Following the significant governance and reputational challenges EOH faced as a consequence of actions driven by the previous management team, a new board of directors was appointed in 2019 to drive governance and protect shareholder value. We, as the Board, are committed to ethical leadership and best practice corporate governance principles. EOH's strong leadership team is committed to rebuilding the EOH brand by being ethical and transparent, and ensuring sound corporate governance throughout our business and subsidiaries. EOH has utilised the services of a number of experts in the Governance field, such as the University of Stellenbosch Centre for Corporate Governance to supplement and enhance work done in governance.
Key focus areas for the EOH Board during FY2020
- Considering and approving the Group strategy for FY2021
- Finalising the investigation into fraud and corruption at EOH in prior years, including criminal charges and the institution of civil proceedings for the recovery of money lost by EOH as a result of wrongdoings
- Approving a governance framework and governance policies
- Ensuring the Group's liquidity remained strong, particularly throughout the COVID-19 lockdown, with a strong emphasis on cost saving measures
- Ensuring that the Group met its deleverage targets, particularly through the sale of businesses
- Ensuring business continuity throughout the COVID-19 lockdown
- Rollout of a new Employee Value Proposition (EVP) centred around talent retention, attraction, development and remuneration.
Composition of the Board
EOH has a unitary Board with the necessary collective knowledge and balance of skills, experience, resources and diversity to guide the business effectively. The Board's composition promotes the balance of authority and precludes any one director from dominating decision making. The directors bring to the Board a wide range of experience and expertise and, in the case of the independent non-executives, an independent perspective and judgement on issues of policy, strategy and performance. The Board believes that the current composition reflects an appropriate balance of knowledge, skills, experience, diversity and independence to effectively guide the business. Directors are classified as executive directors if they are full-time employees of EOH. At the date of this report, the Board comprised eleven directors, three of whom are executive directors, seven are independent non-executive directors and one non-executive director is not classified as independent. Seven of the Board members are black and four are women.
The Chairman and the CEO are appointed by the Board. Their roles are formally defined and separate. The Chairman is primarily responsible for leading the Board and for ensuring that the Board plays an effective role, facilitating communication with shareholders and fostering constructive relations between the executive and non-executive directors. The Chairman is considered to be independent. The CEO is responsible for the commercial and operational management of the Group, including providing leadership to the executive team.
Dr Xolani Mkhwanazi, who was appointed Chairman of EOH on 5 June 2019, sadly passed away on 4 January 2020, and was replaced by the lead independent director, Andrew Mthembu with effect from 7 February 2020. Anushka Bogdanov replaced Andrew Mthembu as lead independent director on 20 February 2020, but has subsequently resigned as a director of EOH on 28 July 2020. At the date of this report, a replacement lead independent director has not yet been appointed.
The Nominations Committee identifies potential candidates for the Board should a director retire, resign or be disqualified and removed. The committee assesses the appropriateness of candidates in terms of their experience, skills and considers all facets of diversity to determine the optimal composition and balance of the Board. Selection, induction and ongoing training of directors is formalised and a basic succession plan is in place for key executives in the event of any resignations.
Newly appointed directors are ratified at the next annual general meeting (AGM) following their appointment.
Board independence (%)
Board racial composition (%)
Board gender composition (%)
Independence of non-executive directors
The Board is satisfied that apart from one non-executive director who represents the company's black empowerment partner, the non-executive directors, through their actual conduct at Board and committee meetings, have no material relationships with EOH. Directors who have served for longer than nine years will be reassessed annually to ensure that they remain independent.
In terms of the Company's memorandum of incorporation (MoI), one-third of the non-executive directors are required to 'retire' at each AGM, and if they are eligible and available for re-election, their names are put forward for re-election by the shareholders at the next AGM. The non-executive directors who have been in office for the longest period since their appointment are required to 'retire' in terms of the rotation policy.
Diversity and inclusivity policy of the Board
We recognise and embrace the benefits of a diverse Board and believe that diversity at Board level is an essential component for sustaining a competitive advantage. Race, age and gender diversity, underpinned by the relevant skills as well as business, geographic and academic experience and background, enhance the composition of a truly diverse Board.
The Board is committed to ensuring a diverse and inclusive Board and the Company's diversity and inclusivity policy forms part of the Board Charter. Board appointments are made on merit, having due regard for the benefits of diversity.
Role and responsibilities of the Board
The overriding role of the Board is to ensure the long-term sustainability and success of EOH for the benefit of all stakeholders. The duties, responsibilities and powers of the Board, the delegation of authority and matters reserved for the Board are set out in the Company's MoI and the Board Charter.
The Board approves the long and short-term strategy of EOH and determines how business is conducted. This includes the setting, monitoring and review of strategic targets and objectives, the approval of material capital expenditure, acquisitions, internal controls, risk management and IT governance. The EOH EXCO is responsible for managing the Group's operations and the Group's overall strategy, which is discussed, debated and approved by the Board.
The EOH Board Charter aligns with the recommendations of King IV and outlines the powers, responsibilities, induction and ongoing development requirements of Board members.
The Board Charter details the responsibilities of the Board, which include:
- Input into the Group's strategic direction;
- Providing effective leadership based on an ethical foundation and a sound Governance, Risk and Compliance (GRC) framework;
- Ensuring the Group conducts itself in accordance with the principles of fairness, accountability, transparency, responsibility, competence and integrity;
- Ensuring an appropriate GRC framework is in place and applied across the Group;
- Ensuring the Code of Ethics is adopted and implemented across the Group;
- Ensuring the Group is, and is seen to be, a responsible corporate citizen;
- Defining levels of materiality and risk tolerance;
- Governing risk and opportunities in a way that supports the Group achieving its goals;
- Ensuring the adequacy and effectiveness of the Group's internal control systems and procedures;
- Ensuring appropriate technology systems are in place;
- Approving the annual budget and operating plan of the Group;
- Approving EOH's annual financial statements and public pronouncements on financial performance and ensuring the integrity of such reports;
- Considering and, if appropriate, declaring distributions in accordance with the provisions of the Companies Act;
- Ensuring that the Group remunerates fairly, responsibly and transparently;
- Communicating with internal and external stakeholders in a transparent and timely manner; and
- Ensuring the overall sustainability of the Group.
The Board is satisfied that it has fulfilled its responsibilities defined in the charter for the year under review.
The performance and effectiveness of the Board and its subcommittees are evaluated every two years to ensure continued improvement. An evaluation exercise was conducted during the year under review to assess the Board effectiveness across the following areas:
- Business and strategy
- Board dynamics and processes
- Diversity and Composition
- Monitoring and Risk Management
The areas for improvement identified in the assessment are being addressed through a detailed development plan.
Key performance measures and targets for assessing the achievement of strategic objectives and positive outcomes over the short, medium and long term are defined within the EOH reporting framework. The respective Board subcommittees perform ongoing oversight over the implementation of the Group and operational strategies and their value drivers. The EXCO performs oversight and monitoring of operational budgets, plans and targets by management against agreed performance measures and targets.
The Board delegates certain functions to committees without abdicating any of its responsibilities. The committees are chaired by non-executive directors and operate under Board-approved terms of reference.
Audit Committee: Only independent non-executive directors with other participants as invitees. Members are elected by shareholders at the Company's AGM; (see further activities of the Audit committee in its report)
Governance and Risk Committee: The majority of members are independent non-executive directors; (see further activities of the Governance and Risk committee in its report)
Information and Technology Committee: Both non-executive and executive directors; (see further activities of the information and technology committee in its report)
Nomination and Remuneration Committee: All the members are independent non-executive directors; (see further activities of the Nomination and Remuneration committee in its report)
Social and Ethics Committee: The majority of members are independent non-executive directors; (see further activities of the Social and Ethics committee in its report); and
Asset Disposal and Strategic Acquisition Committee: The majority of members are independent non-executive directors (see further activities of the ADSA Committee in its report)
Group Company Secretary
The Group Company Secretary supports the directors and Chairman, and has direct access to and ongoing communication with the Chairman. All directors have access to the services of the Group Company Secretary and may obtain independent professional advice. The Board believes this provides the necessary access to corporate governance advice. The Group Company Secretary is not a director of the Company or its subsidiaries, and also acts as secretary of the Board committees.
The Group Company Secretary is EOH Secretarial Services (Pty) Ltd, represented by Neill O'Brien. The Board is satisfied that the Group Company Secretary is suitably qualified, competent and experienced to provide such guidance.
EOH's wholly owned subsidiaries each have their own board of directors. The boards of the subsidiaries and the management committees of the various operating divisions have the necessary mix of skills and experience.
The Board response to King IV
King IV advocates an outcomes-based approach and defines corporate governance as the exercise of ethical and effective leadership towards the achievement of the following governance outcomes:
- Ethical culture;
- Good performance;
- Effective control; and
EOH is committed to maintaining a high standard of corporate governance and continuously engages with some of the leading governance institutions to assist in the design and implementation of King IV. We implemented a governance tool during 2019, which was used to assess our application of the corporate governance principles as recommended by King IV. An annual assessment is undertaken to assess ourselves against these principles. We have adopted a substance-over-form approach with regards to alignment with King IV to avoid tick-box compliance and also because this approach accommodates the achievement of the recommended King IV outcome/governance standards by applying practices other than those specifically detailed in the King IV report.
EOH has met its reporting requirements relating to the JSE Listings Requirements and the Companies Act (as amended). In July 2020, the JSE fined the Group for prior period errors contained in previously published financial statements for the 2017 and 2018 financial years. EOH has remained compliant with the Companies Act, particularly with reference to the incorporation provisions and has operated in conformity with the Company’s MOI.
The Board is committed to driving the strategy, based on an ethical foundation, to support a sustainable business that acts in the best interests of the Group, society, the environment and its stakeholders. The Board sets the tone for an ethical organisation and has discharged its responsibilities by ensuring that a robust and resilient GRC framework is in place. There are systems, procedures and monitoring structures in place to ensure the effectiveness of this framework. The directors of EOH are competent and act ethically in discharging their responsibility to provide strategic direction and effective governance in terms of the Board Charter and EOH's MoI.
The Board commits to the Constitution of the Republic of South Africa (including the Bill of Rights) and embraces the principles of fairness, accountability, integrity and transparency.
The Group has adopted an overarching formal Code of Ethics founded on our values of 'Authenticity', 'Partnership', 'Adaptability, 'Ingenuity, and 'Mastery'. All employees have a duty to act in accordance with these values and thereby to maintain and enhance the reputation of the Group.
The EOH Code of Conduct was developed around the principles of ethical leadership and was adopted by the Board. The code commits EOH and its employees to the highest ethical standards of conduct particularly in relation to non-discriminatory practices, unethical practices, bad behaviour, and confidentiality of personal information.
Our decisions and actions are guided by our core values:
The EOH EXCO is responsible for ensuring that these values are adhered to throughout the Group and the Board's Social and Ethics Committee ensures the application of these principles. During the 2020 year, the entire organisation underwent Code of Ethics training through a series of animated on-line training interventions. Awareness training has also been provided to employees regarding gifts and entertainment and declaration of interests. The Group Compliance function oversees and assists with the enforcement of the policies and processes
Conflicts of interest
Board members are under a legal duty to prevent any conflict of interest with Company business and to make full disclosure of any areas of potential conflict. The Group Company Secretary maintains a register of directors' interests and directors are required to declare their interests annually in order to determine whether there are any conflicts with their duties and the interests of EOH. The directors have certified that they have no material interest in any transaction of any significance with the Company or any of its subsidiaries.
In line with our value of transparency, all employees and directors of the Company are expected to make a declaration of any perceived or actual conflict of interest when a gift or courtesy of significant value is accepted and to ensure a commitment and adherence to the Code of Conduct and relevant legislation.
Directors' interests in EOH shares
It is not a requirement of the Company's MoI or the Board Charter that directors own shares in the Company. The shares held by the directors as at 31 July 2020 are disclosed in note 37 of the Annual Financial Statements.
Trading in Company shares
EOH has a Personal Account Dealing Policy outlining the processes to be followed should Directors and senior executives want to trade in company shares. Directors and senior executives are prohibited from trading in EOH shares during closed periods, which commence on 1 February and 1 August each year and remain in force until the publication of the interim and final results respectively. Closed periods also include any period during which the Company trades under a cautionary announcement. The Group Company Secretary informs the Board and management of closed periods. All directors' trading in EOH shares require the prior approval of the Group CEO or Group Financial Director. No director can approve his own trading of EOH shares. The Group Company Secretary retains a record of all such share dealings and dealings are announced as required in terms of the JSE Listings Requirements.
EOH aims to create a climate where workplace concerns and irregularities including suspected fraud and corruption, can be reported by employees safely and without fear of retribution and victimisation. This is formalised in the Code of Ethics and other related governance policies.
EOH utilises the Expose-IT app, which provides a secure, completely anonymous and confidential channel for employees, suppliers, customers and any other stakeholders to report concerns regarding wrongdoing at EOH. Reports received through the app will be monitored by an independent entity. The app is available on both Apple and Android.
A Zero Tolerance Corruption and Bribery Policy
EOH has a Zero Tolerance Policy towards bad behaviour and unethical practices. The bidding process is governed through a joint bid compliance management process and only accredited third-party partners and suppliers are used. EOH has adopted the ISO 37001 (the International Standard on Anti-bribery and Corruption) standard and is aligning its processes with the standard. Third-party due diligence has been implemented for all new customer, supplier, and partner on-boarding across the Group.
The directors individually and collectively are responsible for realising the Group's strategic objectives and for managing risks and opportunities to ensure an ongoing sustainable business. EOH's EXCO is responsible for working with the CEO to implement the strategies and policies of the Group. The Board oversees and monitors, with the support of its committees, the implementation and execution by management of the policies and procedures in order to ensure that the Group achieves its objectives.
The Group's business model incorporates the environmental, social and governance aspects of sustainability. Implementation is supported by formal policies governing environmental, corporate social investment, ethical and remuneration matters, all of which form key components of the value-creation process.
The Board is responsible for ensuring that the Group's reporting on its financial performance is reported fairly, with the assistance of the Audit Committee and the external auditors.
Business continuity and resilience management
During the 2020 year the COVID-19 pandemic required EOH to reassess business continuity plans in place and make adjustments for full remote working. Lessons learnt from the pandemic will be analysed and continuous improvement made to our business continuity plans to ensure these plans are robust and fit-for-purpose.
The Board is responsible for governance and enterprise risk management, and determines how risk is approached and addressed across the Group. The Audit Committee assists the Board by providing an independent and objective view on the Group's financial, accounting and control mechanisms. The Governance and Risk Committee assist with considering business risks and the mitigation of these risks as well as the Group's compliance with all relevant statutory and regulatory requirements.
The Board is also responsible for ensuring that the information and technology needs of the businesses are in place and effectively governed. The Information and Technology Committee assists in this regard.
The directors are also responsible for the systems of internal control. These are designed to provide reasonable, but not absolute, assurance as to the reliability of the Annual Financial Statements, and to adequately safeguard, verify and maintain accountability of assets, as well as prevent and detect material misstatement and loss. Management believes that a strong internal control environment, is critical to the success of EOH. Management is aware of the material breakdowns in the control environment in the past, and is working to remediate this. However, there is still significant room for improvements in the control environment, both from a design and effectiveness standpoint.
The Board, supported by the Audit Committee, has approved the Internal Audit charter as well as the internal audit plan.
The internal audit function is carried out by the company's internal audit department, with external expertise used where appropriate. An integrated risk-based approach guides the development of the internal audit allocation of resources as the third line of defence.
The process by which directors are selected and their performance regularly reviewed, ensures that the Board collectively has the necessary ethical culture, range of skills, technical knowledge and experience to perform effective oversight of the Group.
EOH's systematic and integrated approach to stakeholder engagement aims to create the necessary channels to stay informed about stakeholders' key concerns and create transparency about the challenges the Group faces and progress in addressing these. The Board, through its committees, ensures that the interests of all stakeholders are addressed.
Our strategy aims to build greater confidence with all stakeholders through good governance, strong financial performance, transparency and increased disclosure. The Group's enhanced reporting framework defines the disclosure and reporting requirements to:
- Stakeholders and regulators;
- External communication protocol;
- Monitoring and reporting requirements of the Group in terms of report frequency, content coverage and audience/stakeholders;
- Audit, risk and assurance escalation, reporting and disclosure requirements; and
- All remuneration practices in relation to directors and the executive.
Reputation and brand management
The EOH of the future is foremost committed to protect and promote its reputation and brand. A formal reputation and brand management strategy provides clear guidelines on building and retaining a strong brand. It covers the measures taken by EOH to avoid conflicts of interest and to train its employees accordingly. EOH's relationships with its vendors and suppliers are based on strong partnerships, transparency and ethical conduct.
The Board meets quarterly and on an ad hoc basis when considered necessary. Board meetings are convened by formal notice incorporating agendas and accompanied by background material relating to matters to be discussed at each meeting to enable the directors to prepare in advance.
|Stephen van Coller (CEO)||24/24||5/5||3/3||1/1|
|Megan Pydigadu (Group CFO)||24/24||4/4||1/1|
|Andrew Mthembu (appointed chairman on 6 Feb 2020||24/24||6/9||3/4||1/1|
|Mike Bosman≠||24/24||9/9||4/5||6/6||6/6||4/4||1/ 1|
|Dr Xolani Mkhwanazi***||4/6|
|*||Appointed 20 February 2020|
|**||Appointed 21 May 2020|
|***||Deceased 4 January 2020|
|^||Resigned 28 July 2020|
|≠||Reconstitution of board committees on 5 March 2020|