Governance report

STATEMENT OF COMMITMENT

The Board of Murray & Roberts Holdings Limited (“Board”), in promoting and supporting the highest standards of business integrity, ethics and corporate governance, and in adopting the King III Code of Governance Principles (“King III”), continued to conduct the business of the Group with prudence, transparency, integrity and accountability, and is pleased to deliver this integrated annual report.

The Board has continued on its journey of meeting the requirements of King III and in particular its “apply or explain” principle. While the Group does not yet fully apply all of the principles of King III, the following additional areas of application were achieved in relation to the year under review:

	Passing of a non-binding advisory vote on the Company’s 2011 remuneration policy
	Development, approval and implementation of a policy and plan for a system and process of Group-wide risk management
	Development and approval of a policy and plan for a system and process of Group-wide regulatory compliance that delivered limited assurance of compliance in relation to the South African environment
	Outline of a comprehensive and effective IT governance policy and plan
	Development, approval and implementation of a risk-based internal audit policy and plan, and fully embedding internal audit as a Group-wide function

As noted above, Murray & Roberts has not yet fully applied all of King III’s governance principles (and recommended practices), and the following table lists the requirements of King III that have not yet fully been applied:

BOARD OF DIRECTORS

At the date of this report, Murray & Roberts had a unitary Board with 13 directors, of whom 10 are independent non-executive directors and three are executive directors. The composition of the Board promotes a balance of authority and prevents any one director from exercising undue influence over decision-making.

The Board is the highest governing authority in the Group and has ultimate responsibility for corporate governance. It appreciates that strategy, risk, performance and sustainability are inseparable and the Board is responsible for approving the strategic direction of the Group, which integrates these elements. The Board is governed by a charter that sets out the framework of its accountability, responsibility and duty to the Company.

The Board has a fiduciary duty to conduct its business in the best interest of the Company and, in discharging its duty, ensures that the Group performs in the best interests of its stakeholders. The Company’s key stakeholders include present and future investors, customers, business partners, employees, regulators and the communities in which it operates.

The Board

	Provides ethical leadership and gives direction to the Group in all matters
	Approves the strategic plan developed by management and monitors its implementation
	Acknowledges that strategy, risk, performance and sustainability are inseparable by:
	– satisfying itself that the strategy and business plans do not give rise to risks that have not been thoroughly assessed by management – monitoring the governance of key risk areas and key operational performance areas, including IT – endeavours to ensure that the strategy will result in sustainable outcomes – considering sustainability as a business opportunity that guides strategy formulation
	Directs the commercial and economic fortunes of the Company
	Endeavours to ensure the Company is a responsible corporate citizen by considering the impact of the business operations of the Company on its people, society and the environment
	Endeavours to ensure measurable corporate citizenship policies are developed and programmes implemented
	Monitors the Company’s compliance with all relevant laws, regulations and codes of business practice, and considers adherence to non-binding rules and standards through a compliance framework
	Monitors the Company’s communication with all relevant stakeholders (internal and external) openly and promptly, on the basis of substance over form
	Endeavours to ensure that shareholders are treated equitably
	Endeavours to ensure that disputes are resolved effectively and expeditiously
	Defines levels of materiality, reserving specific powers to itself and delegating other matters by written authority to management
	Monitors performance through the various Board committees established to assist in the discharge of its duties without abdicating its own responsibilities
	Endeavours to ensure directors act in the best interest of the Company by adhering to legal standards of conduct, disclosing real or perceived conflicts to the Board and dealing in securities only in accordance with a developed policy
	Determines policies and processes to ensure the integrity and effectiveness of
	– risk management, risk-based internal audit and internal controls – executive and general remuneration – external and internal communications – director and chairman selection, orientation and evaluation – the annual integrated report

Directors are required to act with due attentiveness and care in all dealings and to uphold the ethics and values of the Company. Accordingly, they are required to adhere to a Code of Conduct that incorporates agreed standards of accepted behaviour and guidance on decision-making, promotes integration and coordination, and reaffirms the directors’ commitment to the Group.

BOARD MEETINGS

The Board meets formally at least five times a year. In addition, directors meet ahead of the scheduled meeting at which the Group’s budget and business plan is examined in the context of an approved strategy. At this meeting, the directors engage with senior executives on the implementation of the Group’s strategy.

The Board has adopted a policy to visit key operations on an annual basis. During the year under review, the Board visited the Medupi power station project. The chief executive keeps all directors informed between meetings of major developments affecting the Group. The record of attendance at Board meetings for the year is reflected in the of this report.

CHANGES TO THE BOARD

During the year, the Board appointed TCP Chikane as non-executive director. Due to other business commitments, non-executive director, ADVC Knott-Craig, resigned during the year. Non-executive director, AA Routledge has indicated, that after more than 18 years of service, he will not be available for re-election and will retire at the 2012 annual general meeting.

SP Sibisi has indicated that he wishes to limit his non-executive directorships to institutions focused on science or technology. As a consequence he will resign as a non-executive director. NM Magau has indicated that she will resign having served on the Board for the past eight years. 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 unanimously agreed to appoint M Sello as independent non-executive chairman following the retirement of RC Andersen.

CHAIRMAN AND GROUP CHIEF EXECUTIVE

The roles of chairman and Group chief executive are separate. They operate under distinct mandates issued and approved by the Board. The mandates clearly differentiate the division of responsibilities within the Company and ensure a balance of power and authority.

The chairman, an independent non-executive director, presides over the Board, providing it with effective leadership and ensuring that all relevant information is placed before it for decision. The Group chief executive is responsible for the ongoing operations of the Group, developing its long term strategy, and recommending the business plan and budgets to the Board for consideration and approval.

The Board appoints the chairman and the Group chief executive. The Board appraises and appoints the chairman annually and the remuneration & human resources committee appraises the Group chief executive annually. This committee also assesses the remuneration of the Board, chairman and Group chief executive. The nomination committee is responsible for Board succession planning.

BOARD COMMITTEES

The Board has established and mandated a number of permanent standing committees to perform specific work on its behalf in various key areas affecting the business of the Group.

They are the:

	Executive committee
	Audit & sustainability committee
	Health, safety & environment committee
	Nomination committee
	Remuneration & human resources committee
	Risk management committee
	Social & ethics committee

Shareholders elect the members of the audit & sustainability committee at each annual general meeting. The audit & sustainability committee still forms part of the unitary Board even though it has statutory duties over and above the responsibilities set out in its terms of reference.

Although all the committees assist the Board in the discharge of its duties and responsibilities, the Board does not abdicate its responsibilities. The Board and each committee give attention to new and existing governance and compliance matters according to their respective mandates. A statement from the chairman of the Board and chairman of each committee, other than the executive committee, is included in this report.

Each committee operates according to a Board-approved terms of reference. With the exception of the executive committee, an independent non-executive director chairs each committee. The committee chairmen are appointed by the Board.

Each committee chairman participates fully in setting the agenda and reporting back to the Board at the board meeting that follows a committee meeting. In line with King III and as mandated by the individual terms of reference, each committee chairman attends the annual general meeting and is available to respond to shareholder questions on committee activities.

During the year, all committees, other than the executive committee, conducted a self-assessment of their effectiveness with positive outcomes in each case. All committee terms of reference were also reviewed and updated.

The record of attendance of the respective committees for the year is reflected in record of attendance section of this report.

SELECTION OF DIRECTORS

The Board has an approved policy on the selection and continuation of office for directors, and the nomination and evaluation processes to be followed. One third of directors are required to retire annually by rotation and, if put forward for re-election, are considered for reappointment at the annual general meeting. All directors are appointed at the annual general meeting by a shareholders’ resolution. The Board is permitted to remove a director without shareholder approval.

The nomination committee considers and makes appropriate recommendations to the Board on the appointment and re-election of directors. This process encompasses an annual evaluation of skills, knowledge and experience, considers transformation imperatives and ensures the retention of directors with an extensive understanding of the Company. All recommended director appointments are subject to background and reference checks: Re-election of directors to the Board is made according to a formal and transparent process. Each non-executive director is provided with a formal letter of appointment.

For newly approved directors there is an induction programme to familiarise them with the Group.

The names of directors standing for re-election at the 2012 annual general meeting are contained in the resolutions of the annual general meeting.

As recommended by King III, the Board, assisted by the nomination committee, assessed the independence of the non-executive directors. All non-executive directors meet the criteria for independence as set out in King III.

INDEPENDENT ADVICE

There is an agreed procedure for directors to seek professional independent advice at the Company’s expense.

BOARD AND COMMITTEE EFFECTIVENESS

External appraisal 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. 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.

GROUP SECRETARY

All directors have access to the advice and services of the Group secretary who is responsible for ensuring the proper administration of the Board, sound corporate governance procedures and assisting with best practice as recommended in King III. All directors have full and timely access to information that may be relevant to the proper discharge of their duties. The Group secretary provides guidance to the directors on their responsibilities according to the prevailing regulatory and statutory environment, and the manner in which such responsibilities should be discharged. The Board is responsible for the appointment and removal of the Group secretary.
E Joubert was appointed as Group secretary effective 1 August 2012, succeeding Y Karodia, who has taken up a senior financial position within the Group.

EXECUTIVE COMMITTEES

The directors of Murray & Roberts Limited serve as members of the executive committee of the Board, chaired by the Group chief executive. The directors support the Group chief executive in:

	Implementing the strategies and policies of the Group
	Managing the business and affairs of the Group
	Prioritising the allocation of capital, technical know-how and human resources
	Establishing best management practices and functional standards
	Approving and monitoring the appointment of senior management
	Fulfilling any activity or power delegated to the executive committee by the Board that conforms to the Company’s memorandum of incorporation

RISK MANAGEMENT, SYSTEMS OF CONTROL AND INTERNAL AUDIT

The Board promotes the rational engagement of risk in return for commensurate reward and is responsible for ensuring that risk management, including related systems of internal control, are formalised throughout the Group. These systems of risk management aim to promote the efficient management of operations, the protection of the Group’s assets, compliance with legislative environments ensuring business continuity and providing reliable reporting in the interests of all stakeholders. Details of the Group’s risk management process.

CONFLICTS OF INTEREST AND SHARE DEALINGS

Directors are obliged to disclose their shareholdings, additional directorships and any potential conflicts of interest, direct or indirect, that may arise, at every meeting of the Board. These are appropriately managed and recorded in the minutes.

In accordance with the JSE Listings Requirements and the prohibitions contained in the Security Services Act, the Group has an insider trading policy. It requires directors and officers who may have access to price sensitive information to be precluded from dealing in Murray & Roberts Holdings Limited’s shares as well as the shares of listed subsidiary, Clough Limited for a period of approximately two months prior to the release of the Group’s interim results and a period of three months prior to the release of the Group’s annual results. To ensure that dealings are not carried out at a time when other price sensitive information may be known, directors, officers and participants in the share incentive scheme must at all times obtain permission from the chairman, Group chief executive or Group financial director before dealing in the shares of the Group. The Group secretary is notified of any share dealings and, in conjunction with the corporate sponsor, publishes the details of dealings in the Group’s shares by directors that have been approved on the Stock Exchange News Service (“SENS”) of the JSE Limited. All approved director dealings are reported to the Board.

SPONSOR

Deutsche Securities (SA) Proprietary Limited acted as sponsor during the period under review in terms of the JSE Listings Requirements.