Blue Label is committed to the governance principles of King III and continues to develop its governance policies, practices and procedures in line with an integrated governance, risk and compliance framework. The board is satisfied that every effort has been made in 2011/12 to apply all material aspects of King III as far as appropriate.

During the year under review focus had been placed on areas in which the application of the King III principles could be improved such as IT governance, risk management, integrated reporting structure and processes and compliance. In support of the company’s commitment to strengthen its application of the King III principles:

• Internal audit completed a review and follow up review of the maturity of the group’s IT governance processes as it relates to King III. Further information on the group’s IT environment and governance are set out on pages 43 and 69.
• The group has enhanced its risk assessment procedures to include linkage to strategic objectives, extensive risk categorisation, periodic assessment of risk movements, assessing assurance over risks, prioritised residual risk exposures and action plans.
• Internal audit completed a review of the group’s compliance function with the objective of providing assurance on the initiatives taken to date as well as the compilation of a roadmap and advice on a way forward to mature the company’s compliance function. More information is available on page 59.

The board conducts its business in accordance with the principles of King III which includes exercising discipline, independence, responsibility, fairness, social responsibility, transparency and the accountability of directors to all stakeholders. The board remains ultimately accountable for the performance of the company and oversees processes which ensure that each business segment is responsible for acting in accordance with sound governance principles. The board has a formal charter which sets out its role and responsibilities. Key responsibilities are summarised as follows:

• Provide effective leadership based on an ethical foundation.
• Ensure that the company’s workplace ethics are upheld effectively.
• Ensure that the company has an effective and independent audit, risk and compliance committee.
• Contribute towards and approve the strategic direction of the company.
• Satisfy itself that the strategy and business plans proposed for the achievement of the group’s objectives do not give rise to risks that have not been thoroughly assessed by management.
• Ensure that the strategy will result in sustainable outcomes taking into account financial, environmental and social objectives as approved by the board.
• Ensure the integrity of the company’s integrated annual report.
• Define levels of authority, define areas of materiality and approve a framework for delegated authority.
• Report on the effectiveness of the company’s system of internal controls.
• Be responsible for the governance of risk through effective risk management practices, including regularly reviewing and evaluating risks to the company and ensuring the existence of an effective risk-based internal audit as well as appropriate internal controls.
• Ensure that Blue Label is and is seen to be a responsible corporate citizen.
• Identify, manage and monitor the gap between stakeholder perceptions and the performance of the company so as to manage Blue Label’s reputation.

Assessments of the performance of the board collectively and the directors individually were conducted in May 2012. The board was assessed on its effectiveness and composition, board dynamics, risk management, ethical leadership and corporate citizenship, remuneration of directors and succession planning. Individual directors were appraised in terms of knowledge, skills and execution of duties. The results were summarised in a report from the company secretary to the chairman of the board.

In the same process, the directors formally assessed the performance of the chairman, which was reported to the board by the chairman of RNC. All assessments are approached in a constructive manner with a view of improving the effectiveness of the board, the chairman and the directors.

Blue Label has a unitary board of ten directors: four executive directors, two nonexecutive directors and four independent non-executive directors. The chairman is an independent non-executive director.

The RNC, in terms of its mandate, ensures that the board collectively possesses the skills, experience, diversity in demographics and mix of personalities, appropriate for the strategic direction of the company and necessary to secure its sound performance. Directors are selected and appointed by the board based on the recommendation of RNC. Following its recommendation, the board appointed Mr JS Vilakazi as an independent non-executive director to the board. Mr Vilakazi’s induction as a director of Blue Label was in line with his experience as a nonexecutive director in a listed company environment and involved one-on-one meetings with executive management to gain a more in-depth understanding of the group and the industry it operates in.

In terms of the company’s memorandum of incorporation, directors are subject to retirement by rotation every three years. In this regard Messrs GH Harlow and NN Lazarus SC will be retiring at the upcoming annual general meeting and being eligible, have made themselves available for re-election. Mr Vilakazi will also be retiring and being eligible, has made himself available for election at the forthcoming annual general meeting in accordance with article 13.16 of the company’s memorandum of incorporation. The detailed categorisation of the directors as well as a brief curriculum vitae of each director appears on pages 22 to 25.

The RNC regularly canvasses opportunities to strengthen the board with individuals whom it believes can make an active and positive contribution to the continuing development and growth of the company.

Subsidiary board meetings are held quarterly, ahead of the Blue Label board meeting. Two non-executive directors on the Blue Label board i.e. Messrs Harlow and Ellerine, serve as directors on the boards of The Prepaid Company and Blue Label Distribution, while Mr Harlow serves as a director and chairman on the board of Cellfind, Blue Label One, Velociti and Blue Label Data Solutions.

The board has delegated certain functions to well-structured committees without abdicating its own responsibilities. The board approved, in February 2012 to reconstitute the Transformation Committee into the Transformation, Social and Ethics Committee, in compliance with the requirements of the Act. This was done to align Blue Label’s already well-established transformation practices with regulatory requirements and to enhance the group’s social and ethical activities and reporting.

The membership and principal functions of the board committees are set out below:

The non-executive directors bring leadership, judgement and insight to the board. They have access to management and may engage separately with management with or without the attendance of executive directors. A non-executive director has no fixed term of appointment and no service contract with the company. Fees are independent of the company’s financial performance, they receive no bonus and do not participate in the company’s Forfeitable Share Plan.

Both Messrs Harlow and Lazarus SC earn advisory fees for strategic input as well as corporate finance advice and, in the case of Mr Lazarus SC, legal consultancy services as well. Fees paid during the year under review in respect of consultancy services rendered amounted to R0.7 million in respect of Mr Harlow (2011: R1.3 million) and R5.1 million in respect of Mr Lazarus SC (2011: R4.6 million). The majority of the fees paid to Mr Lazarus SC pertained to legal consultancy services regarding litigation which the group is involved in, commercial negotiations and contracts relating to the business of the group, and certain corporate finance services in respect of acquisitions and disposals.

The company secretary is responsible for the efficient administration of the group in accordance with the Act, King III and the JSE Listings Requirements. She ensures that all directors have full and timely access to all information that may be relevant to the proper discharge of their duties and obligations. This includes information incorporated in board documentation, corporate announcements, and any other information or developments which may affect Blue Label or its operations. Directors and prescribed officers have direct access to the guidance and assistance of the company secretary in regard to matters relating to, inter alia, their duties and responsibilities, meeting management, ethics and governance matters, compliance with statutory and regulatory requirements and policies and procedures. The company secretary facilitates, where appropriate, the procurement of services of independent professionals and advisers.

The company secretary is also responsible for ensuring that the proceedings and affairs of the directorate, the company itself and, where appropriate, stakeholders of the company are properly administered in accordance with the relevant laws and regulations.