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BOARD COMMITTEE reportS
The health, safety & environment (HSE) committee assists the Board to fulfil its supervisory role relating to the integration of sound HSE management into all aspects of the Group’s business activities. The committee operates under an approved charter. The committee reviews HSE performance in operational entities and provides guidance to management and the Board. It also evaluates the appropriateness and adequacy of policies and strategies against global best practice. MEMBERSHIPThe committee comprises five non-executive directors and the Group chief executive, and is chaired by WA Nairn, an independent non-executive director. During the year under review, independent members RC Andersen, ADVC Knott-Craig, NM Magau and JM McMahon served on the committee. ADVC Knott-Craig resigned from the committee on 21 November 2011. The Group executive directors, operating platform executives and executives responsible for sustainability, health and safety attend meetings ex officio. The committee met five times during the year. TERMS OF REFERENCEThe committee’s responsibilities include:
The Board reviewed and approved the committee’s terms of reference during the year. ASSESSMENTIn addition to the formal Board evaluation process, the committee also evaluates its performance and effectiveness by way of selfassessment questionnaires. Based on the results, the committee and Board believe that the committee functions effectively and has complied with its terms of reference in all material respects. SAFETYFatalitiesThe committee deeply regrets the death of four employees (2011:12) who sustained fatal injuries while on duty. All four incidents occurred at underground mining operations and the hazards involved were as a result of fall of ground and equipment and machinery failure. While this performance is a significant improvement over previous periods, it remains far from the Board’s aspiration of zero fatalities. Management has revised standards and working procedures to prevent similar occurrences. Lost time injury frequency rateThe Group’s consolidated lost time injury frequency rate, measured over a million hours worked, improved to 1.14 (2011: 1.28). Further information on the Group’s safety performance is provided in the social performance section of the Group performance review. As indicated in the last report to stakeholders, in 2011 management brought in DuPont Sustainable Solutions to conduct a comprehensive health and safety evaluation and to help in crafting a plan to achieve its Zero Harm goals. The evaluation was completed during the year and it brought about an increased level of health and safety awareness in the organisation. It also helped in establishing a common understanding across the company’s operations on health and safety challenges and opportunities for improvement. The recommendations from this evaluation have been incorporated into safety improvement plans which are being implemented at all operations. HEALTHOccupational HealthWork continued on improving occupational health programmes aimed at addressing potential health risks associated with operations. Noise induced hearing loss (“NIHL”) remains a prevalent occupational disease threat at mining, construction and manufacturing businesses. During the past year, 36 (2011:104) new NIHL cases were recorded resulting in an occupational disease frequency rate of 0.18, measured over a million hours worked (2011: 0.47). Assessments are carried out at operations to identify areas with noise levels above legal limits and corrective measures are implemented to eliminate or reduce the exposure. More effort is being focused to engineer out excessive noise levels and to provide employees with knowledge, skills and resources to protect themselves against noise exposure. Silicosis and tuberculosis remain health risks to employees working in environments with silica dust and these risks are often compounded by HIV/AIDS. 21 (2011: 37) TB cases were reported during the financial year. Plans are being reviewed as part of the integrated employee wellness programme to mitigate this challenge. Employee WellnessIn 2011, a need was identified to streamline and enhance the Company’s wellness programmes following an evaluation conducted by an outside service provider. While an integrated employee wellness strategy is being developed to address wellness challenges, the current approach to employee wellness includes various programmes which are at different levels of maturity at operational level e.g. random substance abuse tests, voluntary HIV/AIDS testing and an Employee Assistance Programme. The HIV/AIDS prevalence among employees who have been tested is estimated at 12% (2011: 14%). The real prevalence is likely to be higher than this figure given the 18% prevalence estimated for the working population of South Africa.
The nomination committee ensures that the structure, size, composition and effectiveness of the Board and its committees are maintained at levels that are appropriate to the Group’s complexity and strategy. It does so by regularly evaluating the Board’s performance, undertaking performance appraisals of the directors, evaluating the effectiveness of committees and making related recommendations to the Board. The Board is responsible for evaluating the performance of the Group chairman. The committee operates under an approved charter. MEMBERSHIPThe committee comprises the chairman of the Board and three other independent non-executive directors. The Board appoints the chairman of the committee. RC Andersen served as chairman of the committee and SP Sibisi, M Sello and RT Vice as members. The committee met four times during the year under review. The Board reviewed and approved the committee’s terms of reference during the year. BOARD & COMMITTEE EFFECTIVENESSExternal appraisals of the effectiveness of the Board, its committees and individual directors were conducted during the year. The appraisals were benchmarked against the Group’s strategic requirements and the need to ensure the capacity to deliver these requirements and strengthen the diversity and sector expertise of directors. Self-assessment questionnaires were also performed by each committee during the year under review. The appraisals were positive and their recommendations are being followed through for implementation. An internal appraisal of the chairman was led by the chairman of the remuneration & human resources committee and discussed by the Board. The appraisal was positive. ASSESSMENTIn addition to the formal Board evaluation process, the committee also evaluates its performance and effectiveness by way of selfassessment questionnaires. Based on the results, the committee and Board believe that the committee functions effectively and has complied with its terms of reference in all material respects. SUCCESSIONSuccession planning, taking into account the strategy of the Group and future retirements from the Board, was addressed. The committee takes cognisance of the importance of institutional knowledge to the Board and the need to balance this with introducing new ideas and experience. During the year, the Board appointed TCP Chikane as a nonexecutive director. Shareholders will be requested to confirm this appointment at the annual general meeting. Due to other business commitments, non-executive director, ADVC Knott-Craig, resigned during the year. Non-executive director, AA Routledge has indicated that he will not be available for reelection and will retire at the 2012 annual general meeting. SP Sibisi has indicated that he wishes to limit his non-executive directorships to institutions whose core business is underpinned by science or technology. As a consequence he will resign as a non-executive director. NM Magau has indicated that as she has served on the Board for the past eight years as a non-executive director, she felt a need for a change and will also be resigning. Both these resignations will be effective at the conclusion of the 2012 annual general meeting. RC Andersen who has served as independent non-executive chairman over the past almost nine years has given notice of his intention to retire as a director and chairman of the Company effective 1 March 2013. The Board has agreed unanimously to appoint M Sello as independent non-executive chairman following the retirement of RC Andersen. PERFORMANCE AND RE-ELECTIONThe committee reviewed the performance of directors RC Andersen, M Sello and RT Vice who, in terms of the memorandum of incorporation, retire by rotation at the 2012 annual general meeting. RC Andersen recused himself from the committee’s review of his performance. The committee recommends their re-election to the Board. King III recommends that the independence of non-executive directors be assessed by the Board on an annual basis. The Board, assisted by the nomination committee, conducted an assessment of the independence of its non-executive directors. All non-executive directors meet the criteria for independence set out in King III. In the year under review, the average length of service of the current non-executive and executive directors was less than six years. AUDIT & SUSTAINABILITY COMMITTEEThe committee considered whether the current members (individually/ collectively) of the audit & sustainability committee satisfy the requirements of section 94 of the Companies Act No. 71 of 2008 (as amended) and King III. The nomination committee recommends the election of DD Barber, TCP Chikane, M Sello and RT Vice to the audit & sustainability committee. This recommendation will be submitted to the shareholders at the annual general meeting to be held on 31 October 2012. The members of the audit & sustainability committee will serve for a one-year term, concluding at the 2013 annual general meeting. M Sello will be stepping down as a member when appointed chairman of the Company, effective 1 March 2013.
The remuneration & human resources committee assists the Board to fulfil its corporate governance supervision responsibilities and to align the remuneration philosophy with the company’s business strategy. The key focus in this regard is to attract, retain, motivate and reward directors, senior executives and staff by the payment of fair, competitive and appropriately structured remuneration in the best interests of the company and shareholders. The committee operates under approved terms of reference. MEMBERSHIPThe committee comprises the Group chairman and three independent non-executive directors. RT Vice served as chairman of the committee with RC Andersen, NM Magau and AA Routledge as members. M Sello and JM McMahon were appointed as committee members with effect from 27 June 2012. The Group chief executive, Group financial director and sustainability executive attend meetings ex officio. The executives who attended meetings ex officio did not participate in any discussions or decisions pertaining to their own remuneration. Specialised advice is sought from time to time. The committee met four times during the year under review. TERMS OF REFERENCEThe chairman of the committee reports to the Board on the committee’s deliberations and decisions. The committee assists the Board by regularly submitting reports and recommendations on the Group’s employment framework and policies, and remuneration philosophy. The committee is responsible for considering and approving proposals regarding the guaranteed pay, benefits, short term incentives, long term share incentives and related matters of executive directors of the Group, including the Group chief executive, all managing directors of the Group’s operating companies and senior Group executives. It also considers and approves the remuneration and benefits paid to general staff and has responsibility to oversee the Group pension, provident and other benefit plans. The functions, role and mandate of the Group chief executive are considered by the committee and his performance is assessed. Succession planning to the Group chief executive and senior executives is also considered by the committee. The committee considers the Group’s leadership succession and development strategy and the Group’s employment equity status as described in this report. The committee oversees the preparation of the remuneration report and recommends the report to the Board, ensuring that this report is accurate, complete and transparent and provides a clear explanation of how the Remuneration Policy has been implemented. The committee ensures that the Remuneration Policy is put to a nonbinding advisory vote of shareholders at the annual general meeting. The Board reviewed and approved the committee’s terms of reference during the year. ASSESSMENTIn addition to the formal Board evaluation process, the committee also evaluates its performance and effectiveness by way of selfassessment questionnaires. Based on the results, the committee and Board believe that the committee functions effectively and complies with its terms of reference in all material respects. DIRECTOR AND EXECUTIVE REMUNERATIONThe remuneration packages of executive directors and senior executives include performance-related remuneration, which is determined in terms of incentive schemes operated at Group and operating entity level. These schemes are disciplined and are designed and implemented with assistance from independent remuneration consultants to competitively reward those directors and executives who have contributed to the Group’s performance. Non-executive directors receive a fee for their contribution to the Board and its committees. This fee structure reflects the skill and experience brought to the Company by each non-executive director, responsibilities undertaken, the time commitment involved and the importance of attendance at and contribution to Board and committee meetings. Please refer to the details on non-executive director fees. The Group’s remuneration policy is described in the remuneration report of this report. The remuneration of executive directors for the year ended 30 June 2012 is set out in note 42 to the consolidated annual financial statements. Remuneration details of non-executive directors for the year to 30 June 2012 are set out in note 42 to the consolidated annual financial statements. The proposed fee increase for non-executive directors is included in the notice of annual general meeting. RETIREMENT AND OTHER BENEFIT PLANSA number of retirement funds operate within the Group. In South Africa these are registered as pension or provident funds and accordingly are governed by the Pension Funds Act. Although some funds are privately administered, the majority of funds are incorporated in outsourced umbrella schemes. The assets of the funds are independently controlled by boards of trustees which include representatives elected by the members. Further details on retirement and other benefit plans are provided in note 19 to the consolidated annual financial statements. Employees of Murray & Roberts in the Middle East region are not required to belong to a retirement fund, while in Australia contributions are made, as part of total fixed cost of employment, to a superannuation fund structured as a defined contribution fund. In Canada, contributions, as part of total fixed cost of employment, are made to a registered retirement fund.
The risk management committee assists the Board to fulfil its corporate governance supervision responsibilities over the development and implementation of the Integrated Assurance Framework. The committee operates under approved terms of reference. MEMBERSHIPThe committee comprises four independent non-executive directors. During the year under review, SP Sibisi served as chairman of the committee with DD Barber (chairman of the audit & sustainability committee), WA Nairn and RT Vice as members. TCP Chikane was appointed a member of the committee with effect from 27 June 2012. The Group chief executive, Group financial director, Group commercial executive and Group risk executive attend meetings ex officio. As the chairman of the audit & sustainability committee also serves on this committee, overlapping responsibilities are appropriately managed. The committee met four times during the year. The committee’s terms of reference were reviewed and approved by the Board during the year. ASSESSMENTIn addition to the formal Board evaluation process, the committee also evaluates its performance and effectiveness by way of selfassessment questionnaires. Based on the results, the Board believes that the committee functions effectively and has complied with its terms of reference in all material aspects. RISK MANAGEMENTThe role of the committee is to assist the Board to ensure that:
The committee continues to consider and review the Group Risk Framework. The committee is satisfied that the further enhancements implemented by management during the year ensured that the Group responded effectively to the risks it faced. The Murray & Roberts Limited risk committee acts as custodian of the Group risk mandate, interrogates Group-level risk and interrogates key decisions prior to Board approval. During the year this committee reviewed 30 major project bids. Currently 15 of the Group’s operating companies utilise the opportunity management system. This project portfolio management system was developed in-house and continues to be enhanced to highlight project risks entering the Group’s environment. At 30 June 2012, opportunities in the active pipeline amounted to R73 billion. A top-down assessment of Group-level risks was conducted in support of the 2012 results. Operating companies conducted risk assessments as part of their business planning process, and also carried out a range of project risk assessments. A table of significant risk exposure is included under the risk management section of this report. The Integrated Assurance Framework effectively aligned risk management, regulatory compliance and internal audit, and ensured that common areas of concern were addressed comprehensively and timeously. INTERNAL AUDITThe Group’s risk-based systems approach to internal audit delivered anticipated results. The Group internal audit executive, following a co-sourced approach deploying Group and KPMG resources, carried out reviews of all of the Group’s critical controls and major projects. All material findings were satisfactorily addressed by management and follow-up procedures were carried out to confirm responses by management. Findings relating to the need to improve risk management practices at project level are receiving attention. INSURANCE AND TREASURYMurray & Roberts has a Group insurance programme covering asset and liability risks. Bonds and guarantees are integrated with the treasury management system, and administered centrally. CLAIMS AND LITIGATIONSGroup Legal Services, under the leadership of the Group commercial executive, and with the support and involvement of the operating platform commercial executives, manages the Group’s contractual risk. The capacity of Group legal services has been substantially increased with the appointment of two construction attorneys and an advocate specialising in regulatory compliance. The Group commercial executive leads the engagement of general litigation and reputational risks to the Group, supported as appropriate by external legal advice. FORENSICSThe Group employs a firm of forensic consultants and investigators that reports to the Group commercial executive. Tip-Offs Anonymous, an independent hotline service provider, is available to report inappropriate, unethical and/or unlawful behaviour in the workplace. Every reported incident was investigated and resolved to the satisfaction of the executive committee.
The social & ethics committee assists the Board to fulfil its supervisory role, specifically in relation to the Group’s commitment to Zero Harm from its business activities, to its employees, shareholders, customers, business partners and society in general. It also monitors the Group’s ethical practices. MEMBERSHIPThe committee comprises the Group chairman and two independent non-executive directors. M Sello serves as chairman of the committee, with RC Andersen (Group chairman) and AA Routledge as members. The Group chief executive, Group financial director, Group commercial executive and Group sustainability executive attend meetings in an ex officio capacity. The committee met four times during the year under review. TERMS OF REFERENCEThe chairperson of the committee reports to the Board on the committee’s deliberations and decisions. The committee regularly submits reports and recommendations and assists the Board by:
The Board reviewed and approved the committee’s terms of reference during the year. ASSESSMENTIn addition to the formal Board evaluation process, the committee also evaluates its performance and effectiveness by way of selfassessment questionnaires. Based on the results, the Board believes that the committee functions effectively and has complied with its terms of reference in all material respects. COMPETITION MATTERSMurray & Roberts does not condone any anti-competitive or collusive conduct by its employees and is committed to compliance with the Competition Act. Murray & Roberts continues to work with the Competition Commission in the best interests of the Group and to eliminate any possible collusion within the construction industry. Further details on competition matters are contained in the chairman’s statement and the ethics performance review. STATEMENT OF BUSINESS PRINCIPLESThe Statement of Business Principles, adopted in the previous financial year, was widely distributed across the Group, both to existing employees and new appointments, and its message was disseminated in forums designed to reaffirm its importance as the standard bearer of the moral and ethical culture the Group is striving to embed. Every director, officer and employee of the Group must comply with the letter and spirit of the Statement of Business Principles. TRANSPARENCYThe Group encourages concerned employees to report observed unethical behaviour within any of its operations, and continues to promote the Tip-Offs Anonymous hotline service that supports reporting of workplace dishonesty and unethical behaviour, including discrimination, theft, fraud and corruption. During the year under review, 58 cases were reported and investigated. Of those, 46 were closed out and 12 remain under investigation. A professional firm of forensic consultants and investigators appointed by the Group assists with investigations into reported cases. Appropriate disciplinary and legal action has been initiated in all cases of dishonest conduct. FRAUD, CORRUPTION, ANTI-COMPETITIVE BEHAVIOUR AND UNFAIR BUSINESS PRACTICESMurray & Roberts subscribes to good corporate governance, good corporate citizenship and ethical business practices. The Group is a signatory to the World Economic Forum Partnering Against Corruption Initiative. The Group is also a member of Business Leadership South Africa and supports its Code of Good Corporate Citizenship. All executives involved in preparing and authorising each specific project bid, sign a declaration that they have not committed, and are not aware that anyone else affiliated with the bid has committed, whether directly or indirectly, any unethical or unlawful practices in the preparation and submission of the tender. BROAD-BASED BLACK ECONOMIC EMPOWERMENTMurray & Roberts is committed to BBBEE in our South African business and addresses the full range of empowerment requirements across its diverse operations. The Group achieved a consolidated BBBEE rating of level 3 when measured on the Construction Sector Charter and individual operating company BBBEE ratings range from level 2 to level 6. All operating companies are encouraged to improve their ratings so that the Group can, at least, maintain a level 3 BBBEE rating. Further details on BBBEE matters are contained in the transformation and local economic development review.
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