King IV WEB Disclosure

KING IV REPORT ON CORPORATE GOVERNANCE FOR SOUTH AFRICA 2016 (‘KING IV’)

The King IV report was released in November 2016, and replaces King III in its entirety. In terms of the JSE Listings Requirements, the Group is required to report in line with the principles of King IV. King IV builds on its predecessors’ positioning of sound corporate governance as an essential element of good corporate citizenship. It calls for an acknowledgement that a company doesn’t operate in a vacuum, but is an integral part of society and has accountability to its stakeholders.

The legal status of King IV is that of a set of principles accompanied by a range of leading practices that are designed to achieve compliance with the principles. The application regime for King IV is ‘apply and explain’. The more widely the leading practices are adopted, the more likely the company’s conduct will conform with the required standard of care, and the more likely its directors will meet the business judgement rule as provided in the Companies Act. King IV does, however, recognise that the suggested leading practices may not be suitable and appropriate for all companies. Mindless compliance is discouraged: leading practices are to be scaled in accordance with the size of turnover and workforce, the resources available, the extent and complexity of the company, and the level of impact it has on the triple context in which it operates.

The principal outcomes which compliance with King IV seeks to achieve are:
– an ethical culture with effective leadership;
– performance and value creation in a sustainable manner;
– adequate and effective controls; and
– trust, good reputation, and legitimacy.

Part 5.1: Leadership, Ethics and Corporate Citizenship

Principle 1: The Board should lead ethically and effectively

In accordance with the Board charter and the Group Code of Ethics (“the Code”), members of the Board are, individually and collectively, required to possess the following characteristics and exhibit them in their conduct. In this way they offer effective leadership designed to achieve the Group’s strategic objectives and positive outcomes over time.

1. Integrity
An essential prerequisite sought by the Nominations Committee for potential Board candidates is the nominee’s demonstrated track record of an ability to act in good faith and in the best interests of the Group. Areas of potential conflict of interest are required to be disclosed before appointment, and thereafter at the commencement of each Board meeting. A conflicted director may participate in debate, but is required to recuse him/herself when voting is conducted.

Ethical behaviour is expected to extend beyond mere legal compliance, and to set the tone for the entire Group.

2. Competence
Board members are required to ensure that they have sufficient working knowledge of the Group, the industry, the triple context in which it operates, and the principal laws, rules and codes of conduct to which it is subject. Responsibility for the development of this knowledge is the collective responsibility of the Board, and each member. Updates on relevant changes in applicable regulations are brought to the attention of Board members at the next Board meeting. In addition, members are encouraged, at the reasonable cost of the Group, to seek independent professional advice on all matters they consider necessary.

3. Responsibility
Members of the Board assume collective responsibility for setting the policy and direction of the Group, oversight of its implementation, and accountability for its performance. They set parameters for risk/reward opportunities in a manner which are both responsible and in the best interests of the Group in the triple context.

Members are expected to attend meetings of the Board and, where applicable, its committees. Attendees are expected to have devoted adequate time and effort to matters on the agenda so as to be properly prepared. Attendance at meetings during the past financial year is recorded in the Integrated Annual Report.

4. Accountability
Three committees, viz, audit and risk assessment, remuneration, and social, ethics and transformation have been formed to assist the Board in the discharge of its responsibilities. However, despite this delegation, the Board remains accountable.

5. Fairness
Board members have adopted a stakeholder-inclusive approach in the execution of their governance role, and are committed to directing the Group in a manner that does not adversely affect the natural environment, society or the well-being of future generations.

6. Transparency
The Board is transparent in the manner in which it exercises its governance role and responsibilities.

Board members are held to account for their ethical and effective leadership by continuous peer review, and an annual assessment by members of the conduct of the Board as a unit.

Principle 2: The Board should govern the ethics of the Group in a way that supports the establishment of an ethical culture.

The Board has:
– accepted responsibility for ensuring that management activity cultivates a culture of ethical conduct and that the highest level of integrity permeates all aspects of the Group’s business; and
– developed the Code to provide guidance to all employees to ensure they act with uncompromising honesty and integrity. The Code encompasses the Group’s interaction with both internal and external stakeholders, and the broader society. It is communicated to each employee at time of engagement, is reinforced at meetings of Exco, dealer principals and staff, and is posted on the Group’s internal web site. The Code aims to guide every level of the business in terms of expected behaviour and practices.

Subject to its oversight, the Board has delegated to management the responsibility for implementation and execution of the Code, and thereby the establishment of an ethical Group culture.

Management measures performance by reference to the number of instances of unethical behaviour detected and reported by Group employees, the internal audit department, business partners, and the outsourced, anonymous, toll-free hotline. Use is made of a consultant labour attorney to ensure that breaches of standards are dealt with fairly, that employee rights are recognised, and to apply sanctions and remedies that are appropriate.

Past and continued focus is on ensuring that the internal audit department continues to operate efficiently and effectively, and that the audit function is designed to concentrate on areas of perceived greatest risk and potential loss. Internal audit results provide the best barometer of adherence to standards, and the first indication of adverse trends.

Principle 3: The Board should ensure that the organisation is and is seen to be a responsible corporate citizen.

The Board assumes responsibility for ensuring that the Group’s core purpose, values, conduct and strategy are congruent with the laws of the country and in compliance with its own Code. In this way it strives to adhere to values aligned with responsible corporate citizenship.

The Board oversees the Group’s activities in the areas of:
– the workplace, where the development of its people is seen as a strategic imperative, and fundamental to its sustainability. The Group’s mission is to provide a stable and challenging work environment in which employees are treated with dignity on an equal opportunity basis, with open lines of communication, and are rewarded commensurate with their achievement. People development is viewed as a strategic imperative, fundamental to sustainability.

– transformation, where a strong emphasis on education and skills development will lead to greater diversity. This philosophy is applied to both senior and middle management, and technical and semi-skilled staff. The Group realises that the quality of leadership, at all levels, will influence its ability to retain its competitive edge. A focus on existing and potential leaders, particularly those from previously-disadvantaged backgrounds, serves to strengthen the current team, and ensure a robust leadership pipeline for the future. The Group’s achievements in the areas of equity employment and compliance with B-BBEE legislation are recorded in the Integrated Annual Report.

– the economy, including areas of wider economic transformation. In this regard the Group aims to achieve sustained profitability to enable it to meet its obligations to employees, suppliers, financiers, and shareholders. Fraud detection is enhanced by the use of whistle-blowers facilities. Offenders are appropriately treated in accordance with relevant legislation;

– the society, where issues such as public health and safety, consumer protection, and the need to treat customers fairly is top of mind. The Group contributes to various community and charitable projects in the areas in which it operates; and

– the environment, where recognition is given to the need for stewardship to minimise the consumption of natural resources, and dispose of waste in a responsible manner. The principal natural resource used by the Group is water for washing of vehicles. Consumption has been considerably reduced in recent years through the use of the CMH Green waterless car wash system. Further details of the Group’s efforts under this heading are recorded in the Integrated Annual Report. Adherence to health and safety regulations, both in the work and public areas, helps to minimise injuries and health impairment of staff and the community.

Part 5.2: Strategy, Performance and Reporting

Principle 4: The Board should appreciate that the Group’s core purpose, its risks and opportunities, strategy, business model, performance and sustainable development are all inseparable elements of the value-creation process.

The Board plays a prominent role in the strategy development process and ensures that it is aligned with the core purpose of the Group and its value-creation drivers. It exercises ongoing oversight of the implementation thereof by management, measured against agreed performance measures and targets.

Subject to this oversight, the Board delegates to management the formulation and development of the Group’s strategy and the responsibility for the execution and implementation of approved policies and operational plans. Development of Group strategy has reference to:
– timelines. The Group focuses primarily on the rolling 12 months ahead. Excluding its car hire fleet, the Group has a relatively low investment in long-term assets. Even the car hire fleet is, for practical purposes, of a short-term nature as it can be increased or decreased at short notice, through the retail motor division or to third parties. The Group’s strength and core focus is its adaptability and versatility to be able to react quickly to a changing economic environment. Medium- to long-term (2-3 years) planning relates primarily to the Group’s plans to retain or expand its current range of business segments;
– the triple context. Being specialists in the retail motor and car hire segments, management is easily able to assess the potential risks and opportunities posed in the triple context. Regarding the environmental issues, the businesses have a relatively low impact. In the social space, development promotes employment and increases opportunities for community upliftment;
– the capital resources available. Responsible and conservative cash flow planning is the cornerstone of strategy planning;
– the needs and expectations of material stakeholders. In this regard, management is cognisant of the need to generate sustainable growth in earnings and cash flow; and
– the inter connectivity of the above elements.

As part of its oversight role, the Board remains alert to the financial viability of the Group, its solvency, liquidity, and ability to continue as a going concern, and this is assessed by the Board biannually.

Issues relating to the Group’s disclosure on strategy and performance are addressed under Principle 5.

Principle 5: The Board should ensure that reports issued by the Group enable stakeholders to make informed assessments of its performance, and its short-, medium-, and long-term prospects.

The Board assumes responsibility for the Group’s reporting, taking into account management’s determination of the reporting framework and standards to be adopted, the various legal requirements, and the intended audience and purpose of each report.

The Board ensures that:
– annual financial statements, sustainability reports, social, ethics and transformation reports, and remuneration reports are issued timeously in compliance with legal requirements;
– an integrated report is issued at least annually;
– management’s base for determining materiality levels governing the inclusion or exclusion of information in external reports is reasonable; and
– the external reports, including this report on corporate governance, are published on the Group’s web site.

Part 5.3: Governing Structures and Delegation

Principle 6: The Board serves as the focal point and custodian of corporate governance in the Group.

The Board exercises its leadership role by:
– steering the Group and setting its strategic direction;
– approving of policy and planning that gives effect to the direction provided;
– exercising oversight of implementation and execution by management; and
– ensuring accountability for the Group’s performance.

The role, responsibilities, membership requirements and procedural conduct are contained in a Board Charter. The Charter is reviewed biennielly, and amended when considered necessary.

In the event that any Board member wishes to;
– obtain independent, external professional advice on matters within the scope of his/her duties, at the cost of the Group; or
– obtain documentation from, or liaise with, members of management;
such request must be directed to the Board chairman for prior approval.

Full details of the number of Board meetings held during the past financial year, and the attendance at those meetings, is recorded in the Integrated Annual Report.

Principle 7: The Board should comprise the appropriate balance of knowledge, skills, experience, diversity and independence for it to discharge its governance role and responsibilities objectively and effectively.

Full details of the Group’s compliance with this principle, and an explanation of how the requirements are applied in practice, are recorded in the Corporate Governance Report which is contained in the Integrated Annual Report.

Principle 8: The Board should ensure that its arrangements for delegation within its own structures promote independent judgement, and assist with balance of power and the effective discharge of its duties.

Subject to its ultimate accountability for all its responsibilities, the Board has delegated specific functions to Board committees, each with its own charter that defines its powers and duties. The terms of reference of each committee are reviewed and approved biennially by the Board, and include:
– the composition of the committee, and its role, responsibilities, authority and functions;
– its tenure. Committees are appointed for one year from the date of the annual general meeting of shareholders;
– its reporting requirements. Committees are required to report to the Board at the next Board meeting following the committee meeting; and
– a periodic evaluation of the committee’s performance.

The composition of each committee is designed to ensure that it has the necessary knowledge, skills, experience and capacity to execute its duties effectively, whilst ensuring that no individual has the ability to dominate decision-making. Each committee has at least three members. Members of the Board, including executive directors, are entitled to attend committee meetings, either by standing invitation or on an ad hoc basis, to provide information and insights in their areas of expertise. Non-members may not participate in discussion without the consent of the chairman, and may not vote.

The Board has established the following committees:
– audit and risk assessment;
– remuneration; and
– social, ethics and transformation
The Board has decided against the establishment of a formal nominations committee. If and when the need arises, an ad hoc committee will be constituted comprising non-executive independent directors, and chaired by the Board chairman.

Audit and risk assessment committee
The audit and risk assessment committee is a statutory committee established in compliance with the Companies Act. Its primary role is to provide independent oversight over, amongst others:
– the effectiveness of the Group’s assurance functions and services, with particular emphasis on combined assurance arrangements, including external assurance service providers, internal audit, and the finance function; and
– the integrity of the Integrated Annual Report and other external reports issued by the Group.

In addition to its statutory duties the Board has delegated to the committee the oversight of the Group’s risk governance.

The Board is satisfied that the committee:
– collectively has the necessary financial literacy, skills and experience to execute its duties effectively;
– comprises only independent, non-executive directors; and
– is chaired by a Board-nominated member.

The committee members, and its chairman, are nominated by the Board, and appointed subject to approval of shareholders at the annual general meeting.

Full details of the committee, and how it discharged its responsibilities, are disclosed in the Report of the Audit and Risk Assessment Committee contained in the Integrated Annual Report.

Remuneration committee
The Board has allocated oversight of remuneration to a dedicated remuneration committee. The committee comprises independent, non-executive directors, and is chaired by a Board-nominated member.

Full details of the committee, and how it discharged its responsibilities, are disclosed in the Report of the Remuneration Committee contained in the Integrated Annual Report.

Social, ethics and transformation committee
The social, ethics and transformation committee is a statutory committee established in compliance with the Companies Act. Its primary role is to provide independent oversight over the Group’s ethics, responsible corporate citizenship, social and economic development, environment, health and safety issues, and stakeholder relationships. In addition, the Board has delegated to the committee the task of ensuring that the Group has an appropriate strategy that aligns with transformation and skills development legislation.

The committee comprises both executive and non-executive directors, and is chaired by a Board-nominated member.

Full details of the committee, and how it discharged its responsibilities, are disclosed in the Report of the Social, Ethics and Transformation Committee contained in the Integrated Annual Report.

Principle 9: The Board should ensure that the evaluation of its own performance and that of its committees, its chairman and its individual members, support continued improvement in its performance and effectiveness.

The Board conducts formal biennial evaluations of its performance as a whole, and of its committees. Such evaluations are led by the Chairman of the Board, assisted by the company secretary, and take the form of evaluation questionnaires circulated to all members. Responses are co-ordinated by the company secretary and presented to members. Where deficiencies are detected, remedial action is taken. No material deficiencies were detected during the last evaluation.

Principle 10: The Board should ensure that the appointment of, and delegation to, management contribute to role clarity and the effective exercise of authority and responsibilities.

Chief executive officer appointment and role
The chief executive officer (“CEO”) is appointed by, and is accountable to, the Board. He is responsible for leading the implementation and execution of approved strategy, policy and operational planning, and serves as the link between management and the Board. The following issues have been agreed between the CEO and the Board:
– the CEO will not be a member of the audit and risk assessment, remuneration nor nominations committees, but may attend any meeting thereof by invitation;
– the CEO will not take up additional professional positions, save those related to charitable or community service organisations; and
– that six months’ notice of termination of service will be given by either party.

The Board confirms that succession planning, for both emergency and longer-term eventualities, is in place.

Delegation
The Board has developed a delegation of authority framework which articulates those powers and authority levels which it reserves for itself, and those which are delegated to management via the CEO. Whilst the CEO has the authority to appoint executives, the Board remains responsible to ensure that key management functions are headed by individuals with the necessary competence and authority, and are adequately resourced.

The Board is satisfied that the framework contributes to role clarity and the effective exercise of authority and responsibilities.

Professional corporate governance services to the Board
Through the office of the company secretary, the Board has access to professional and independent guidance on corporate governance and its legal duties. The company secretary has been appointed in compliance with the Companies Act and the JSE Listings Requirements to provide the Board with guidance and advice on discharging its responsibilities. With regard to the company secretary, the Board:
– is responsible for the appointment, terms of employment, and removal from office;
– ensures that the position carries the necessary empowerment and authority level;
– ensures that the incumbent has the necessary competence, gravitas and objectivity to provide independent guidance and support at Board level;
– ensures that the incumbent has unfettered access to Board members, but is able to maintain an arm’s-length relationship; and
– assesses, at least annually, the incumbent’s performance and independence.
Details of the company secretary are recorded in the Corporate Governance Report, contained in the
Integrated Annual Report.

Part 5.4: Governance Functional Areas

Principle 11: The Board should govern risk in a way that supports the Group in setting and achieving its strategic objectives.

The Board assumes responsibility for the governance of risk by setting the direction for how it should be approached in the Group. Risk is an inherent and integral element of business, and its governance encompasses both the associated opportunities and potential negative effects.

Oversight of the Group’s risk management function has been assigned to the audit and risk assessment committee, which has been tasked with giving due consideration to the effectiveness of risk management activities, the key risks facing the Group, and the responses taken to address them. Management carries the responsibility for implementation and execution of agreed policy.

The committee has, in conjunction with management, prepared a risk matrix which details primary identified risks, and management’s strategies to reduce the impact thereof. This matrix has been co-ordinated with the Group’s delegation of authority framework, as recorded in Principle 10, and aims to align the levels of potential risk with the appropriate authority level. The matrix includes:
– the risks and opportunities emanating from the triple context in which the Group operates, and the capitals it uses;
– the design and implementation of risk responses; and
– business continuity arrangements which allow the Group to operate under adverse conditions.

The key areas of focus, being the primary risks identified, and management’s strategies to reduce the impact thereof, are recorded below:

Low economic growth
• rapid reduction of working capital assets
• close monitoring of accounts receivable levels and quality
• review of operation overheads and efficiencies
• maximise efforts to retain existing customers and attract new customers by the provision of good service and follow up

Information and technology
• appropriate disaster recovery and business continuity plans
• decentralisation of systems
• implementation of access controls and segregation of duties
• emphasis on IT data security and protection of sensitive information

Management succession
• identification of individuals within the Group for training and leadership focus
• mentoring members of Exco to be the Group’s leaders of tomorrow
• extensive training programmes for lower management levels and technical staff

Key suppliers
• diversification of product range to reduce dependency on a single supplier
• development of good working relationships with principal suppliers

Business continuity
• diversification of business across many geographically-dispersed operating units
• wide range of key suppliers
• wide range of product offerings
• strategies to ensure compliance with B-BBEE legislation

Crime
• continual review of branch security
• strong internal financial controls
• established anti-hijacking measures
• anonymous, toll-free whistle-blowing facility for reporting of irregular activities
• gap analysis, being regular monitoring of actual profitability and working capital levels against budget

Legal compliance
• ongoing review of applicable legislation
• centralisation of selected specialist areas, eg. taxation and contracts, where compliance risk is high
• management awareness seminars on legislation amendments
• liaison with industry bodies on compliance issues

Insurance
The Group has in effect a comprehensive insurance policy administered by a reputable broker and underwritten by financially sound insurers. The principal areas of cover include:
• tangible assets – fire and allied perils;
• business interruption;
• public and employers’ liability;
• directors’ and officers’ liability;
• fidelity;
• business travel;
• motor fleet (subject to limits recorded below); and
• riot, strike and civil commotion.

In all instances, cover is subject to an excess which must be borne by the Group, and which is within the Group’s tolerance limits. Because of the perceived high cost: benefit assessment, the Group has no insurance cover in respect of “on-road” motor vehicle losses such as accident damage and theft. The low aggregation risk and the predictability of these losses mitigates against insurance, but full provision for potential losses is provided internally. To-date, no material unexpected losses have occurred in respect of these uninsured risks.

Principle 12: The Board should govern technology and information in a way that supports the Group setting and achieving its strategic objectives.

Information and technology (“IT”) is essential to manage and safeguard the transactions, information and knowledge necessary to sustain Group operations. It is an integral part of the business and fundamental to its growth generation and sustainability. The Board is responsible for the governance of IT and sets the direction for how it is addressed in the Group. To this end, the Board approves IT policy and delegates to management the responsibility of implementation and execution, whilst exercising oversight to ensure the achievement of the Group’s strategic objectives.

The oversight role aims to ensure that:
– people, technologies and processes are integrated across the Group;
– IT risks are considered alongside Group-wide risks;
– systems are in place to identify and counter incidents of cyber crime and adverse social media events;
– relationships with outsourced service providers are adequately managed;
– investment in IT is assessed in terms of cost and expected delivery of value; and
– information generated is adequately protected, and used ethically and responsibly in compliance with relevant laws.

The individual responsible for the IT department is suitably qualified and experienced. He is a member of the Group executive committee (“Exco”), and regularly interacts with both the Board and Exco members on related matters.

The Group has a relatively low level of investment in IT hardware, the majority of it related to desktop and communication equipment. The principal software applications, and the hosting and update thereof, are outsourced from industry specialists. These applications are principally in respect of:
– motor retail dealer accounting and management;
– car hire accounting, fleet management, and bookings;
– payroll processing and employee information management;
– e-mail, web hosting and SMS communication;
– online marketing; and
– customer relationship management.

The effectiveness of IT management is measured with reference to:
– software glitches and / or malfunctions causing disrupted operations;
– network downtime;
– ongoing testing of disaster recovery plans and processes;
– reported / detected attempts to breach the information systems; and
– adherence to budgeted and approved cost projections.

Obsolete hardware is disposed of through a responsible outsourced specialist, after it has been sanitised to permanently remove all stored information.

Key areas of focus during the past year, and which are expected to remain of importance during the year ahead are;
– ongoing development of online marketing, the generation of sales leads, and the conversion of these leads into sales;
– steps taken to minimise the threat of cyber crime; and
– efforts to drive down the cost of communication systems, in respect of both data and voice transmission, whilst not compromising on line speed or voice quality.

Principle 13: The Board should govern compliance with applicable laws and adopted, non-binding rules, codes and standards in a way that supports the Group being ethical and a good corporate citizen.

The Board assumes responsibility for the Group’s compliance with the various laws, rules, codes and standards that apply to its operations. The task of implementing and executing the Board’s policy and direction is delegated, subject to oversight, to executive management.

The responsibilities include:
– identification and advice on existing or new legislation that is applicable to the Group;
– facilitating compliance and assigning responsibility; and
– monitoring compliance.

The risk of non-compliance with regulatory requirements is mitigated by:
– review and discussion of new legislation at both Board and Exco meetings;
– attendance at management awareness seminars held by legislation specialists;
– centralisation of selected specialist areas, where the risk of non-compliance could be material. These include taxation, health and safety, property lease contracts, manufacturer franchise agreements, and finance facilities; and
– close liaison with manufacturers, finance houses, the Retail Motor Industry bodies, the SA Vehicle Renting and Leasing Association, and the Group’s legal advisors.

The Group’s areas of focus, both during the year under review and planned for the year ahead, are those special risk areas mentioned above, where compliance is centralised at head office.

Principle 14: The Board should ensure that the Group remunerates fairly, responsibly and transparently so as to promote the achievement of strategic objectives and positive outcomes in the short, medium and long term.

Full details of the Group’s compliance with this principle, and an explanation of how the requirements are applied in practice, are recorded in the Report of the Remuneration Committee which is contained in the Integrated Annual Report.

Principle 15: The Board should ensure that assurance services and functions enable an effective control environment, and that these support the integrity of information for internal decision-making and of the Group’s external reports.

The Board assumes responsibility for assurance by setting the direction concerning the arrangements for assurance services and functions. Subject to its oversight, the Board has delegated to the audit and risk assessment committee the responsibility for ensuring that those arrangements are effective in achieving:
– an effective internal control environment;
– support of the integrity of information used for internal decision-making by management, the Board, and its committees; and
– the integrity of external reports.

The Group applies a combined assurance model, which is a co-ordinated approach to assurance activities provided by internal and external assurance specialists, and management. The model is designed to ensure that sufficient controls exist to mitigate and reduce significant risk areas within the Group so that, taken as a whole, it supports the assurance objectives without omissions or necessitating duplication of effort. It achieves this through:
– the Group’s line managers who own and manage departmental risks;
– the internal audit department that facilitates and oversees compliance;
– independent external auditors; and
– other independent assurance service providers in areas such as health and safety, and the environment.

The audit and risk assessment committee, and the Board, review and assess the output of the combined assurance process with objectivity and professional scepticism to form an opinion on the integrity of the reports, and the degree to which an effective control environment has been achieved.

Assurance of external reports
The Board assumes responsibility for the integrity of external reports issued by the Group by setting the direction for how assurance of these reports should be approached and addressed. In this regard, the Board considers the following factors to satisfy itself that the combined assurance model is effective and sufficiently robust to provide reliance in support of the integrity of the reports:
– the legal requirements;
– whether assurance should be applied to the underlying data extracted to compile the report, the process for preparing and presenting the report, or both;
– whether the nature, scope and extent of assurance are suited to the intended audience and purpose of the report; and
– the specification of applicable criteria for the measurement or evaluation of the underlying subject matter of the report.

Each external report discloses a description of the assurance functions, services and processes underlying its preparation, and a statement by the Board verifying its integrity.

Further details regarding how the audit and risk assurance committee has applied the combined assurance model are recorded in the Report of the Audit and Risk Assessment Committee contained in the Integrated Annual Report.

Internal audit
The Board, through delegation to the audit and risk assessment committee, assumes responsibility for internal audit by setting the direction for the arrangements needed to provide objective and relevant assurance that contributes to the effectiveness of governance, risk management and control processes. In this regard, the Board:
– approves an internal audit charter that defines the role and associated responsibilities and authority of the department; and
– ensures that the department has the necessary skills and resources to address the complexity and volume of risks faced by the Group.

The Board approves the appointment, employment terms, and removal of the chief audit executive, and ensures that the position:
– has the necessary competence, gravitas, and objectivity;
– is independent from executive management;
– has access to the Board chairman;
– is not a member of executive management, but is invited to attend executive meetings to be informed about strategy and policy decisions; and
– reports to the chairman of the audit and risk assessment committee on the performance of the internal audit department.

The internal audit department provides a biannual written statement to the Board regarding the effectiveness of the Group’s governance, risk management and control processes.

Principle 16: In the execution of its governance role and responsibilities, the Board should adopt a stakeholder-inclusive approach that balances the needs, interests and expectations of material stakeholders in the best interests of the Group over time.

Stakeholder relationships
The Board assumes responsibility for the governance of stakeholder relationships by setting the direction for how they should be approached and conducted, and by approving policy that articulates and gives effect thereto. Responsibility for implementation and execution of effective stakeholder relationship management is delegated to management, subject to Board oversight.

The Board acknowledges the importance of proactive engagement with all of its stakeholders and, in this regard, strives to foster sound relationships between the Group and each stakeholder grouping. The identified stakeholder groups include:
shareholders and investors. This group is seen as the main audience of the Group’s Integrated Annual Report. Communication with these stakeholders is primarily through formal means via the Group’s web site, the JSE stock exchange news service, publications in the financial press, distribution of annual and interim financial results, and the annual general meeting of shareholders (AGM). The AGM is attended by all directors, who are available to respond to shareholders’ queries on how the Board executed its governance duties. Also present is the designated partner of the Group’s external auditors. Minutes of the AGM are made publicly available via the JSE stock exchange news service. Throughout the year executive directors are accessible to shareholders and potential investors. In addition, invitations are extended to members of the Investment Analysts Society to attend results presentations to provide them with timeous and relevant information regarding financial information and prospects. The Board is mindful of its obligation to treat shareholders equitably, and to protect minority interests.

employees. The engagement with this group is through:
– regular dialogue and communication sessions
– team-building exercises
– notice boards
– newsletters
– training and development sessions
– internet and email
– branch visits

– banks and vehicle finance houses. Communication is through regular meetings with senior management.

customers. Communication is through:
– interaction on dealership floors
– sales follow-up
– emails and SMS

suppliers. Interaction is through
– daily communication with dealership management
– periodic meetings with senior management

industry bodies. Regular update sessions are attended, and written communications received.

Group company relationships
The Board of the holding company assumes responsibility for governance across the Group by setting direction and approving a Group governance framework that articulates and gives effect to its direction on relationships and the exercise of authority across the Group. In all material instances, the Group directors represent the sole, or a majority of, directors of subsidiaries. This ensures that the boards of subsidiaries are included in the Group governance framework, despite them being separate legal entities to which its directors owe fiduciary duties.

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