THE BOARD OF DIRECTORS (THE BOARD) OF TRANSACTION CAPITAL (THE GROUP) IS THE FOCAL POINT AND CUSTODIAN OF ITS CORPORATE GOVERNANCE FRAMEWORK. THE GROUP FOLLOWS A STAKEHOLDER-INCLUSIVE APPROACH TO GOVERNANCE, WITH THE BOARD BEING ULTIMATELY RESPONSIBLE AND ACCOUNTABLE TO STAKEHOLDERS FOR THE PERFORMANCE, ACTIVITIES AND CONTROL OF THE GROUP.
Transaction Capital has set out its governance structures in line with the principles set out in the King IV Report on Corporate Governance™ for South Africa, 2016 (King IV). King IV advocates an outcome-based approach and defines corporate governance as the exercise of ethical and effective leadership towards achieving the following governance outcomes:
- An ethical culture.
- Good performance.
- Effective control.
The Transaction Capital board is committed to complying with legislation, regulations and best practices relevant to the group. The board regards the process of assessing and monitoring adherence to adopted governance standards as a dynamic process, and it endeavours to continually improve governance structures within the group. The board assessed the group’s alignment to King IV, as reported in the 2017 integrated annual report.
In line with this review, the following actions have been implemented in the current financial period:
- The composition of the remuneration committee and social and ethics committee was enhanced by including non-executive director representation.
- Remuneration policies and reporting were aligned to the King IV principles. The remuneration policy and the remuneration implementation report presented to shareholders at the 2017 annual general meeting (AGM) held on 8 March 2018 received the required support from shareholders.
- The board charter and terms of reference for the board sub-committees were updated to align with King IV.
- A diversity policy that includes voluntary targets on gender and race diversity at board level was adopted.
- IT policies aligned to King IV were rolled out within each of the divisions.
- As part of refreshing the group sustainability
policy and embedding the shared-values
approach to sustainability and stakeholder
issues, the following matters are in the process
of being implemented:
- The group ethics charter is being updated to align with current best practice, and to ensure that it is practical and addresses the key ethical risks of the group. A new value of ‘accountability’ has been added as a core value.
- The adoption of a transformation and Broad-Based Black Economic Empowerment (B-BBEE) policy as a sub-policy of the sustainability policy, to specifically address the group’s commitment to transformation and the spirit of B-BBEE.
The application of King IV is on an apply and explain basis, and many of the practices underpinning the principles form an integral part of the group’s internal controls, policies and procedures governing corporate conduct. The recommended practices have been adopted and reported as necessary, taking into account Transaction Capital’s business operations and its governance structure.
The board maintains a high level of individual and collective responsibility, accountability, fairness and transparency, which together drive a culture of risk awareness, ethical behaviour and value creation.
The board is responsible for the strategic direction of the group, which it considers in conjunction with the group’s values and ethics charter. The group’s values provide the foundation for effective and ethical leadership, and are the basis for all deliberations, decisions and actions at board level and within every area of the business.
Based on an ethical foundation, the board provides effective and responsible leadership by directing strategy and operations in a way that supports sustainable business while considering the short- and long-term impacts on society, the environment and stakeholders, as per the group’s sustainability policy.
Transaction Capital’s ethics charter outlines the group’s core values of integrity, respect, excellence, accountability and innovation. In addition, it describes Transaction Capital’s guiding business principles that direct all business dealings within the group and with other stakeholders. As an ethical roadmap for the group, the ethics charter requires all group operations and employees to conduct business with honesty and integrity, and in accordance with the highest legal and ethical standards.
The group chief executive officer (CEO) and divisional CEOs are the custodians of the charter, assisted by the group’s ethics officer. The board reviews the charter regularly.
Transaction Capital maintains an independent whistle blowing hotline operated by an external service provider. Reports can be made anonymously through the hotline and are directed to the group ethics officer. Each incident is investigated independently, with reports provided to the group ethics officer or executive management on the results of the investigation and actions taken. In addition, reporting of unethical or fraudulent behaviour to line management and the respective human resources departments of the group’s businesses is encouraged. This is reported in the social and ethics committee meetings (and audit, risk and compliance (ARC) committee meetings where relevant) as well as the relevant board meetings.
The sustainability policy has been approved by the board and adopted by the group. Each division’s social relevance is core to achieving the group’s strategic objectives. In addition, the ARC committee oversees the preparation of the integrated annual report, with certain sections being reviewed by the external and internal auditors where appropriate.
Engaging with stakeholders forms an integral part of Transaction Capital’ strategy. The sustainability policy governs the relationship and interaction with stakeholders, with the board and social and ethics committee assuming responsibility for stakeholder engagement.
Stakeholder engagement takes place at all levels, across subsidiaries and the group. At a shareholder and investor level, engagement takes place on a continuous basis through site visits, roadshows, meetings and ongoing interactions by the investor relations team. A stakeholder engagement report is submitted to the board bi-annually.
Engagement with employees and other key stakeholders is reported at each social and ethics committee meeting, the minutes of which are included in the board packs ahead of quarterly board meetings.
The divisions each have their own tailored stakeholder engagement plans in place, which are reported, considered and discussed at their respective board meetings.
RESPONSIBLE CORPORATE CITIZENSHIP
For further details on the social relevance of Transaction Capital’s divisions, refer to SA Taxi and TCRS.
Ultimate responsibility for corporate citizenship lies with the board, with oversight vested in the social and ethics committee and the ARC committee. The principles of responsible corporate citizenship underpin all key aspects of the business. The social and ethics committee monitors many of the aspects listed under the King IV practices (including employment equity, fair remuneration, equal work for equal pay, safety, health, economic transformation, public health and safety, consumer protection, community development and protection of human rights). The ARC committee is responsible for the prevention, detection and response to fraud and corruption. It is also responsible for tax policy.
Governance framework and structures
THE ROLE OF THE BOARD OF DIRECTORS
The board acts as the custodian of governance and has approved a formal charter that sets out its responsibilities in this regard. The board, in conjunction with the nominations committee, is responsible for appointing the CEO and for monitoring his management of the performance of Transaction Capital’s assets and resources against approved strategic and financial objectives.
Transaction Capital’s governance and compliance framework facilitates the board’s role of providing direction and oversight. It sets the group’s risk appetite and a high level of accountability to support consistent compliance with regulatory requirements, while also encouraging an entrepreneurial mindset as a key driver of performance.
The board delegates specific responsibilities to appropriately mandated and constituted subcommittees, set out below. The ARC committee and the social and ethics committee fulfil the statutory governance requirements on behalf of Transaction Capital, its divisions and group subsidiaries.
STRATEGY AND REPORTING FUNCTIONS OF THE BOARD
The board has set out its mission, strategy and associated risks in this integrated annual report. The board considers the risks and opportunities related to the context in which the group operates in directing strategy, assessing its business model and enhancing sustainability to create value for all stakeholders.
The board has delegated the formulation and implementation of group strategy to management with the required input from the board. The board has approved the group strategy along with key performance criteria and targets for management to assess its implementation. An authority framework is in place for the group that governs the authority delegated to group management and matters reserved for approval by the board.
The ARC committee assists the board with the governance of risk, as detailed in the committee’s terms of reference. The board assesses the overall viability of the company in regard to its reliance and effects on capital, solvency and liquidity, and its status as a going concern.
The integrated annual report enables stakeholders to make an informed decision about the group’s strategic direction and prospects. Based on the recommendation of the ARC committee, the board approves the annual financial statements, the integrated annual report and any other reports published by the company.
The board has adopted the board charter and approves board sub-committee terms of reference and group policies. The board charter and group policies regulate how the board conducts itself in the best interest of the company and its stakeholders, taking into account the principles of good corporate governance and legislation.
The board, in conjunction with the nominations committee, assesses the composition and membership of the board and board committees holistically on an annual basis.
The non-executive directors of the board bring independent judgement and experience to the board’s deliberations and decisions. No one individual or group of individuals has unfettered powers of decision-making.
The board charter and nominations committee terms of reference prescribe that the selection of non-executive directors should be based on the appropriateness of their business skills and expertise to the strategic direction of the group. The nominations committee and the board take into account the academic qualifications, technical expertise, industry knowledge, experience, business acumen and diversity when board appointments are considered. In addition, the board considers the integrity and leadership skills as well as other directorships and commitments of all directors to ensure that they have sufficient time available to fulfil their responsibilities.
The 2018 annual board review determined that the board was satisfied with the composition of the board and its sub-committees.
Transaction Capital supports the principles and aims of diversity at board level. Accordingly, the group has adopted a diversity policy to address gender and racial diversity. The voluntary target of employing at least three female directors and three black directors at board level was met in the reporting period. Going forward, the nominations committee will assess diversity targets and progress in meeting targets annually.
In terms of their fiduciary duties, directors should act independently in exercising their judgement and fulfilling their duties, and should not have their discretion fettered in any way. This requires that directors apply their minds honestly and make decisions in the best interest of the group on all matters presented to the board. Directors do not participate on matters in which they may be conflicted.
Based on its most recent assessment performed in November 2018, the board, together with the nominations committee, is satisfied that the board’s overall composition reflects an appropriate combination of knowledge, skills, experience, diversity and independence.
All committees have fully functional structures, with clear objectives set out in their respective terms of reference. Through the chairman of each committee, the committees report back to the board at each board meeting. The committees also report to stakeholders annually as required (be it in the integrated annual report and/or at the AGM).
APPOINTMENT OF DIRECTORS
The nominations committee assists in identifying suitable board members, and performs background and reference checks prior to their appointment.
New directors are introduced to Transaction Capital through a formal induction programme, which is the responsibility of the company secretary and/or financial director, and consists of an information pack, detailed discussions on the environment and operations of each of the major businesses, and site visits. Formal induction processes were fulfilled for the directors appointed during the reporting period.
Directors are encouraged to take independent advice, where necessary, for the proper execution of their duties and responsibilities. This is done at Transaction Capital’s expense, after consultation with the chairman. In addition, directors have unrestricted access to the group’s auditors and professional advisers, and to the advice and services of the company secretary.
After advising the group CEO of their intention to do so, directors may attend any committee or subsidiary board meeting, and have unrestricted access to any executive, manager or employee in the group as well as to any information generated by the group.
In addition, the company provides training to directors, as required.
BOARD APPOINTMENTS, EVALUATIONS AND PROCESSES
Transaction Capital’s board comprises the following members:
INDEPENDENT NON-EXECUTIVE DIRECTORS*
- Christopher Seabrooke (chairman)
- Phumzile Langeni
- Kuben Pillay
- Diane Radley (appointed 15 July 2018)
- Buhle Hanise (appointed 1 January 2019)
Olufunke Ighodaro resigned as an independent non-executive director on 30 November 2018.
- Roberto Rossi
- Paul Miller
- David Hurwitz (CEO)
- Ronen Goldstein (financial director)
- Mark Herskovits (executive director: capital management)
- Jonathan Jawno (executive director)
- Michael Mendelowitz (executive director)
This year, Kuben Pillay, Roberto Rossi and Michael Mendelowitz will retire by rotation and are standing for re-election at the AGM. These directors have been appraised by the board and their re-election is recommended. In addition, Diane Radley and Buhle Hanise, who were appointed in the 2018 and 2019 financial years respectively, will also be nominated for election as directors.
ASSESSMENT OF THE EFFECTIVENESS OF THE BOARD, ITS COMMITTEES AND THE COMPANY SECRETARY
Formal performance evaluations of the board, its committees and the company secretary are conducted annually by means of an evaluation questionnaire. The evaluations assess the combination of skills, performance during the year, contribution and independence of individual directors, and the effectiveness of committees. Results of the evaluations provide the basis for enhancements of the board and its committees for the following year.
The nominations committee workplan includes discussions on board performance as well as that of committees, the chair and members.
Based on the annual evaluations undertaken during November 2018, the board is satisfied that:
- All directors are committed to their roles and are performing to acceptable standards.
- The board and its committees are effective and operating to an appropriate standard.
- The group’s risk management processes are operating effectively.
- All directors and committee members have the appropriate qualifications, experience and skills required to fulfil the respective committee’s mandate.
- Independent non-executive directors meet the criteria for independence in terms of King IV.
- The expertise, performance and experience of the chairman, CEO, financial director, internal audit executive and the company secretary are adequate (as detailed below).
Christopher Seabrooke is the independent non-executive chairman of the Transaction Capital board and is responsible for leading the board in fulfilling its mandate. The offices of chairman and CEO are separate.
The board appoints the chairman from among its members annually and, together with the nominations committee, is responsible for the succession plan of the chairman. The chairman’s performance is reviewed as part of the annual board review, the result of which showed that the chairman leads effectively and ethically.
Chief executive officer
David Hurwitz is the group CEO, responsible for the leadership of Transaction Capital and the implementation of the strategies, structures and policies adopted by the board.
The board appoints the CEO and sets the terms of his employment contract. The board has a delegation of authority framework in place, in terms of which the CEO clearly leads the implementation and execution of approved strategy, policy and operational planning, and serves as the link between the board and management. The CEO is accountable to and reports to the board. The role of CEO is clearly defined and his performance assessed by the board.
During November each year, the chairman and company secretary facilitate a formal performance appraisal of the CEO, which comprises an evaluation by each director. In addition, the CEO’s employment contract is assessed for adequacy on an annual basis. The annual review concluded that the CEO is effective and ethical in leading and managing the group.
Ronen Goldstein is the financial director of Transaction Capital and is responsible for reporting on Transaction Capital’s financial performance.
The ARC committee and the board are satisfied with the financial director’s qualifications, experience and competence to fulfil this role. The finance function was assessed as adequate by the ARC committee for the financial period.
Theresa Palos is the company secretary of Transaction Capital. The board is satisfied with the qualifications, experience and competence of the company secretary.
All directors have access to the services and advice of the company secretary, who supports the board as a whole and the directors individually in fulfilling their duties.
The company secretary is required to fulfil duties under the Companies Act and the JSE Listings Requirements, and to ensure that appropriate procedures and processes are in place for board proceedings. The company secretary is a resource in the group on governance, and together with the group ethics officer and legal executive, is responsible for ethics and legislative changes. The company secretary is entitled to obtain independent advice to achieve these objectives.
The board has assessed the company secretary function as adequate and is satisfied that an arm’s length relationship is maintained between the board and the company secretary.
The nominations committee is responsible for formulating the formal succession plans of the board, the CEO and the CEO’s direct reports. The committee reviews these succession plans annually. On approval of the succession plans, the CEO conducts alignment discussions with potential successors, where necessary, which may result in direct development interventions.
Directors are required to attend all board meetings. The board follows a formal workplan that includes strategy, operational and financial performance, risk and governance. Progress against the group’s strategic objectives is reported on at each meeting.
The company secretary is responsible for circulating the agenda and other meeting papers in good time. Formal board papers are prepared for each item on the meeting’s agenda, including reports by the executive office. At least four board meetings are held annually, one of which includes a strategic review.
BOARD AND COMMITTEE MEETING ATTENDANCE FOR THE YEAR UNDER REVIEW
|Board||Audit, risk and
|Number of meetings held for the year||5||3||2||2||2||4|
|Christopher Seabrooke||Independent non-executive||5||3||2||2||–||3|
|Phumzile Langeni||Independent non-executive||5||3||–||–||2||–|
|Kuben Pillay1||Independent non-executive||5||–||2||2||2||–|
|Olufunke Ighodaro2||Independent non-executive||4||3||–||–||–||4|
|Diane Radley3||Independent non-executive||3||1||–||–||–||1|
|1.||Kuben Pillay was appointed as member of the social and ethics committee and Paul Miller was appointed as member of the remuneration committee on 1 November 2017.|
|2.||Olufunke Ighodaro resigned as an independent non-executive director and as chairperson of the ARC committee on 30 November 2018. Diane Radley was appointed as chairperson of the ARC committee on this date.|
Terms of reference for board sub-committees are reviewed annually. The governance function of the board sub-committees is outlined in the respective committee terms of reference approved by the board.
Included in each committee’s terms of reference is the imperative to enhance the standard of governance within the group, together with clearly defined authority delegation and reporting procedures. The board receives formal feedback from the chairperson of each committee at each board meeting. Copies of the minutes of committee meetings are included in the board documentation.
BOARD SUB-COMMITTEES AT DATE OF REPORT
|Chairperson||Diane Radley1||Christopher Seabrooke1||Kuben Pillay1||Phumzile Langeni1||David Hurwitz2|
|Number of meetings per year||At least three||At least two||At least two||At least two||At least four|
|Composition||Independent non-executive directors.||Non-executive directors, the majority of whom are independent. The chairperson is the independent non-executive chairman of the board.||All members are non-executive, the majority of whom are independent.||The chairperson is an independent non-executive director. The committee comprises a majority of non-executive directors.||Includes independent non-executive directors as necessary.|
|1.||Independent non-executive director.|
Each of Transaction Capital’s divisions has its own board of directors, with each division’s governance processes aligned to Transaction Capital’s governance framework, thereby appropriately allocating levels of authority to individuals and committees throughout the group structure.
The composition of each division’s board includes non-executive directors, some of whom may be executive or non-executive directors of Transaction Capital. Directors of these boards are of sufficient calibre, experience, diversity and number for their views to carry significant weight in board decisions.
The activities of each division’s board include reviewing and providing input on the corporate strategy, business plans, risk propensity, budgets and sustainability. The strategies, business plans and performance criteria for each division are clearly defined, with appropriate key performance indicators in place to measure and monitor performance against their strategies.
Combined assurance framework
AUDIT, RISK AND COMPLIANCE
The ARC committee oversees the external audit function and the internal audit function, and is responsible for overseeing the combined assurance model and objectives, which include:
- Enabling an effective internal control environment.
- Supporting the integrity of information used for internal decision-making by management, the board and its committees.
- Supporting the integrity of external reports.
Internal audit, risk management and compliance collaborate on combined assurance to support the board, and to effectively cover the group’s significant risks and material matters.
The ARC committee is satisfied that the external auditor remains independent of the organisation and the group has a policy in place to address the provision of non-audit services by the external auditors.
The ARC committee considers the financial reporting procedures that are in place and whether these procedures are operating effectively.
The purpose, authority and responsibility of the internal audit function are defined in the internal audit charter, which is aligned to the requirements of the International Standards for the Professional Practice of Internal Auditing.
The group internal audit executive reports administratively to the CEO and functionally to the chairperson of the ARC committee. Internal audit has remained independent of all operational functions.
The role of internal audit is to support the achievement of strategic objectives (and the supporting operational, financial and compliance objectives) through a systematic, disciplined approach to evaluating and recommending improvements that serve to increase the effectiveness of internal controls, risk management and governance processes. The annual internal audit plan is based on an assessment of risk areas identified by internal audit and management, and is updated as appropriate to ensure it is responsive to changes in the group and its businesses. An independent quality review on internal audit was conducted during 2016, and the internal audit function was found to generally conform to the International Standards for the Professional Practice of Internal Auditing, which is the highest rating awarded during such a review.
In accordance with Transaction Capital’s combined assurance model, internal audit continues to liaise with external audit and other identified assurance providers to effectively assure against key risks.
RISKS AND OPPORTUNITIES
Transaction Capital has a board-approved risk framework, which sets the policy, risk appetite and tolerance levels of the group, identifies the top risks, and ensures ongoing risk oversight and monitoring for the group.
INFORMATION AND TECHNOLOGY
The board has delegated the governance of information and technology (IT) to the ARC committee, which also ensures that an IT governance reporting framework is in place. Chief information officers are appointed at each division, with the appointments ratified by the group CEO. IT expenditure is reported on and governed under the group’s authority framework. In the current financial year, the group implemented an updated IT policy that addresses the governance of IT in line with the recommended practices of King IV.
Each subsidiary sets its own strategy with regards to IT, and reports thereon to its board and the ARC committee. Disaster recovery and business continuity plans are in place for the group and are tested regularly. Compliance, information security, cybersecurity, risk and the control environment are all dealt with within each IT team.
In summary, IT governance ensures that IT goals are met and IT risks are mitigated so that IT delivers value to sustain and grow the divisions. IT forms an integral part of the business.
The ARC committee and social and ethics committee are responsible for compliance oversight. Board processes are in place to keep up to date with changes in the legislative landscape. The group-wide risk framework specifically manages compliance risk, with dedicated internal compliance functions in place within the divisions.
Regulatory compliance is non-negotiable. This approach is explicitly articulated in Transaction Capital’s values and ethics charter.
The board proactively oversees the review of the group’s systems of control and governance. It also continuously recommends enhancements to ensure that each division is managed ethically, in compliance with legislative requirements and in line with best practice governance guidelines.
Suitably qualified compliance officers are employed in the divisions that have high levels of regulatory compliance requirements, interaction and reporting. The roles of the compliance officers are to:
- Identify the applicable legislative, regulatory and governance requirements.
- Prepare relevant monitoring programmes relating to these requirements.
- Recommend improvements to the functional heads within the businesses, and assist with implementation.
Quarterly compliance reports are submitted by the divisions to the ARC committee and board for consideration.
The divisions actively engage with legal counsel where necessary for advice on the application and implementation of any proposed new legislation, as well as potential effects on their respective businesses.
As per the requirements of the JSE Debt Listings Requirements, adherence to the governance framework and King IV principles in relation to TransCapital Investment Limited have been overseen by Transaction Capital’s board and ARC committee.
Due to the nature of its businesses, the group is subject to a range of regulations and legislation including, without limitation:
- National Credit Act.
- Debt Collectors Act.
- Financial Sector Regulation Act.
- Insurance-related legislation including the Financial Advisory and Intermediary Services Act, the Insurance Act, the Short-term Insurance Act and Long-term Insurance Act.
- Financial Intelligence Centre Act.
- Consumer Protection Act.
- Competition Act.
- Legislation relating to the corporate affairs of the group, including the Companies Act, the Financial Markets Act, the JSE Listings Requirements and the JSE Debt Listings Requirements.
- Tax-related legislation, including the Income Tax
- Act and the Value-Added Tax Act.
- Labour-related legislation, including the Labour Relations Act, the Basic Conditions of Employment Act and the Employment Equity Act.
- Second-hand Goods Act.
Compliance with the letter and spirit of all laws, regulations and codes is required. The board, supported by the ARC committee, is responsible for keeping abreast of changes to the legislative landscape.
The remuneration committee is responsible for establishing and overseeing the group’s remuneration policy, which promotes the achievement of strategic objectives and encourages individual performance at all levels within the group.
Remuneration consists of base pay and short- and long-term incentives that are deemed to adequately remunerate executives while aligning executives with the requirements of shareholders. The remuneration policy and its implementation are put forward for separate non-binding advisory votes at the AGM. Shareholder approval is required for non-executive directors’ fees.