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Corporate governance
Management approach
DRDGOLD’s Board of Directors (board) ensures that the principles of good corporate governance are upheld and implemented. All the directors are fully aware that they are the custodians of corporate governance in the organisation and this is reflected in the way they execute their fiduciary duties, which is with diligence, integrity and honour. The intention is that this filters down to all employees. The upholding of such ideals puts the company in a position to improve organisational performance and deliver value to shareholders and stakeholders alike. DRDGOLD has set up systems and controls to promote discipline, transparency, accountability, responsibility and fairness for the protection of the interests of shareholders, employees and the communities in which the company operates.
This section of the report should be read in conjunction with the corporate governance section on the DRDGOLD website at www.drdgold.com.
Corporate governance structure
| Non-executive directors | Chairman | Executive directors |
|---|---|---|
| J Turk | G C Campbell (non-executive director) | D J Pretorius |
| E A Jeneker | C C Barnes | |
| R P Hume |
| Audit Committee | Nominations Committee | Remuneration Committee | Risk Committee | Transformation and Sustainable Development Committee |
|---|---|---|---|---|
| R P Hume (chairman) | G C Campbell (chairman) | E A Jeneker (chairman) | D J Pretorius (chairman) | E A Jeneker (chairman) |
| G C Campbell | R P Hume | G C Campbell | G C Campbell | D J Pretorius |
| E A Jeneker | R P Hume | R P Hume | C C Barnes | |
| J Turk | E A Jeneker | |||
| J Turk | ||||
| C C Barnes |
Compliance
DRDGOLD’s primary listing is on the JSE Limited, and the company complies in the first instance with the JSE Listings Requirements. Its secondary listing is on the Nasdaq Capital Market and the company is registered with the Securities and Exchange Commission (SEC) in the United States of America. Accordingly, DRDGOLD is subject to compliance with the Sarbanes-Oxley Act of 2002 (SOX) and to certain Nasdaq Rules.
Integrated reporting and King III
DRDGOLD is fully committed to timeous, relevant and transparent communication of issues relevant to all stakeholders, and is committed to observing the provisions of the King Report on Corporate Governance for South Africa (the King III Report).
The King III Report came into effect on 1 March 2010. It replaces the King II Report as a codified body of principles which is intended to serve as a guideline for the enhancement of high standards of corporate governance. It adopts an ’apply or explain’ approach to corporate governance in contrast to the ’comply or explain’ approach that was adopted by the King II Report. The ’apply or explain’ approach implies that the board, in its collective decisionmaking, may conclude that, to follow a practice recommended in King III would not, in particular circumstances, be in the best interests of the company. In these circumstances, the board can decide to apply the recommendation differently or apply another practice and still achieve the objective of the overarching corporate governance principles of fairness, accountability, responsibility and transparency. In essence, the explanation or rationale of the application or otherwise of the principles and recommendations of the King III Report constitutes compliance with King III.
DRDGOLD complied substantially with the King III Report during the year under review. A more detailed account of DRDGOLD’s approach to the adoption of the King III Report is available under Corporate governance of the DRDGOLD Annual Integrated Report 2011.
The new Companies Act
The new South African Companies Act (Act No 71 of 2008) which was promulgated on 1 May 2011 has changed the corporate business landscape markedly. The company has put in place plans to convert the Transformation and Sustainable Development Committee into the Social and Ethics Committee and has converted its Memorandum of Association and Articles of Association into a Memorandum of Incorporation. DRDGOLD is fully committed to completing the legislated changes within the designated window periods and has already made use of the Act’s business rescue proceedings article in terms of Chapter 6 of the Companies Act to reduce the extent to which the company and its shareholders are exposed to risks related to its Blyvoor underground mining operation.
Restructuring of separate surface treatment and underground mining interests
On 14 January 2011, DRDGOLD announced a change in its group structure in order to better distinguish between its surface retreatment and underground operations. In terms of this restructuring, operating subsidiary DRDGOLD South African Operations (Proprietary) Limited changed its name to Ergo Mining Operations (Proprietary) Limited (Ergo Mining Operations) and controls the DRDGOLD surface operations with the exception of the surface operation of Blyvoor. Ergo Mining Operations therefore controls Ergo Mining (Proprietary) Limited (Ergo JV), Crown Gold Recoveries (Proprietary) Limited (Crown), ErgoGold, and East Rand Proprietary Mines Limited (ERPM). In addition, Blyvoor, primarily an underground mining operation previously held 100% by DRDGOLD SA, is now directly held by DRDGOLD (74%), Khumo Gold (20%) and the DRDSA Empowerment Trust (6%). This restructuring enables the company to maximise shareholder value through the development of separate investment opportunities.
Significant legal issues or fines
DRDGOLD did not incur any material fines during the year under review in respect of non-compliance with laws and regulations.
Leadership and oversight by the board
The board is responsible for setting the direction of DRDGOLD through the establishment of strategic objectives and key policies. It monitors the implementation of strategies and policies through a structured approach to reporting on the basis of agreed performance criteria and defined, written delegations to management for the detailed planning and implementation of such objectives and policies.
The board currently comprises two executive directors and four non-executive directors. The board charter sets out the directors’ responsibilities and serves as a standing guideline for the benefit of directors.
The majority of DRDGOLD’s directors are independent in accordance with the JSE Listings Requirements. In February 2005, DRDGOLD appointed Mr Campbell as the independent non-executive chairman of the board. The appointment of an independent chairman is in full compliance with the King III Report’s recommendations.
As Mr Campbell is not part of the executive, he approaches the business of the company in an impartial and objective manner.
DRDGOLD has adopted a formal and transparent policy in terms of which the Nominations Committee identifies, interviews and recommends short-listed candidates to the board. The board deliberates on the suitability of the candidates and appoints the most suitable person. This procedure is in compliance with both Nasdaq and JSE requirements.
There are a number of committees in place to enable the board to discharge its duties and responsibilities properly and to carry out its decision-making functions effectively. Each committee acts within written terms of reference which have been approved by the board and according to which specific functions of the board are delegated. Each committee has defined purposes, membership requirements, duties and reporting procedures. The committees are subject to regular evaluation by the board with respect to performance and effectiveness.
Sustainability leadership
The board established the Transformation and Sustainable Development Committee (Transco) for DRDGOLD to be able to achieve the triple bottom line espoused in the King III Report and in order to reach the empowerment goals to which this South Africanbased company is committed.
The objectives of this committee are to:
- promote transformation within the company and economic empowerment of previously disadvantaged communities, particularly within the areas where the company conducts business;
- strive towards achieving the goal of equality, as required by the South African constitution and other legislation and within the context of the demographics of the country, at all levels in the company and its subsidiaries; and
- conduct business in a manner that is conducive to the attainment of internationally acceptable environmental and sustainability standards.
Transco is chaired by an independent, non-executive director and met each quarter during the year.
Sustainability issues also fall within the ambit of the Audit, Risk, Remuneration and Nominations Committees. The Audit Committee is composed solely of non-executive directors, all of whom are independent according to the definition set out in the Nasdaq Rules. The six-member Risk Committee includes four nonexecutive directors and two executive directors. Four non-executive directors comprise the Remuneration Committee, all of whom are independent. Two independent non-executive directors make up the Nominations Committee.
Conflicts of interest
The company expects employees to perform their duties in accordance with the best interests of the company and not to use their position or knowledge gained through their employment with the company for their private or personal advantage. Directors are required to declare any material conflicts of interest which may have an impact on their ability to perform their duties in a manner that complies with good corporate governance practices.
Where necessary, the company may also seek independent legal opinion regarding potential conflicts of interests in so far as these may affect specific directors, to determine whether or not a conflict of interest exists and to provide appropriate recommendations to the company to follow in dealing with these matters.
Risk management
Responsibility for risk management at DRDGOLD starts with the board which delegates the discharge of some of the duties associated with this to its Risk Committee. These include risk management and control responsibilities, assurance issues, health, safety and environmental compliance, and the monitoring and reporting of all the matters.
Responsibility for the quality, integrity and reliability of the company’s risk management rests with the Risk Committee which facilitates communication between the board, the Audit Committee, internal auditors and other parties engaged in risk management activities.
Requirements of the King III Report and the Integrated Framework from the Committee of Sponsoring Organisations (COSO) have been incorporated into the company’s processes so that they also comply with SOX section 404 which deals with a company’s internal control systems.
The Risk Committee meets every quarter and reports back to the board.
The Risk Committee ensures that:
- an effective risk management programme is implemented and maintained;
- risk management awareness is promoted among all employees;
- risk programmes (financing/insurance) adequately protect the company against catastrophic risks;
- regular risk assessments are conducted;
- the total cost of risk in the long term is reduced;
- the protection of DRDGOLD’s assets is promoted throughout the company;
- the health, safety and well-being of all stakeholders is improved; and
- DRDGOLD’s activities are carried out in such a way that the safety and health of employees are ensured.
Identifying hazards and assessing risks
Quarterly risk assessments are carried out at each of DRDGOLD’s mines and divisions where all the key risks are analysed and new risks identified. Each risk is ranked and allocated to a person who is then responsible for the implementation of actions to mitigate the risk. All risks are included in a centralised database from which data is taken to draw up risk maps for each operation or division. These are then presented to management and the Risk Committee.
The process of conducting hazard identification and risk assessment for the operations is based on three aspects:
- the baseline assessment, which covers the whole operation in a systematic way in respect of all risks;
- the issues-based assessment, where specific assessments are carried out prior to the start of an activity; and
- the continual assessment of health, safety and environmental assessments, which forms part of the daily work programme.
Code of ethics
DRDGOLD is committed to the highest ethical standards. The company’s code of ethics, which may be accessed on the company’s website at www.drdgold.com, governs the relationship between the company and its stakeholders. The code applies to directors, officers, employees, contractors, communities, clients, customers and suppliers.
Commitment to external initiatives
DRDGOLD is an advocacy member of the Chamber of Mines of South Africa. The chamber is a voluntary membership, private sector employer organisation and is the principal advocate of major policy positions endorsed by the mining employers. It represents these to various organs of South African national and provincial governments and to other relevant policy-making and opinion-forming entities, both within the country and abroad. The chamber also works closely with the various employee organisations in formulating these positions where appropriate.