Corporate governance review

Governance practices and reporting

Datatec’s Board is fully committed to upholding the King III “RAFT” principles, namely:

  • Responsibility;
  • Accountability;
  • Fairness; and
  • Transparency.

The directors appreciate that these principles are essential for good governance and are important to successful stakeholder engagement.

The standards of disclosure are regulated by the Companies Act, the JSE Listings Requirements, AIM Rules and the King III Code. In addition, the Board has adopted the principles of corporate governance contained in the UK Code issued in September 2014 by the UK Financial Reporting Council.

The Board appreciates that effective corporate governance is a key driver of sustainability and acknowledges its responsibility in this regard, including to report openly thereon to stakeholders. Throughout the year (and up to the date of approval of this Integrated Report and annual financial statements), the principles articulated in the King III Code have been applied or, if not applied, explained, as have the main principles of the UK Code.

The Company has published a register, showing how it has applied the principles of the King III Code on its website www.datatec.com

The Board

The Board is responsible for the leadership and guidance of the Group and exercises control over all divisions and subsidiaries by monitoring the executive management. The Board is at the apex of the Group’s corporate governance structure and ensures the Group is a responsible corporate citizen, cognisant of the impact its operations may have on the environment and society in which it operates, while acting in accordance with Datatec’s Code of Conduct.

The Board is governed by a formal Board Charter that regulates the parameters within which it operates and defines its roles and responsibilities in accordance with legislation and global best practice. The Board Charter was comprehensively reviewed and updated in 2011 to reflect the King III Code and the Companies Act. The directors are of the opinion that they have adhered to the terms of reference set out in the Board Charter for the year. A copy of the Group's Board Charter is available on the website www.datatec.com

The responsibilities of the Chairman and CEO, and those of other non-executive and executive directors, are clearly separated to ensure a balance of authority which precludes any one director from exercising unfettered powers of decision-making.

The non-executive directors draw on their experience, skills and business acumen to ensure impartial and objective viewpoints in decision-making processes and standards of conduct. The mix of technical, entrepreneurial, financial and business skills of the directors is considered to be balanced, thus enhancing the effectiveness of the Board.

Datatec supports diversity among its stakeholders, particularly employees, and is an equal opportunities employer. Diversity is enshrined in Datatec’s Code of Conduct and the Board strongly supports the principle of diversity. In terms of gender diversity, the Board acknowledges that there is currently just one female among the eight directors and has determined that the Nominations Committee should give priority to seeking female candidates to fill forthcoming non-executive director vacancies.

To fulfil their responsibilities adequately, directors have unrestricted access to timely financial and other information, records and documents relating to the Group. The Board receives presentations from the management teams of its major subsidiaries, enabling it to explore specific issues and developments in greater depth.

Directors are provided with guidelines regarding their duties and responsibilities and a formal orientation programme has been established to familiarise incoming directors with the Group’s business, competitive position, strategic plans and objectives.

Directors’ attendance at Board meetings during FY16 and subsequently to the date of this report (all meetings were scheduled):

  10 March 2015 12 May 2015 15 July 2015 19 October 2015 26 January 2016 14 March 2016 10 May 2016
SJ Davidson P P P P P P P
RP Evans P P P – – – –
O Ighodaro P A P P P P A
JF McCartney P P P P P P P
JP Montanana P P P P P P P
PJ Myburgh P P P P P P P
LW Nkuhlu P P P P P P P
S Seabrooke P P P P P P P
NJ Temple P P P P P P P

P = Present  – = Not a director at the time  A = Absent

Independence and length of service

The Board has determined that the retirement age for directors should be maintained at 70 but in exceptional cases where service continues beyond this age the director concerned will be subject to annual retirement and re-election by shareholders at the Annual General Meeting. The Board is of the opinion that independence is a matter of a director’s character and attitude of mind and is not compromised after any particular length of service. On the contrary, the Board believes that the quality of service of its directors increases over time and that this is particularly true in relation to the chairs of committees and the Board.

The Nominations Committee and the Board review the independence of the non-executive directors thoroughly each year and this review of independence takes into account the length of service as a factor to be carefully considered in the assessment of independence, among other factors. The review process followed by the Nominations Committee and the Board highlights issues such as whether a non-executive director has the ability to control or significantly influence management, controls a significant number of shares in the Company or any of its subsidiaries, has any contractual relationships with the Company or if the non-executive director is a member of a board of another company with one or more Datatec directors.

The Company will continue to review the independence of its non-executive directors and regularly engage with its stakeholders to ensure good governance.

At the request of the Group, John McCartney continues to fill the role of non-executive director of WestconGroup and is separately remunerated for those services. The Board has determined that this does not impinge on his independence on the Datatec Board.

Rotation of directors

In terms of the Group’s Memorandum of Incorporation, one-third of the Board’s directors must retire from office at each Annual General Meeting on a rotation basis. Retiring directors may make themselves available for re-election, provided that they remain eligible as required by the Memorandum of Incorporation and in compliance with the JSE Listings Requirements and AIM Rules.

At the upcoming Annual General Meeting, Prof Nkuhlu, Mr Montanana and Mr Temple will retire by rotation and Mr Montanana and Mr Temple, being eligible, will offer themselves for re-election. On behalf of the Board, the Chairman confirms that, on the basis of the annual evaluation of the Board and of the performance of individual directors, the performance and commitment of Mr Montanana and Mr Temple throughout their periods of office have been highly satisfactory. The Board unanimously recommends shareholders to vote in favour of their re-election at the Annual General Meeting.

Reviews

In addition to Board and committee self-evaluations, the directors were evaluated during the year as follows:

  • Individual assessments conducted by the CEO and Chairman
  • Non-executive directors were assessed for independence by the Nominations Committee and the Board (as noted above)
  • The Chairman was assessed by the non-executive directors and CEO
  • The CEO was assessed by all the non-executive directors
  • The CFO was assessed by the Audit, Risk and Compliance Committee (see Audit, Risk and Compliance Committee report).
Share dealings and conflicts of interest

Datatec has a Share Dealing Code to regulate dealings by its directors and applicable employees in the Group’s shares. “Insider” is broadly defined in the Financial Markets Act 2012 and includes directors, prescribed officers in terms of the Companies Act, immediate family members of directors and/or prescribed officers, or any person who might have obtained information from an insider.

All directors and employees in the Group are prohibited from dealing, directly or indirectly, in Datatec shares or derivative financial instruments on the basis of previously unpublished, price-sensitive information.

All directors of the Group and directors of major subsidiaries are prohibited from dealing during closed periods and an appropriate communication is sent to all directors of the Group and the directors of major subsidiaries alerting them that the Company is entering a closed period.

Directors’ share dealings in appropriate periods must be authorised first by written permission from the Chairman, prior to any dealing taking place. Directors’ dealings are then reported to the Company Secretary, who along with the Company’s sponsor ensures that such dealings are disclosed on SENS in accordance with the JSE Listings Requirements. Datatec issues simultaneous notification on the UK RNS without delay as required by the EU Market Abuse regulations.

Directors are required to declare their interests at Board meetings and a register of interests is kept by the Company.

Succession planning

Succession planning for the Board, management team and senior executives is the responsibility of the Board, assisted by the Nominations Committee. There is a formal succession plan in place for the Chairman, CEO, Board, Board Committee Chairs and senior management that is reviewed annually by the Nominations Committee. The committee then reports to the Board, which determines if any action needs to betaken.

New appointments

A formal induction programme is in place for directors which comprises a presentation on responsibilities, familiarisation meetings and reviews of prior Board and committee meetings. Training is provided with regard to the Companies Act, JSE Listings Requirements and AIM Rules.

Board committees

The Board has established four committees to assist it with its duties:

  • Audit, Risk and Compliance Committee
  • Social and Ethics Committee
  • Remuneration Committee
  • Nominations Committee
Support functions
Independent advice

All directors have access to seek professional and independent advice about the affairs of the Group at the Group’s expense.

Company Secretary

All directors have unlimited access to the advice and services of the Company Secretary. The Company Secretary is responsible for the duties set out in section 88 of the Companies Act, including governance and proper administration of the Board, regulatory advice, monitoring the implementation of Board decisions and ensuring that ethical governance standards are implemented.

Datatec Management Services (Pty) Ltd, a South African company, is the Company Secretary. This company ismanaged by Simon Morris. The certificate required to be signed in terms of subsection 88(2)(e) of the Companies Act appears here.

The Board undertakes an annual evaluation of the Company Secretary in accordance with the JSE Listings Requirements. The evaluation criteria for the Company Secretary includes assessing the qualifications, knowledge of or experience with relevant laws, ability to provide comprehensive support and the ability to provide guidance to directors as to their duties, responsibilities and powers. The annual evaluation in October 2015 involved the completion of a questionnaire by Board members and a discussion during a meeting of the Board in the absence of the Company Secretary. Based on the results of the evaluation, the Board is comfortable that the Company Secretary maintains an arm’s length relationship with the Board at all times, has the relevant experience to discharge his duties and is sufficiently qualified and skilled to act in accordance with, and advise directors in terms of the JSE Listings Requirements and update the directors in terms of the recommendations of the King III Code and other relevant local and international law. Simon Morris is a qualified Chartered Accountant (ICAEW).

Application of King III

The full application of the King III Code showing the extent to which Datatec has applied its principles or giving reasons for the recommendations which have not been applied is set out in the Group’s King III Register available on the Group's website www.datatec.com

Board committees

Audit, Risk and Compliance Committee

During the year ended 29 February 2016, the Audit, Risk and Compliance Committee comprised four independent non-executive directors:

  • Chris Seabrooke (Chairman)
  • Funke Ighodaro
  • Prof Wiseman Nkuhlu
  • Stephen Davidson

The King III Code recommends that the Group Chairman should not sit on the audit committee but this is permitted by the JSE. The Board is of the view that the presence of Stephen Davidson, the Group Chairman, as a member of the Audit, Risk and Compliance Committee is a valuable aspect of the Group’s corporate governance and assists effective communication within the Board.

The committee considers its Chairman, Chris Seabrooke, to be designated the financially qualified member. Biographical details of the committee members, including their financial qualifications, are shown here.

The committee operates within defined terms of reference as set out in its Charter and the authority granted to it by the Board and meets at least three times a year, with the external auditors, the internal auditors, the Group Chairman (in addition to being a member of the committee), CEO, CFO, Chief Risk Officer and Group Legal invited to attend. The external and internal auditors have unrestricted access to the Audit, Risk and Compliance Committee and meet with the committee members, without management present, at least once a year. The Audit, Risk and Compliance Committee Charter is available on the Group’s website www.datatec.com.

The principal functions of the committee are to:

  • review the annual financial statements, the half-yearly results announcement and other financial reports;
  • assess the risks facing the business and review the Group’s risk management procedures; discuss the findings and recommendations of the internal and external auditors;
  • monitor the effectiveness of internal controls and comment on the state of the internal control environment (Risk report);
  • review the internal and external audit plans; and
  • review the effectiveness of the internal and external auditors.

Directors’ attendance at Audit, Risk and Compliance Committee meetings during FY16 and subsequently to the date of this report (all meetings were scheduled):

  5 March 2015 11 May 2015 19 October 2015 9 March 2016 9 May 2016
CS Seabrooke P P P P P
O Ighodaro P P P P P
LW Nkuhlu P P P P P
SJ Davidson P P P P P

P = Present

The committee reviews its performance annually by means of questionnaires completed by individual committee members and attendees which are then discussed at Board and committee meetings. These appraisals enable the committee to evaluate its effectiveness objectively and to conclude that it is operating effectively under the terms of reference set down in its Charter.

The committee is satisfied that it has met its responsibilities for the year under review and to the date of this report with respect to its terms of reference as set out in its Charter.

Furthermore, the committee is satisfied that it has complied with its legal and regulatory responsibilities throughout that period.

The Audit, Risk and Compliance Committee’s report to shareholders for the year ended 29 February 2016 is presented here in this Integrated Report.

The Chairman of the committee will be available at the Annual General Meeting to answer queries about the work of the committee.

Social and Ethics Committee

The Board has established a Social and Ethics Committee under the terms of the Companies Act 71 of 2008. This committee is chaired by Prof Wiseman Nkuhlu and in addition comprises the CEO, Jens Montanana, and Company Chairman, Stephen Davidson.

The committee operates within defined terms of reference as set out in its Charter and the authority granted to it by the Board and meets at least twice a year.

The Social and Ethics Committee Charter is available on the Group’s website www.datatec.com.

The committee’s role is to monitor the Company’s activities in the areas of social and economic development; good corporate citizenship; the environment, health and public safety; relationship with all stakeholders; and labour and employment matters. In carrying out this role, it will have regard to any relevant legislation, other legal requirements or prevailing codes of best practice.

A key role of the committee is to monitor the Company’s standing in terms of the goals and purposes of the ten principles set out in the United Nations Global Compact.

The committee monitors the application of the Company’s Code of Conduct across the Group and takes account of the OECD's recommendations for preventing corruption as well as anti-bribery and corruption legislation and best practice from around the world, including the US Foreign Corrupt Practices Act and the UK Anti-Bribery Act.

It also monitors the Company’s application of BBBEE legislation in its South African operations and the promotion of equality and prevention of unfair discrimination throughout the global operations of Datatec.

The committee also monitors the Company’s contribution to development of communities in South Africa undertaken through the work of the Datatec Educational and Technology Foundation.

Directors’ attendance at Social and Ethics Committee meetings during FY16 and subsequently to the date of this report (all meetings were scheduled):

  5 March 2015 19 October 2015 9 March 2016
LW Nkuhlu P P P
JP Montanana P P P
SJ Davidson P P P

P = Present

The committee reviews its performance annually by means of questionnaires completed by individual committee members and attendees which are then discussed at Board and committee meetings. These appraisals enable the committee to evaluate its effectiveness objectively and to conclude that it is operating effectively under the terms of reference set down in its Charter.

In summary, the committee’s role can perhaps best be described as overseeing the good corporate citizenship of the Group on behalf of the Board.

The committee’s report to shareholders for the year ended 29 February 2016 is presented here in this Integrated Report.

The Chairman of the committee will be available at the Annual General Meeting to present its annual report noted above and to answer queries about the work of the committee.

Remuneration Committee

The Remuneration Committee operates under terms defined in its Charter, which has been approved by the Board. The Remuneration Committee Charter is available on the Group’s website www.datatec.com.

The composition of the Remuneration Committee during FY16 was:

  • John McCartney (Chairman)
  • Stephen Davidson
  • Chris Seabrooke
  • Nick Temple

The Remuneration Committee’s meetings during FY16 and subsequently to the date of this report (all meetings were scheduled), together with the attendance of the committee members, are as follows:

  10 March 2015 12 May 2015 15 July 2015 19 October 2015 14 March 2016 10 May 2016
JF McCartney P P P P P P
SJ Davidson P P P P P P
CS Seabrooke P P P P P P
NJ Temple P P P P P P

P = Present

The CEO and the CFO may be invited to attend meetings of the Remuneration Committee, but neither may take part in any discussions regarding their own remuneration.

The role of the committee is to assist the Board to ensure that the Company remunerates directors and executives fairly and responsibly in alignment with the creation of long-term shareholder value and to ensure that the disclosure of director and senior management remuneration is accurate, complete and transparent.

The main functions of the committee include:

  • Determining, agreeing and developing the Company’s general policy on executive and senior management remuneration so that it will promote the achievement of strategic objectives and encourage individual performance;
  • Ensuring that the remuneration policy is put to a non-binding advisory vote at the general meeting of shareholders once every year;
  • Determining specific remuneration packages for executive directors of the Company, including basic salary, benefits in kind, annual performance-based bonuses, share incentives and pensions;
  • Determining any grants to executive directors and other senior employees made pursuant to the Company’s share schemes and satisfy itself as to the accuracy of recorded performance measures that govern the vesting of incentives;
  • Selecting an appropriate comparator group when comparing remuneration levels;
  • Regularly reviewing incentive schemes to ensure continued contribution to shareholder value and that these are administered in terms of the rules;
  • Advising on the remuneration of non-executive directors; and
  • Overseeing the preparation of, and recommend to the Board, the remuneration report, included in the Integrated Report.

The Remuneration Committee employs the services of specialist consultants in the field of executive remuneration to assist it when necessary. The consultants which have been retained in this role to date are Towers Watson and PricewaterhouseCoopers.

The committee reviews its performance annually by means of questionnaires completed by individual committee members and attendees which are then discussed at Board and committee meetings. These appraisals enable the committee to evaluate its effectiveness objectively and to conclude that it is operating effectively under the terms of reference set down in its Charter.

The Chairman of the committee reports on the committee’s activities at each Board meeting and committee members will be available at the Annual General Meeting to answer questions about the committee’s work.

Further details of remuneration matters are covered in detail in the remuneration section of this report.

Nominations Committee

The committee operates within defined terms of reference as set out in its Charter which has been approved by the Board. The Nominations Committee Charter is available on the Group’s website www.datatec.com.

The Nominations Committee currently consists of the following independent non-executive directors:

  • Stephen Davidson (Chairman)
  • Funke Ighodaro
  • John McCartney
  • Chris Seabrooke

The Nominations Committee’s meetings during FY16 and subsequently to the date of this report (all meetings were scheduled), together with the attendance of the committee members, are as follows:

  10 March 2015 19 October 2015 14 March 2016
SJ Davidson P P P
O Ighodaro P P P
JF McCartney P P P
CS Seabrooke P P P

P = Present

The CEO and CFO may be invited to attend the committee’s meetings, but neither may take any part in decisions regarding their own succession. The committee is satisfied that it has met its responsibilities for the year with respect to its terms of reference.

The committee is responsible for making recommendations to the Board regarding the appointment of new executive and non-executive directors and makes recommendations on the composition of the Board generally. The committee ensures that director appointments are formal and transparent and oversees succession planning for the Board and senior management.

The committee reviews its performance annually by means of questionnaires completed by individual committee members and attendees which are then discussed at Board and committee meetings. These appraisals enable the committee to evaluate its effectiveness objectively and to conclude that it is operating effectively under the terms of reference set down in its Charter.

The Chairman of the committee reports on the committee’s activities at each Board meeting and will be available at the Annual General Meeting to answer questions about the committee’s work.