of the business of the Italtile Group, which includes providing Italtile with clear strategic direction. The schedule of matters reviewed by the Board includes:

  • Approval of the Group's strategy and annual budget;
  • Overseeing Group operational performance and management;
  • Ensuring that there is adequate succession planning at senior levels;
  • Overseeing director selection, orientation and evaluation;
  • Approval of major capital expenditure or disposals, material contracts, material acquisitions and developments;
  • Reviewing the terms of reference of Board Committees;
  • Determining policies and processes which seek to ensure the integrity of the Group's risk management and internal controls;
  • Maintaining and monitoring the Group's systems of internal control and risk management;
  • Communication with shareholders, including approval of all circulars, prospectuses and major public announcements;
  • Approval of the interim statement and Integrated Annual Report and accounts (including the review of critical accounting policies and accounting judgements and an assessment of the Company's position and prospects); and
  • Approval of dividends.

The Board retains full and effective control over the business of Italtile. The Board has defined levels of materiality through a written delegation of authority, which sets out decisions the Board wishes to reserve for itself. The delegation is regularly reviewed and monitored.

Division of responsibility

The Company conducts an annual evaluation of its Board, Board Committees and inidual directors, and is confident that there is an appropriate balance of power and authority on the Board.

The division of responsibilities maintains a balance of power and authority on the Board.

Term of office

The four executive directors have a fixed term of employment. In accordance with the Company's Memorandum of Incorporation, all non-executive directors are subject to retirement by rotation and re-election by shareholders at least every three years. If requested to serve a further term, those retiring directors may offer themselves for re-election by shareholders. Any director appointed during the year must retire at the annual general meeting held immediately after his or her appointment.

Board meetings

The Board meets at least every quarter or more frequently if circumstances require.

At the meetings, the Board considers both financial and non-financial qualitative information that might have an impact on the Group's stakeholders.

Prior to every Board meeting, each director receives an information pack which provides background information on the performance of the Group for the year to date and any other matters for discussion at the meeting.

Board members have full and unrestricted access to relevant information, management, and the Company Secretary, and may, at the cost of the Group, seek independent professional advice in the fulfilment of their duties.

Details of attendance at Board meetings are set out below:

Board member     Attendance at  
meetings  
in 2014  
G A M Ravazzotti     4/4  
N Booth     n/a  
J N Potgieter#*     n/a  
P D Swatton     4/4  
P Langenhoven#     2/4  
S M du Toit     4/4  
S I Gama     4/4  
A Zannoni     4/4  
S G Pretorius     4/4  
N Medupe▫     n/a  
B G Wood#     4/4  

# Executive
° Appointed 1 July 2014
* Appointed 1 August 2014
 Appointed 20 August 2014

Board appointment policy

The Board evaluates its composition each year to ensure an appropriate mix of skills, experience, professional and industry knowledge to meet the Company's strategic objectives. Demographic representation is also a consideration. New directors are subject to a ‘fit and proper' test. An induction programme is available to incoming directors, providing guidance on their responsibilities. The appointment of the directors is approved at the annual general meeting of shareholders.

None of the non-executive directors have entered into service contracts or standard letters of appointment with Italtile.

Lead independent director

Whilst the Board is led by a non-executive Chairman, S M du Toit continues to serve as lead independent non-executive director to the Company's Board.

Board committees

The Board has established four committees to which it has delegated specific responsibilities in meeting its corporate governance and fiduciary duties.

These committees operate within written terms of reference approved by the Board.

These are:

  • Audit and Risk Committee;
  • Remuneration Committee;
  • Nominations Committee; and
  • Social and Ethics Committee.
Audit and Risk Committee
Accounting and internal controls

The Board has established controls and procedures to ensure the accuracy and integrity of the accounting records and to provide reasonable assurance that assets are safeguarded from loss or unauthorised use and that the financial statements may be relied upon for maintaining accountability for assets and liabilities and preparing the financial statements.

Management monitors the operation of the internal control systems in order to determine if there are deficiencies. Corrective action is taken to address control deficiencies as they are identified. The Board, operating through the Audit and Risk Committee, oversees the financial reporting process and internal controls systems. The Group applies the principles of integrated reporting.

Remuneration report
Remuneration Committee – composition and terms of engagement

The Remuneration Committee is a sub-committee of the Board of directors. The Committee meets at least twice per annum. The Committee is chaired by an independent non-executive director and is comprised of three directors. In order to ensure that the majority of directors on the Committee are independent, Mr S G Pretorius replaced Mr P D Swatton with effect from 1 November 2013. The current members of the Committee are:

Ms S M du Toit (Chairman), Mr G A M Ravazzotti and Mr S G Pretorius.

The Board considers the Committee's composition to be appropriate in terms of the necessary knowledge, skills and experience of its members.

The Italtile Limited Group Company Secretary, E J Willis, attends all meetings of the Committee as secretary. The Chief Financial Officer attends all meetings by invitation in order to provide input and guidance with regards to executive director and senior management remuneration.

No attendee may participate in any discussion or decision regarding his or her own remuneration.

The Committee met twice during the year. Attendance at the meeting was as follows:

Members and invitees   Attendance  
at meetings  
in 2014  
S M du Toit   2/2  
G A M Ravazzotti   2/2  
P D Swatton   1/2  
S G Pretorius   1/2  

Remuneration Committee – role and responsibilities

The Committee operates within a written terms of reference confirmed by the Board, which includes:

  • assisting the Board in setting the Group's remuneration policy;
  • advising on the fees for non-executive directors;
  • determining the total remuneration of the executive directors and executive management; and
  • reviewing and recommending short and long- term incentive policies for directors, executive management and staff.

The Committee reviews and evaluates the contribution of each director and member of senior management and determines their salary adjustments on an annual basis. The Committee reviews remuneration and Board best practice reviews published by PWC and EY.

Remuneration policy

Italtile is committed to maintain pay levels that reflect an inidual's worth to the Group. The Group's philosophy is to treat employees as business partners. Remuneration policies are designed to attract, reward and retain the executives and employees needed to deliver on Italtile's business strategy. Italtile is cognisant of the ratio between the pay of the CEO and that of entry-level workers.

Performance management

For executives and senior management, performance is linked to strategic delivery and defined financial targets set each year. The Committee performs a rigorous review of performance in determining remuneration packages.

Policy on annual incentive schemes

All employees share in Group profits, based on an inidual's contribution to the Group.

Policy on long-term incentives

There are three long-term incentive schemes within the Italtile Group, each rewarding performance in an appropriate manner, designed to reward and retain key personnel. The long-term incentives include the Italtile Long-Term Incentive Plan, the Share Appreciation Rights Scheme, and the Executive Retention Plan.

Long-Term Incentive Plan

In accordance with the Long-Term Incentive Plan (LTIP), selected directors and employees of the Group are entitled to receive conditional notional Italtile Limited share awards. 25% of the awards vest after three years from grant date, and the balance (75%) after five years. There is no strike price attached to these awards, and the exercise price is defined as the volume weighted average price of Italtile Limited shares as traded on the JSE over the 10 trading days preceding and including the vesting date.