King IV

Application of the King IV principles

Reported as at June 30 2019

Bid Corporation Limited (Bidcorp or the company) is a listed company on the Johannesburg Stock Exchange operated by the JSE Limited (JSE). Bidcorp, operating as Bidfood in most geographies, has adopted a decentralised model of management which encourages the entrepreneurial spirit contained in each of its businesses. Each business is directly responsible for its product range, its buying and sales approach. Businesses retain their local brand, tone of voice, look and feel. The cultural differences are important to differentiate the regional locations. Customers should see each business as an autonomous, small, local business.

The company complies with the principles of King IV™* and the mandatory corporate governance requirements of the JSE. Paragraph 3.84 of the JSE Listings Requirements stipulates that issuers must comply with certain specific requirements concerning corporate governance. Bidcorp complies with all the requirements of paragraph 3.84.

For the period ended June 30 2019, Bidcorp applied all the principles of King IV as set out below.

LEADERSHIP, ETHICS AND CORPORATE CITIZENSHIP

LEADERSHIP

Principle 1 – The board should lead ethically and effectively

Bidcorp’s board of directors (the board) exercises effective leadership, adhering to the duties of a director. The directors have the necessary competence and act ethically in discharging their responsibility to provide strategic direction and control of the company as provided for in the board charter and the Bidcorp Memorandum of Incorporation (MoI).

The board charter outlines the policies and practices of the board on matters such as directors’ dealings in the securities of the company and declarations of conflicts of interest. Directors adhere to Bidcorp’s declarations of interest policy, which is based on the Companies Act requirements. The board, through the audit and risk committee, considers and takes note of the declarations of interests tabled and identifies and acts on conflicts. Bidcorp’s directors, executives and senior employees are prohibited from dealing in Bidcorp securities during company defined closed periods. The company secretary informs directors, executives and senior employees of the insider trading legislation and advises them of closed periods.

The board is committed to driving the strategy and Bidcorp’s international operations, based on an ethical value-based foundation, to support a sustainable business, acting in the best interest of the company, taking into account Bidcorp’s strategic impact on the environment and the stakeholders it reaches, as well as considering risks and overseeing and monitoring implementation and execution by management, ensuring accountability for the company’s performance.

The board exercises control through the governance framework of the company which includes detailed reporting to the board and its committees, board reserved decision‐making authority and a system of assurances on internal controls.

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ORGANISATIONAL ETHICS

Principle 2 – The board should govern the ethics of the company in a way that supports the establishment of an ethical culture

The board determines and sets the tone of Bidcorp’s values, including principles of ethical business practice, human rights considerations and the requirements of being a responsible corporate citizen and, through the social and ethics committee, approves Bidcorp’s code of ethics (code), based on responsibility, honesty, fairness and respect.

Management has been delegated the responsibility for implementation and execution of the code and the board, with the assistance of the social and ethics committee, exercises ongoing oversight of the management of ethics, monitoring Bidcorp’s activities with regard to ethics and ensuring it is integrated in the operations of the company.

The code guides interaction with all stakeholders of the group, including employees, and addresses the key ethical risks of the company. The ethics programme, including the independently administered anonymous tip‐offs service and management of the independent ethics reporting line to detect breaches of ethical standards, as well as the dedicated effort to create awareness, detect and resolve ethical violations and provide training on anti‐corruption and anti‐competitive behaviour, all contribute to a strong ethical foundation.

The code is published on the website and incorporated by reference in supplier and employee contracts. A high-level overview for governing and managing ethics is also disclosed in the integrated annual report.

RESPONSIBLE CORPORATE CITIZENSHIP

Principle 3 – The board should ensure that the company is and is seen to be a responsible corporate citizen

In accordance with its role of overseeing the company’s conduct as a good corporate citizen, the board approves the strategy and priorities of the business, including Bidcorp’s key material issues (including risks and opportunities) and, more specifically, those related to sustainability. Through ongoing continuous stakeholder engagement and collaboration, Bidcorp has committed to understanding and being responsive to the interests and expectations of stakeholders and to partnering with them in finding lasting solutions to sustainability challenges.

It is a Bidcorp imperative to be a values‐driven organisation, committed to delivering on local legislation positioned to right historical injustices such as the South African transformation requirements, the Saudi local upliftment efforts and the Brazilian human rights injustices, etc. Bidcorp is committed to these principles to fulfil its legal and moral obligations as a good corporate citizen.

The board, with the support of the social and ethics committee, oversees and monitors how the operations and activities of the company affect its status as a responsible corporate citizen.

Bidcorp’s integrated annual report, supplemented by web‐based sustainability reporting, details the group’s achievements in the scope of the sustainability framework, within the context of global change, material sustainability challenges, governance, ethics and human rights, safety, developing and retaining a skilled and diverse workforce, responding to the changing regulatory context, addressing climate change and promoting water stewardship, highlighting planned future focus.

STRATEGY, REPORTING AND PERFORMANCE

STRATEGY AND PERFORMANCE

Principle 4 – The board should appreciate that the company’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 collates and directs the decentralised operations strategies, aligning them with the overall purpose of the company, the value drivers of its business, the legitimate expectations of its stakeholders aimed at ensuring sustainability; and which takes into account the top group risks. The board oversees and monitors, with the support of its committees, the implementation and execution by management of the policies and priorities and ensures that the company accounts for its performance by, among others, reporting and disclosure. More details regarding the company’s performance against its strategic objectives will be reported in the 2019 integrated annual report.

REPORTING

Principle 5 – The board should ensure that reports issued by the company enable stakeholders to make informed assessments of the company’s performance, and its short, medium and long‐term prospects

The board, through the audit and risk committee, ensures that the necessary controls are in place to verify and safeguard the integrity of assurance and compliance reports as well as other disclosures. The company complies with all required disclosures. Reporting frameworks and materiality are approved by the audit and risk committee to ensure compliance with legal requirements and relevance to stakeholders.

The audit and risk committee, supported by the social and ethics committee in respect of non‐financial information, oversees the integrated annual reporting process and reviews the audited financial statements.

Bidcorp ensures that the annual reports, including the annual financial statements (AFS), the integrated annual report, the sustainability reports and any other relevant information to stakeholders are published on the company’s website, as well as through other media as is appropriate.

GOVERNING STRUCTURES AND DELEGATIONS

PRIMARY ROLE AND RESPONSIBILITIES OF THE BOARD

Principle 6 – The board should serve as the focal point and custodian of corporate governance in the company

The board has an approved charter which it reviews annually. The charter sets out its governance responsibilities, including the role, responsibilities, membership requirements and code of conduct. The board as well as any director or committee may obtain independent, external professional advice at Bidcorp’s expense concerning matters within the scope of their duties and the directors may request documentation from and set up meetings with management as and when required.

An appropriate governance framework and the necessary policies and processes are in place to ensure all Bidcorp entities adhere to foundational group requirements and minimum governance standards. Divisional entities confirm their compliance to the group governance requirements through a signed management representation letter, signed by the business chief executive and finance director, submitted to the audit and risk committee quarterly. Any non‐compliance to this management representation is disclosed through the independently chaired divisional audit and risk committee structure.

Bidcorp’s governance framework and corporate governance practices are disclosed in the integrated annual report.

COMPOSITION OF THE BOARD

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

Also applicable: JSE3.84(e): Categorisation of directors. JSE3.84(a): Balance of power and authority on the Board. JSE3.84(b): Appointment of CEO and Chairman. JSE3.84(i) and (j): Policy on the promotion of gender and race diversity on the Board. JSE3.84(d): CV of each director standing for election or re‐election.

The capacity of each director is categorised as defined in the JSE Listings Requirements, also taking into consideration King IV and other factors as outlined in the board charter. The board comprises a majority of independent non‐executive directors. A review of the independence of independent non‐executive directors is undertaken by the board, led by the lead independent director, Douglas Band, with the support of the nominations committee.

As at June 30 2019, there are two executive directors on the board namely, Bernard Berson, Bidcorp’s CEO and David Cleasby, Bidcorp’s CFO. The chairman role has been fulfilled by independent non‐executive director Stephen Koseff. There are six independent non‐executive directors on the Bidcorp board of the total nine directors. In terms of the company’s MoI, one‐third of directors must retire at every AGM and are eligible for re‐election. When considering appointment or re‐election of directors, the board, with the support of the nominations committee, gives consideration to the knowledge, skills and resources required for conducting the business as well as considering its size, diversity and demographics to ensure its effectiveness.

There is a clear distinction drawn between the roles of the CEO and chairman and these positions are occupied by separate individuals. All non‐executive directors have been determined by the board to be independent directors, barring Brian Joffe. In accordance with King IV, a lead independent director has been appointed to deal with any perceived issues flowing from the limited area of potential non‐independence or conflict of interests.

The board adopted a policy on the promotion of diversity at board level, including but not limited to diversity of gender and race, in compliance with the JSE Listings Requirements. The process for appointment and election of directors is set out in the company’s MoI. The nominations committee assists with the process of identifying suitable candidates to be proposed for appointment to the board and election by the shareholders, taking into consideration the annual review of the board’s effectiveness, which includes, among others, its composition.

A brief CV for each director standing for election or re‐election at the AGM is included in the Bidcorp integrated annual report and is available for review and download on the company’s website.

Newly appointed directors are inducted in Bidcorp’s business, board matters, their duties and governance responsibilities as directors under the guidance of the company secretary, in accordance with each director’s specific needs. Directors are given the opportunity to visit Bidcorp’s plants and operations and receive briefings on new legal developments and changes to the general business environment on an ongoing ad hoc basis.

The succession plan of directors is reviewed as required by the nominations committee and includes the identification, mentorship and development of future candidates.

COMMITTEES OF THE BOARD

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

Also applicable: JSE3.84(c): Audit Committee, Remuneration Committee and Social and Ethics Committee. JSE3.84(g): Expertise and experience of the financial director.

Committees have been established to assist the board in discharging its responsibilities. The committees of the board comprise the audit and risk committee, the nominations committee, the remuneration committee, the social and ethics committee and the acquisitions committee.

The committees are appropriately constituted and members are appointed by the board, with the exception of the audit and risk committee whose members are nominated by the board and elected by shareholders. The nominations committee reviews the composition of board committees and makes recommendations to the board with regard to their composition, including the appointment of the chairman of each committee, taking into account factors such as diversity and skills and the need to create an even spread of power and authority.

External advisers, executive directors and members of management attend committee meetings by invitation. The committees play an important role in enhancing the high standards of governance and achieving increased effectiveness within the group. Charters are drafted by the respective committees and board approved annually. The committee charters form part of the board charter and can be viewed on Bidcorp’s website.

The board considers the allocation of roles and associated responsibilities, and the composition of membership across committees holistically, so as to achieve the following:

  • Effective collaboration through cross‐membership between committees, where required; coordinated timing of meetings; and avoidance or duplication or fragmented functioning in so far as possible
  • Where more than one committee has jurisdiction to deal with a similar matter, the specific role and positioning of each committee in relation to such matter are defined to ensure complementary rather than competing approaches
  • There is a balanced distribution of power in respect of memberships across committees, so that no individual has the ability to dominate decision making, and no undue reliance is placed on any individual

The board applies its collective mind to the information, opinions, recommendations, reports and statements presented by the chairman of a committee.

Audit and risk committee

The board has an audit and risk committee membership comprising independent non‐executive directors only and its independence and effectiveness is reviewed on an annual basis. The audit and risk committee is constituted as a statutory committee of Bidcorp Limited in respect of its statutory duties in terms of section 94(7) of the Companies Act and a committee of the board in respect of all other duties assigned to it.

The committee performs the functions as set out in the Companies Act. Adequate processes and structures have been implemented to assist the committee in providing oversight and ensuring the integrity of financial reporting, internal control and other governance matters relating to subsidiaries.

The audit and risk committee membership includes independent, non‐executive directors only. The chairman of the board is not a member of the committee. Members of the committee are elected by shareholders. All committee members are financially literate and have extensive audit committee experience.
The committee provides independent oversight of, among others, the effectiveness of the company’s assurance services, with particular focus on combined assurance arrangements, including external assurance service providers, internal audit, the finance function and the integrity of the AFS and, to the extent delegated by the board, other external reports issued by the company. The committee also annually considers and satisfies itself of the appropriateness of the expertise and experience of the CFO and the finance function.

The performance of the audit and risk committee and significant issues dealt with during the year are set out in the report of the audit and risk committee included in the AFS.

Nominations committee

The board has delegated oversight of, among others, the following to the nominations committee

(i) the process for nominating, electing and appointing members of the board, (ii) succession planning of directors and (iii) evaluation of the performance of the board and its committees.

All members of the nominations committee are non‐executive independent directors and the board chairman is the chairman of the committee.

Remuneration committee

The remuneration committee is responsible for overseeing remuneration. All members of the committee are non‐executive directors. The chairman of the board is not a member of the committee.

Social and ethics committee

The social and ethics committee is responsible for overseeing and reporting on ethics, responsible corporate citizenship, sustainable development and stakeholder relationships. It is also responsible for executing the statutory duties set out in the Companies Act.
The chairman of the audit and risk committee, as well as the CEO, are members of the committee.

EVALUATION OF THE PERFORMANCE OF THE BOARD GOVERNING BODY

Principle 9 – The board should ensure that the evaluation of its own performance and that of its committees, its chair and its individual members, support continued improvement in its performance and effectiveness

The nominations committee evaluates the effectiveness and performance of the board, its committees and the individual directors every second year. The chairman of the board, through the committee and assisted by the company secretary, leads the evaluation process.

The board, with the support of the nominations committee determines the number of external directorships and other positions a director may hold, taking into consideration the relative size and complexity of the other organisation. Annually, the nominations committee considers other commitments of directors and whether the directors have sufficient time to fulfil the responsibilities as directors to ensure they can still execute their job effectively and are free from conflicts that cannot be managed satisfactorily.

The role of the chairman is formalised and regularly an assessment of the chairman’s ability to add value and his performance against what is expected of his role and function is conducted by the board. The lead independent director is responsible for ensuring that the performance of the chairman is evaluated regularly. The board and the nominations committee are responsible for succession planning for the position of the chairman.

The performance of the board, its committees and the directors are disclosed in the integrated annual report. The role and responsibilities of the board, its committees, the chairman and the directors are outlined in the board charter which is available on the company’s website.

APPOINTMENT AND DELEGATION TO MANAGEMENT

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

Also applicable: JSE3.84(h): The Company Secretary.

The CEO was appointed by the directors with effect from April 20 2016, on recommendation of the nominations committee. The nominations committee is responsible for ensuring that succession plans are in place for the CEO.

The board approves and regularly reviews the framework and top-level delegation of authority in terms of which matters are delegated to the CEO. The CEO is accountable to the board for the successful implementation of the group strategy and the overall management and performance of the group, consistent with the primary aim of enhancing long‐term shareholder value.

The CEO is not a member of the remuneration, audit and risk or nominations committees, but may attend any meeting, or part thereof, by invitation if needed to contribute pertinent insights and information. The board evaluates the performance of the CEO annually against agreed performance measures and targets.

The company secretary

Ms AK Biggs CA(SA) MBA, is the company secretary, duly appointed by the board in accordance with the Companies Act. Ms Biggs is not a director of the company. The board considers the competence, qualifications and experience of the company secretary annually and is satisfied that she is competent and has the appropriate qualifications and experience to serve as the company secretary.
The company secretary has a direct channel of communication to the chairman, while maintaining an arm’s‐length relationship with the board and the directors as far as reasonably possible. The role and responsibilities of the company secretary are described in the board charter.

GOVERNANCE FUNCTIONAL AREAS

RISK GOVERNANCE

Principle 11 – The board should govern risk in a way that supports the company in setting and achieving its strategic objectives

The board has direct responsibility for the governance of risk and approves Bidcorp’s risk policy that gives effect to its set direction on risk. Bidcorp’s risk policy re‐affirms that Bidcorp is committed to effective risk management in pursuit of its strategic objectives, with the ultimate aim to grow value sustainably for all stakeholders by embedding risk management into key decision‐making processes. The board, supported by the audit and risk committee, approves Bidcorp’s group top risk profile, risk appetite and tolerance levels, ensuring that risks are managed within these levels and considers the risk environment from time to time, as deemed appropriate and based on materiality and changes in the external and internal environments.

To support the board in ensuring effective risk management oversight, the audit and risk committee is responsible for ensuring the effective monitoring of relevant group top risks. In monitoring and providing oversight on Bidcorp’s risk, the audit and risk committee will consider potential risks and/or opportunities as appropriate.

Risks are considered at a group level through the management of group top risks and risks on the consolidation of business and divisional identified risks. Risks at the process level also include the management of operational, financial and legal compliance risks.

TECHNOLOGY AND INFORMATION GOVERNANCE

Principle 12 – The board should govern technology and information in a way that supports the company setting and achieving its strategic objectives

The board is ultimately accountable for the governance of information and technology (IT) management, supported by the audit and risk committee who are responsible for the oversight and monitoring of the governance of IT in the group.

Assurance is provided that the IT controls in place are effective, information management risks are addressed and the return on major IT investments are aligned to Bidcorp’s strategy. External auditors and internal audit perform assessments as part of their audit of IT‐related controls. All significant IT‐related audit findings are reported to the audit and risk committee and the board and are managed accordingly.

The IT governance framework is aligned to the group risk management framework, including third‐ party management and disaster recovery measures. All technology solutions impacting financial reporting are part of the internal and external auditing scope.

Measures to ensure compliance to all relevant laws, information security and the protection of personal information are in place.

COMPLIANCE GOVERNANCE

Principle 13 – The board should govern compliance with applicable laws and adopted, non‐binding rules, codes and standards in a way that supports the company being ethical and a good corporate citizen

Bidcorp’s quarterly management representation letter, in line with the group code of ethics, requires all group companies and their directors and employees to confirm compliance with all applicable local laws and regulations. Legal compliance systems and processes are in place and are improved to mitigate the risk of non‐compliance with the laws in the various jurisdictions in which Bidcorp does business and also to ensure appropriate responses to changes and developments in the regulatory environment.

The audit and risk committee receives quarterly reports on compliance matters. Specific areas of law have been identified as key group legal compliance risk areas, and risk mitigation and control steps have been identified for each of these areas.

Competition law, anti‐bribery and anti‐corruption laws, sanction laws and safety, health and environmental laws, have been identified as key group legal compliance risk areas, and require executive management’s focus.

REMUNERATION GOVERNANCE

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

Also applicable: JSE3.84(k): The remuneration policy and the implementation report.

Bidcorp has an embedded rewards strategy and policy which translates into competitive and appropriate reward outcomes. The policy and the implementation report are reported on in detail in the remuneration report.

Bidcorp’s remuneration committee is tasked by the board to independently approve and oversee the implementation of a remuneration policy that will encourage the achievement of Bidcorp’s strategy and grow stakeholder value sustainably.

The remuneration policy aims to enable the attraction and retention of skilled resources and results in rewards aligned with shareholder interests. The policy is designed to achieve the following objectives:

  • To attract, motivate, reward and retain human capital
  • To promote the achievement of strategic objectives in a manner which is aligned with the company’s approach to risk management
  • To promote positive outcomes aligned with short, medium and long-term objectives, an ethical culture and responsible corporate citizenship

The remuneration committee actively engages with Bowmans appointed as independent remuneration advisers, which has resulted in the remuneration policy developing and growing in its compliance journey. The remuneration committee considers shareholders’ contributions thoroughly and incorporates them into the policy where these enhancements align with the group’s strategy.

In line with the recommended practices in King IV, the adoption and implementation of the remuneration policy is tabled for a non‐binding advisory vote by the shareholders at the AGM. The remuneration policy provides for the measures that Bidcorp commits to take in the event that either the remuneration policy or the implementation resolution, or both, are voted against by 25% or more of the votes exercised at the AGM.

ASSURANCE

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 company’s external reports

The audit and risk committee is responsible for the quality and integrity of Bidcorp’s integrated reporting, supported by the social and ethics committee. The board, with recommendations from the audit and risk committee, satisfies itself that the combined assurance model is effective and sufficiently robust for the board to be able to place reliance on the combined assurance underlying the statements that the board makes concerning the integrity of the company’s external reports.

Based on the results of the review of Bidcorp’s systems of internal control and risk management, including the effectiveness of internal financial controls during the year ended June 30 2019, and considering information and explanations provided by management and discussions with the external auditor on the results of the external audit, the audit and risk committee chairman concluded that Bidcorp’s systems of internal control and risk management are effective. The group maintains a system of internal financial control that is designed to provide assurances on the maintenance of proper accounting records and the reliability of financial information used within the business.

A combined assurance approach has been implemented that assists in addressing control over the key risks facing the group. Such risks and their mitigating controls are identified and controlled by management, and the process is monitored and evaluated under the direction of internal audit. The traditional three lines of defence have also been expanded as recommended in King IV where appropriate.

Bidcorp internal audit is responsible for, among others, assisting the board and management in maintaining an effective internal control environment, ensuring the integration of assurance provided and monitoring the adequacy and effectiveness of combined assurance over Bidcorp’s risk management process.
An internal audit charter is in place and outlines the responsibilities of the internal audit function. The audit and risk committee has been delegated the responsibility for overseeing that assurance services are executed in line with the charter.

The annually presented risk-based internal audit plan, approved by the audit and risk committee, is based on an assessment of risk areas identified by internal audit, as well as focus areas highlighted by the audit and risk committee and management.

Divisional internal audit managers function independently from management and have the necessary authority, which includes unfettered access to meetings, minutes, documentation and risk registers of Bidcorp’s businesses and functions. Their performance is evaluated annually by the audit and risk committee and divisional management who confirm that they have the necessary competence and independence.

STAKEHOLDER RELATIONSHIPS

STAKEHOLDERS

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 company over time

Bidcorp strives to ensure a systematic and integrated approach to stakeholder engagement across the group, facilitated through engagement programmes aimed at a more systematic and integrated approach to stakeholder engagement. These programmes are designed to enable increased assurance to the board that all stakeholder issues have been identified, prioritised and appropriately addressed. The board, through the social and ethics committee, considers issues around stakeholder perceptions. The committee has oversight of stakeholder engagement and management.

It is a business imperative that Bidcorp understands and is responsive to the needs and interests of our key stakeholder groups which includes: employees and their representatives; government and regulators; shareholders; the communities around our operations; suppliers and customers; and business partners. The individual stakeholders within these groups are highly diverse and geographically spread, with competing interests sometimes. Bidcorp is therefore constantly seeking to improve the way in which it engages with its stakeholders to effectively respond to this complexity and diversity.

Interaction with stakeholders happens during the normal course of business at multiple levels across the group and Bidcorp strives to resolve disputes with its stakeholders effectively and expeditiously. The investor relations role is the custodian of the stakeholder engagement approach and ensures a coordinated and consistent approach across the group.

The company publishes its financial and operational performance and provides recent historical information, including its integrated annual reports, on its website. Bidcorp invites all shareholders to attend its AGM and also facilitates participation by way of focused proxy solicitation and electronic means. The CEO, CFO and various international management team members conduct presentations on the group’s performance and strategy to analysts, institutional investors and the media. Bidcorp’s investor relations function maintains regular contact with the investment community and analysts.