Governance

Introduction

The board is ultimately responsible for and is committed to ensuring good corporate governance throughout the company in line with the requirements of King III. It is responsible for the performance and affairs of the company and effectively represents and promotes the legitimate interests of the company and its shareholders. The group is committed to achieving its goals with integrity, high ethical standards and in compliance with all applicable laws. The board has adopted a code of ethics and business conduct, which is continuously reviewed and updated. The board, at all times, retains full and effective control over the company and it directs and supervises the business and affairs of the company.

The board ensures that the company is and is seen to be a responsible corporate citizen by considering the financial aspects of the business of the company and the impact that company operations have on the environment and the communities within which it operates. The board acknowledges that strategy, risk, performance and sustainability are inseparable and contributes to and approves the company’s strategy, assesses the risk management process and ensures that the strategy will result in sustainable outcomes.

Governance structure

King III compliance

A
Full application
P
In process or partially applied

 
Principal
Level of
compliance
Comments
1. Ethical leadership and corporate citizenship

 

 
1.1 The board should provide effective leadership based on an ethical foundation
A
Ethics form part of the values of the board and company.  Effective and ethical leadership is entrenched in the board’s decision making and the board complies with the principles of the code of ethics and business conduct and good corporate governance in terms of King III
1.2 The board should ensure that the company is, and is seen to be, a responsible corporate citizen
A
The company identifies and contributes to selected corporate social investment initiatives.  The board has adopted a code of ethics and business conduct, which governs the manner in which the company conducts itself
1.3 The board should ensure that the company’s ethics are managed effectively
A
The board meets regularly to review management of the company.  The company outsources property management to an associate and ensures that all service provides have a code of ethics that is aligned with that of the company.  The board has instituted an independent whistle blowers’ line with Whistleblowers which can be used by any stakeholder to report unethical behaviour.  An anti-fraud, theft, corruption and cyber-crime policy was approved during the reporting period.  The reports are reviewed regularly by the audit and risk committee as well as the social and ethics committee
2. Board and directors
 
 
2.1 The board should act as the focal point for and custodian of corporate governance
A
The board carries out its duties with the highest standards of corporate governance in mind
2.2 The board should appreciate that strategy, risk, performance and sustainability are inseparable
A
Board strategy is discussed at board meetings and the strategic direction of the company approved, bearing in mind shareholder returns, sustainability and risk management
2.3 The board should provide effective leadership based on an ethical foundation
A
Effective and ethical leadership is entrenched in the board’s decision-making processes
2.4 The board should ensure that the company is and is seen to be a responsible corporate citizen
A
The board has adopted a code of ethics and business conduct which governs the manner in which the company conducts itself
2.5 The board should ensure that the company’s ethics are managed effectively
A
The board has adopted a code of ethics and business conduct which governs the manner in which the company conducts itself
2.6 The board should ensure that the company has an effective and independent audit and risk committee
A
The audit and risk committee comprises of three independent non-executive directors.  All the members have the necessary skills and experience required by the audit and risk committee
2.7 The board should be responsible for the governance of risk
A
The board is responsible for the management of strategic and operational risks within the company
2.8 The board should be responsible for information technology (IT) governance
A
The board takes overall responsibility for IT governance.  The board delegated this function to the audit and risk committee.  An IT steering committee was established during the reporting period and the chairman of this committee attend audit and risk committee meeting by invitation.  The minutes of the IT steering committee as well as an IT report are included and reviewed by the audit and risk committee as well as the board
2.9 The board should ensure that the company complies with applicable laws and considers adherence to non-binding rules, codes and standards
A
The board keeps abreast of changes to legislation through notifications received from the audit and risk committee, social and ethics committee and corporate advisors
2.10 The board should ensure that there is an effective risk-based internal audit
A
KPMG has been appointed as internal auditors and the internal audit plan was approved and progress against the plan reviewed at each audit and risk committee meeting.  Findings are discussed as well as management comments
2.11 The board should appreciate that stakeholders’ perceptions affect the company’s reputation
A
The board ensures continuous communication with key stakeholders through the publication of relevant information through company newsletters and news releases on the company website as well as relevant SENS announcements
2.12 The board should ensure the integrity of the company’s integrated report
A
The audit and risk committee is tasked with reviewing the integrity of the integrated report and recommending its approval to the board
2.13 The board should report on the effectiveness of the company’s system of internal controls
A
The effectiveness of the company’s internal control systems is reviewed by management, as well as internal and external auditors.  A combined assurance framework has been adopted during the reporting period
2.14 The board and its directors should act in the best interests of the company
A
The board of directors as a whole and as individuals understand their fiduciary responsibility to act in the best interests of the company
2.15 The board should consider business rescue proceedings or other turnaround mechanisms as soon as the company is financially distressed as defined in the Act
A
The board has noted this responsibility and will deal with it in accordance with the provisions of the Companies Act, King III and advice received from advisors should the need arise
2.16 The board should elect a chairman of the board who is an independent non-executive director.  The CEO of the company should not also fulfil the role of chairman of the board
A
The independent chairman of the board’s role is separate from that of the chief executive officer
2.17 The board should appoint the chief executive officer and establish a framework for the delegation of authority
A
A chief executive officer has been appointed and an approvals framework (reviewed annually) is in place which delegates specific powers and delegations of authorities to management
2.18 The board should comprise a balance of power, with a majority of non-executive directors.  The majority of non-executive directors should be independent
A
The board comprises a majority of non-executive directors of whom a majority are independent
2.19 Directors should be appointed through a formal process
A
The board decides on appointments.  Deliberations and appointments are formal and transparent in terms of the policy for the appointment of directors to the board, which is annexed to the board charter and the remuneration and nominations committee assists the board in determining the skills required
2.20 The induction of and ongoing training and development of directors should be conducted through formal processes
A
Training is arranged for the board as required.  Members of the board are entitled to receive training at the company’s expense
2.21 The board should be assisted by a competent, suitably qualified and experienced company secretary
A
The board confirms that it is satisfied with the qualifications and experience of the company secretary of Pivotal, being Juba Statutory Services represented by Sirkien van Schalkwyk
2.22 The evaluation of the board, its committees and the individual directors should be performed every year
A
The board has formulated a formal evaluation process and will conduct the evaluation annually
2.23 The board should delegate certain functions to well-structured committees without abdicating its own responsibilities
A
The company has established an audit and risk committee, remuneration and nomination committee, social and ethics committee as well as an investment committee.  An IT steering committee was also established during the reporting period and report to the board via the audit and risk committee.  All committees have a formal, approved terms of reference and conducts formal meetings as required
2.24 A governance framework should be agreed between the group and its subsidiary boards
P
Not applicable in the current structure as there are no major subsidiaries
2.25 Companies should remunerate directors and executives fairly and responsibly
A
The board reviews the remuneration of the directors and executives.  The remuneration is benchmarked against industry levels and, where applicable, is performance-based.  The remuneration philosophy which is reviewed by the remuneration and nominations committee will be tabled for shareholders’ approval at each annual general meeting
2.26 Companies should disclose the remuneration of each individual director and certain senior executives
A
Remuneration of each director is disclosed in the integrated report
2.27 Shareholders should approve the company’s remuneration policy
A
The remuneration philosophy is tabled for approval by shareholders at the annual general meeting
3. Audit and risk committees
 
 
3.1 The board should ensure that the company has an effective and independent audit and risk committee
A
The board has an audit and risk committee in compliance with the Companies Act, 2008 as amended and King III
3.2 Audit and risk committee members should be suitably skilled and experienced independent, non-executive directors (subsidiary exemption)
A
The committee consists of suitably qualified and experienced independent non-executive directors
3.3 The audit and risk committee should be chaired by an independent non-executive director
A
The committee is chaired by an independent non-executive director
3.4 The audit and risk committee should oversee the integrated reporting (integrated reporting, financial, sustainability and summarised information)
A
The committee reviews the integrated report prepared by management and recommend this to the board for final approval
  The audit and risk committee should be responsible for evaluating the significant judgements and reporting decisions affecting the integrated report
A
All significant judgements and reporting decision are reported to the committee.
  The audit and risk committee’s review of the financial reports should encompass the annual financial statements, interim reports, preliminary or provisional result announcements, summarised integrated information, any other intended release of price-sensitive financial information, trading statements, circulars and similar documents
A
The audit and risk committee reviews all integrated reports, interim results and any provisional results announcements prior to release.
3.5 The audit and risk committee should be responsible for evaluating the significant judgements and reporting decisions affecting the integrated report
P
All significant judgements and reporting decision are reported to the committee for consideration and evaluation
3.6 The audit and risk committee’s review of the financial reports should encompass the annual financial statements, interim reports, preliminary or provisional result announcements, summarised integrated information, any other intended release of price-sensitive financial information, trading statements, circulars and similar documents
A
The audit and risk committee reviews all integrated reports, interim results, any provisional results announcements as well as any correspondence to the public prior to release
3.7 The audit and risk committee should ensure that a combined assurance model is applied to provide a coordinated approach to all assurance activities
A
A combined assurance framework was approved during the reporting period and will be implemented in the current financial year
3.8 The audit and risk committee should satisfy itself of the expertise, resources and experience of the company’s finance function
A
The committee performs an annual review of the financial director and finance function of the group through discussion with management.
3.9 The audit and risk committee should be responsible for overseeing of internal audit
A
KPMG has been appointed as internal auditors subject to oversight by the audit and risk committee
3.10 The audit and risk committee should be an integral component of the risk management process
A
The company has a combined audit and risk committee
3.11 The audit and risk committee is responsible for recommending the appointment of the external auditor and overseeing the external audit process
A
The committee oversees the external audit functions and reviews the appropriateness and independence of the external auditor annually
3.12 The audit and risk committee should report to the board and shareholders on how it has discharged its duties
A
The committee formally reports to the shareholders in the annual report and at each board meeting
4. The governance of risk
 
 
4.1 The board should be responsible for the governance of risk
A
The board has delegated the oversight of the risk management function to the audit and risk committee.  Risk matters are discussed at each meeting and feedback provided at board meetings.  Annual risk workshops are held to consider all risks on the risk register in detail
4.2 The board should determine the levels of risk tolerance
A
The board operates within its approved terms of reference, framework and policy which are reviewed on an annual basis.  Risk tolerance levels are discussed at each committee meeting
4.3 The audit and risk committee should assist the board in carrying out its risk responsibilities
A
The audit and risk committee assists the board in carrying out its risk management responsibilities and report back to the board at each meeting
4.4 The board should delegate to management the responsibility to design, implement and monitor the risk management plan
P
An initial risk management plan has been approved by the board and reviewed annually
4.5 The board should ensure that risk assessments are performed on a continual basis
A
The board, with the assistance of the audit and risk committee, reviews the risk register at its quarterly meetings.  An annual risk workshop is held to discuss risks in detail
4.6 The board should ensure that frameworks and methodologies are implemented to increase the probability of anticipating unpredictable risks
A
The risk management system endeavours to anticipate unpredictable risks
4.7 The board should ensure that management considers and implements appropriate risk responses
A
Management reports any material risks and its approach to the audit and risk committee on a regular basis
4.8 The board should ensure continual risk monitoring by management
A
Management reports any material risks and its approach to the audit and risk committee on a regular basis
4.9 The board should receive assurance regarding the effectiveness of the risk management process
A
The audit and risk committee reports on the effectiveness of the risk management process to the board
4.10 The board should ensure that there are processes in place enabling complete, timely, relevant, accurate and accessible risk disclosure to stakeholders
A
The board ensures appropriate risk disclosure to stakeholders
5. The governance of Information Technology
 
 
5.1 The board should be responsible for information technology (IT) governance
P
The board is in the process of putting in place an IT governance framework.  An IT steering committee has been established and report to the board via the audit and risk committee
5.2 IT should be aligned with the performance and sustainability objectives of the company
P
The IT steering committee reports to the audit and risk committee on a quarterly basis.  The chairman of the IT steering committee attend the audit and risk committee by invitation
5.3 The board should delegate to management the responsibility for the implementation of an IT governance framework
P
The IT steering committee assists the company in the implementation of the IT governance framework
5.4 The board should monitor and evaluate significant IT investments and expenditure
A
IT investments and expenses are approved by the board as part of the normal budgeting process
5.5 IT should form an integral part of the company’s risk management
P
IT will form part of the company’s risk management system
5.6 The board should ensure that information assets are managed effectively
A
The IT steering committee assists the board with this and minutes of the IT steering committee and IT reports are submitted to the audit and risk committee and the board at each meeting
5.7 A risk committee and audit and risk committee should assist the board in carrying out its IT responsibilities
P
Once the IT governance framework is finalised, it will be monitored by the audit and risk committee
6. Compliance with laws, codes, rules and standards
 
 
6.1 The board should ensure that the company complies with applicable laws and considers adherence to nonbinding rules, codes and standards
A
The board requires management to report on compliance on a regular basis
6.2 The board and each individual director should have a working understanding of the effect of the applicable laws, rules, codes and standards on the company and its business
A
Board members are provided with regular updates on changes in laws, and other regulations, codes and standards
6.3 Compliance risk should form an integral part of the company’s risk management process
A
Compliance risk is an integral part of the risk management system
6.4 The board should delegate to management the implementation of an effective compliance framework and processes
A
Management is responsible for compliance
7. Internal audit
 
 
7.1 The board should ensure that there is an effective risk-based internal audit
A
KPMG has been appointed as internal auditors
7.2 Internal audit should follow a risk-based approach to its plan
A
The internal audit plan followed a risk-based approach and is monitored by the audit and risk committee
7.3 Internal audit should provide a written assessment of the effectiveness of the company’s system of internal control and risk management
A
KPMG will provide a written assessment on the effectiveness of the company’s system of internal control and risk management for review by the audit and risk committee
7.4 The audit and risk committee should be responsible for overseeing internal audit
A
The audit and risk committee oversee the implementation of the internal audit plan by the internal auditor
7.5 Internal audit should be strategically positioned to achieve its objectives
A
The internal audit plan is approved by the audit and risk committee and implementation monitored on an on-going basis
8. Governing stakeholder relationships
 
 
8.1 The board should appreciate that stakeholders’ perceptions affect a company’s reputation
A
The board monitors stakeholder perceptions
8.2 The board should delegate to management to proactively deal with stakeholder relationships
A
Management is responsible for dealing proactively with stakeholder relationships
8.3 The board should strive to achieve the appropriate balance between its various stakeholder groupings, in the best interests of the company
A
All key stakeholders are considered during decision making processes
8.4 Companies should ensure the equitable treatment of shareholders
A
The board considers the equitable treatment of shareholders in decision making
8.5 Transparent and effective communication with stakeholders is essential for building and maintaining their trust and confidence
A
Communication to stakeholders is the responsibility of the executive team and company secretary and is monitored by the board
8.6 The board should ensure that disputes are resolved as effectively, efficiently and expeditiously as possible
A
All disputes communicated to the board are resolved effectively
9. Integrated Reporting and disclosure
 
 
9.1 The board should ensure the integrity of the company’s integrated report
A
The board ensures the integrity of the integrated report
9.2 Sustainability reporting and disclosure should be integrated with the company’s financial reporting
A
Sustainability reporting is incorporated in the integrated report
9.3 Sustainability reporting and disclosure should be independently assured
P
The board is of the opinion that the company’s present portfolio does not warrant independent assurance of its sustainability reports.

Sustainability

Pivotal have established a sustainability framework which was approved by the board during the financial year. We recognise the necessity for embracing sustainability as a key strategic driver that supports ongoing stakeholder value. Our impact on the environment, communities and our value chain will continue to be evaluated for areas of improvement by the social and ethics committee and reviewed by the board.

Sustainability framework

Our sustainability strategy aligns with its core business of property investment and development, and as such, we focus on making a positive contribution to the environment. Our holistic approach towards sustainability includes the three pillars of sustainability (social, environmental and economic) where our initial strategy is to focus on our most material impacts.

Sustainability performance

Pivotal see environmental, social and economic sustainability as a fundamental part of our long-term vision and business strategy, and we have embarked on a journey to enhance performance in these areas.

The first step of our sustainability journey was to assess gaps in our sustainability performance. A sustainability gap assessment was completed in 2015. In 2016 focus was placed on addressing identified gaps and investigating short-, medium- and long-term solutions.

Corporate Social Investment (CSI)

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