Corporate governance report
The group subscribes in all its activities to principles of best practice in business management and corporate governance for South African companies, as set out in the King IV Report on Corporate Governance (King IV), which it implements in accordance with the following framework:
- Establishing a risk and control environment within each of its business entities where management, in conjunction with the necessary support from the Audit and Risk, and Social and Ethics committees, is responsible for identifying, quantifying and managing risks related to the achievement of the organisation's objectives on a sustainable basis. The assessment of risk is based on their potential impact on the group to continue its business.
- Creating a process which provides the board, through the Audit and Risk, and Social and Ethics committees, with assurance regarding the adequacy of internal control within the organisation, i.e. that the risk and control environment is appropriate for the business concerned and that the business is operated in a manner which provides the board with reasonable assurance that the group's assets are appropriately safeguarded.
- Implementing a formalised review process to identify the effectiveness of both the risk management environment and the assurance processes. This is generally the role of the internal audit function and other independent technical assurance specialists used on a consultancy basis. (Refer "Assurance".)
The company's shares are listed on the JSE, which requires all listed companies to comply with the Code of Corporate Practices as set out in King IV. A detailed governance register is located on the group's website, under the "About us" tab.
PRINCIPLE 1: The governing body should lead ethically and effectively
The governing body of the group, namely the board, is committed to ethical leadership beyond mere legal compliance, and to acting in the best interest of the group at all times. The board sets the standards for values, business practices and ethical behaviour for the group. The tone at the top filters through to all levels and is enforced by senior management through stringent control, involvement and review processes. All board members have senior managerial or related professional experience, have knowledge of applicable rules and standards and adhere to the group's code of conduct. The board considers the impact of operational and business decisions on the environment, as well as on society and on the communities where the group operates. Executive board members and other executives conduct regular meetings with each other and with their respective staff in order to ensure that the necessary direction is applied and maintained in the group's activities.
PRINCIPLE 2: The governing body should govern the ethics of the organisation in a way that supports the establishment of an ethical culture
The board assumes responsibility for the establishment and maintenance of ethical standards. Ethical issues are managed by way of executive involvement in day-to-day management processes of the group, and by senior management who interact with staff at all levels to ensure that high ethical standards commensurate with board expectations are maintained. Issues that cannot be resolved by line management are addressed by way of oversight by the Social and Ethics committee, which acts on behalf of the board (SEC, refer "Social and Ethics committee"). The group applies a code of ethics, as approved by the SEC and the board, and all staff who bear line responsibility are required to be trained in the application of this code. Various channels to facilitate effective whistle-blowing procedures are in place in the group to afford employees and other parties the opportunity to bring unethical or unlawful practices to the attention of senior management on an anonymous basis. The board believes that management is sufficiently experienced to ensure that the requirements of the group in respect of laws, rules, codes and standards do not expose the group to material risks in this respect. In addition, senior management consults with external legal counsel in unfamiliar and complex areas.
Insider trading and closed periods
The group declares closed periods which are applicable to all members of staff in relation to dealing in Assore shares prior to the publication of its interim and final results. During these periods directors, officers and staff are prohibited from dealing in the shares of the company. A closed period extends from the first day of the month following the end of a financial reporting period to the day on which the interim or final results are published. Where appropriate, dealing is also restricted where a public announcement is imminent and which includes information considered to be price sensitive. Where relevant, prior to these announcements, all staff, third parties and advisers who require consultation are required to sign non-disclosure agreements, where the announcement is of a price-sensitive nature.
All directors and staff are required to obtain the written approval of the chief executive officer (CEO) prior to dealing in the company's shares at any time during the year. Any dealings by the CEO in Assore shares require the approval of the lead independent director. Due to the significance of the group's involvement in Assmang, as well as Assmang's bearing on the results of Assore's joint-venture partner, African Rainbow Minerals Limited (ARM), senior staff members are also precluded from dealing in ARM's shares in these closed periods.
PRINCIPLE 3: The governing body should ensure the organisation is and is seen to be a responsible corporate citizen
Responsible corporate citizenship is embodied in the group's operations from its mining and manufacturing activities through to involvement within the communities in which it operates and to its customers who utilise its products. The activities in these areas are overseen by the SEC, which also receives feedback from Assmang's SEC and are reported on a bi-annual basis to the Audit and Risk committee and to the board, which assumes ultimate responsibility in this regard.
PRINCIPLE 4: The governing body should appreciate that the organisation's core purpose, its risks and opportunities, strategy, business model, performance and sustainable development are all inseparable elements of the value-creation process
The core purpose of the group is to generate value for its shareholders and to maintain and increase this value in a sustainable manner, always mindful of the legitimate and reasonable needs, interests and expectations of material stakeholders. Decisions that are made within the group are undertaken at appropriate levels, which ensures that opportunities are carefully assessed in conjunction with an analysis of associated risks. Key aspects of these decisions include an assessment of the value to be added or maintained, as set out in the business model.
PRINCIPLE 5: The governing body should ensure that reports issued by the organisation enable stakeholders to make informed assessments of the organisation's performance and its short, medium and long-term prospects
The integrated annual report (IAR) has been prepared on the basis of the framework of the International Integrated Reporting Council (IIRC). Management ensures that the IAR is compiled in a manner that enables stakeholders to determine the risks associated with investing in or transacting with the group, placing them in a position to make sufficiently informed decisions in attempting to achieve their objectives. The IAR sets out the group's strategy and business model, as well as the risks faced by the group and how these risks are addressed or responded to, and sets out those areas which the board believes are material to stakeholders in making their respective risk assessments. Materiality is considered qualitatively and, where relevant, numerically, in conjunction with assurance and service providers.
PRINCIPLE 6: The governing body should serve as the focal point and custodian of corporate governance of the organisation
Board of directors
The directors are committed to the principles of corporate discipline, transparency, independence, accountability, fairness, employment equity and social responsibility.
The Assore board has a unitary structure, comprising 10 directors, five of whom are executive and five non-executive, with all of the latter being independent. Since the chairman represents the controlling shareholder, and in order to enhance the balance of power and authority on the board, the chairman does not have a casting vote. Additionally, the board has appointed a lead independent director, who also occupies the position of deputy chairman.
The independent non-executive directors have, between them, considerable experience gained at senior management levels in diverse listed and unlisted companies and professional firms operating in South Africa and abroad. Assore has an informal gender policy that supports the appointment of women to the board, which currently has two female board members, constituting 20% of the board. Gender and racial diversity is an important consideration when effecting board and executive appointments and these considerations are made in conjunction with considering diversity in business, geographic and academic backgrounds.
In the event that board members believe that independent professional advice relating to the group's affairs would be of benefit to the group, the group will, at its expense, engage appropriate advisers in order to satisfy the concerns raised in this respect.
PRINCIPLE 7: The governing body should comprise the appropriate balance of knowledge, skills, experience, diversity and independence for it to discharge its governance role and responsibilities objectively and effectively
Independent non-executive directors are appointed in terms of three-year renewable contracts and the board evaluates their independence annually, based on returns submitted by each director. The roles of the chairman and CEO are separate, and non-executive directors are not permitted to serve for periods longer than nine years in the aggregate without board approval. Non-executive directors do not receive any benefits from the company other than their fees for services as directors.
Election and succession
Appointments to the board in an executive directorship capacity are based on the nominees holding appropriate professional qualifications and having had substantial exposure to business in general, and in particular in the mining industry, in senior managerial roles and/or related professional practice, including knowledge of applicable legislation, rules, codes and standards. If an executive vacancy arises, or is imminent, and the board is of the opinion that it is of such a nature that a formalised selection process is required, an ad hoc nomination committee is convened to make the relevant appointment. This committee usually consists of two independent non-executive directors, and reports to the board with its recommendations. Induction to the group for incoming non-executive directors occurs prior to appointment by means of a full appraisal of the group's activities by the CEO, and following appointment, non-executive directors are offered the opportunity to visit the group's operations to familiarise themselves with the group's activities.
In accordance with the company's Memorandum of Incorporation (MoI), all non-executive directors are subject to retirement by rotation and re-election by shareholders at least once every three years, provided that at least one-third of their number offer themselves for re-election at each annual general meeting (AGM) as required by the Listings Requirements of the JSE. In addition, all directors are subject to re-election by shareholders at the first AGM following their initial appointment. A brief curriculum vitae of each director is set out under the leadership tab on the group's website www.assore.com/directorate-2/. The appointment to the board and the assessment of continued eligibility on the board are made by the executive directors with the oversight of the non-executive directors and in consultation with the board as a whole. The management structure of the group provides effective succession for each executive director, which occurs by way of understudy by appropriately qualified and experienced senior staff members, ensuring sufficient depth of expertise in areas that are critical to the continuation of the group's business activities. The board is satisfied that its composition reflects the appropriate mix of knowledge, skills, experience, diversity and independence.
The board meets at least four times per annum on predetermined dates, with meetings convened on an ad hoc basis when considered necessary. The board met four times in the year under review and attendance at these meetings is tabled below:
|BH van Aswegen||4||4|
PRINCIPLE 8: The governing body should ensure that its arrangements for delegation within its own structures promote independent judgement and assist with the balance of power and the effective discharge of its duties
Audit and Risk committee
The committee meets at least three times per annum on predetermined dates, with ad hoc meetings convened to consider significant risk and accounting issues when necessary. The committee met three times in the year under review. The attendance at these meetings is tabled below:
|EM Southey (Chair)||3||3|
The chairman of the committee reports on its activities at each board meeting. Representatives of the internal and external auditors are invited to attend all meetings of the committee and, if necessary, have access in private to the chairman of the committee throughout the year. The CEO, chief financial officer (CFO) and representatives of the company secretary attend all meetings by invitation. Board members who are not members of the committee are entitled to make submissions at its meetings, with the prior consent of its chairman. Internal and external auditors meet members of the committee at least once annually without members of management being present in order to discuss the quality of their relationship and evaluate the level of cooperation which they were afforded during the conduct of their audit work in the year under review. The committee recommended the approval of the integrated annual report for 2019 to the board on 18 October 2019.
The terms of reference of the Audit and Risk committee are documented, have been approved by the board, and are reviewed periodically to ensure they remain appropriate to the activities of the group. The principal objectives of the committee that emanate from its terms of reference, and which were applied during the year under review, are:
- to monitor the risk profile as compiled by internal audit and agreed to by management, and make recommendations on the composition and classification of the risk profile for the group (refer to "Risk management");
- by taking into account the group's combined assurance model (refer to "Assurance"), to integrate the activities of assurance providers so that all risks are identified and appropriate mitigation steps are taken;
- to provide a forum for management and representatives of the external and internal audit functions to resolve issues which arise from all external and internal audit activities;
- to make recommendations to the board regarding the appointment of the external auditors;
- to review the activities, services and performance of the external auditors, evaluate their independence and review their overall role and the appropriateness of fees charged;
- to review and approve the annual financial statements, interim reports and related disclosures and other significant announcements made by the group, making the necessary recommendations to the board;
- to consider the appropriateness of the group's accounting policies;
- to monitor and supervise the effectiveness of the internal audit function (refer "Internal audit and internal control") to ensure that the roles of both internal and external audit are clear in order to provide an objective overview of the operational effectiveness of the group's systems of internal control and reporting;
- to receive and consider feedback on issues relevant to the committee raised at meetings of the Social and Ethics committee (refer "Social and Ethics committee"); and
- obtain reports from management, and make the necessary enquiries from external and internal audit and of management, on any matters which are the subject of litigation, ensure compliance with material aspects of legislation and create awareness of pending changes to legislation (refer "Legal compliance").
All the members of the committee, including the chairman (who will make himself available to take questions at the AGM), are independent non-executive directors, who collectively possess the appropriate professional and business experience pertaining to legislative requirements, financial risks, financial and sustainability reporting, and internal controls applicable to the group.
The committee is satisfied that the external audit function remains independent. The chair of the committee approves all services undertaken by the external auditor prior to engagement. The external auditor's own requirements enforce an audit tenure of no more than five years for the incumbent chief audit executive (CAE). The committee assessed the suitability and recommended the reappointment of Ernst & Young Inc. (EY) and the CAE, Dawie Venter, as the group's independent external auditors for the 2019 financial year based on the information submitted by EY in terms of paragraph 22.15(h) of the JSE Listings Requirements.
In accordance with its documented terms of reference approved by the board, the committee is required to meet at least twice per annum on predetermined dates. The committee met twice during the year and attendance at these meetings is tabled below:
|WF Urmson (Chair)||2||2|
|BH van Aswegen||2||2|
The Social and Ethics committee reports to the board and provides feedback on issues raised at its meetings to the board and to the Audit and Risk committee for consideration where relevant. The key aspects of its terms of reference include the monitoring of the group's activities relating to any relevant legislation affecting the group's activities, or prevailing codes of best practice with regard to matters relevant to:
- its corporate strategy and any changes thereto that may be necessary from time to time;
- the social and economic development of communities located in the areas surrounding its operations;
- the maintenance of good corporate citizenship credentials;
- environmental, health and public safety issues at all its operations, including the impact of the group's activities and of its products or services on the environment;
- consumer relationships, including the group's advertising and public relations, and compliance with all legislation relating to the group's activities; and
- labour and employment, including working conditions and employee development.
Since salaries and bonuses are reviewed on an annual basis, the committee meets informally at least once a year, in addition to ad hoc meetings that may be necessary from time to time. The CEO attends meetings of the committee by invitation but is not entitled to vote. Executive remuneration awards were discussed and agreed to by way of round robin resolution.
The Remuneration committee is chaired by the lead independent director and consists of a majority of independent non-executive directors. Group chairman Desmond Sacco is appointed as a member of this committee, based on his interest as controlling shareholder of the company, which the board believes adds to the overall representation of the decisions and policies of the committee.
Recommendations on the broad framework and cost of executive remuneration are made annually to the committee for approval. To do so, the committee is required to determine:
- the group's general policy on executive remuneration;
- specific remuneration packages for executive directors;
- where necessary, criteria to assess the required performance of executive directors; and
- the necessity to take independent professional advice on remuneration issues.
Due to the sensitivity of individual remuneration levels, the remuneration of senior employees, other than directors, is not disclosed. However, the total cost of the remuneration of senior employees is disclosed in the consolidated financial statements (refer note 34.1), and directors' remuneration of the holding company directors for the current and previous financial year is set out in the annual financial statements.
PRINCIPLE 9: The governing body 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
Board and committee performance evaluation
The chairman represents the controlling shareholder and is therefore in a position effectively to evaluate the performance of board members and that of its various committees in meeting the group's objectives, and as a consequence ongoing evaluation of the board and its various committees does not occur on a formal basis. The structure of the management of the business permits regular interaction, which occurs between all levels of management, ensuring that the various structures in the Assore group operate in accordance with their terms of reference. As stated in the section on remuneration, executive directors are not appointed in terms of contracts, and their services may be terminated in accordance with legal requirements without exposing the group to pre-existing financial obligations.
The composition and size of the board as described above enables regular formal and informal interaction between directors to take place to ensure appropriate application of authority in the decision-making process. This ensures that resolutions cannot be passed without the agreement of at least one of the independent non-executive directors.
A key aspect of the group's activities includes marketing and distribution. As a result, the reputation of and relationships with its customers and all other stakeholders is assessed in all of the board's actions, and not in isolation. Further insight into the group's activities is provided to the chairman at regularly convened chairman's review meetings, which are attended by the executive directors and other senior members of management. The skills set required of executive directors of other group companies is determined by the Assore executive. Attendance by external advisers at meetings of the board and its various committees is arranged when considered necessary.
PRINCIPLE 10: The governing body should ensure that the appointment of, and delegation to, management contributes to role clarity and the effective exercise of authority and responsibility
Chief executive officer and chief financial officer
The CEO assumes ultimate responsibility for all executive issues, including the information technology (IT) function, and ensures that issues raised within the group's various committees and subcommittees are addressed by the responsible staff and, further, that these issues are elevated to the appropriate level when it is apparent that more senior management involvement is necessary. The CEO does not have other professional commitments, and besides assuming the chairmanship of an educational institution, is not a member of any other governing bodies outside of Assore. The group has a chief financial officer, who assumes responsibility for the group's financial position and related issues.
The company has appointed a wholly owned subsidiary, African Mining and Trust Company Limited (AMT), as company secretary. The board and senior staff of that company, who are all appropriately qualified, ensure that all applicable provisions of the Companies Act are applied in the affairs and management of the group. The board of directors of AMT includes an adequate number of persons with professional qualifications to ensure that an appropriate level of independence is maintained and that its affairs are conducted on an arm's length basis. The board has considered the necessary skills and competence of these secretarial functions and was satisfied as to the level of expertise included in these functions.
The subsidiary and joint-venture companies of the group have boards of directors that operate independently in relation to the affairs of these companies. The board of the holding company respects the fiduciary duties of the directors of these companies, and policies and procedures adopted by these companies are considered by the respective boards prior to their adoption, necessary alteration or rejection. The board of the holding company is satisfied that the delegation of authority framework contributes to the role clarification and the effective exercise of the authority and responsibilities.
PRINCIPLE 11: The governing body should govern risk in a way that supports the organisation in setting and achieving its strategic objectives
The board has delegated the assessment and management of the group's risk profile, which is compiled by the internal audit function, to the Audit and Risk committee, which advises the board of any unresolved risk management issues. Risk is an inherent feature of conducting business, and in the mining and smelting industries it is exacerbated by the remoteness of location of the operations, the physical danger inherent in the day-to-day activities of these operations and compliance with legislative requirements, particularly with regard to environmental management with which the industry has to comply. These risks are compounded by the volatility of exchange rates and international commodity prices to which the group is exposed on a daily basis and which are largely beyond the group's control.
Management of group risk is critical to the sustainability of the group and is achieved through the identification and control by various risk management committees of all risks, including operational risks, which could adversely affect the achievements of the group's business objectives. Risk assessments are ongoing, and risk registers for all significant operations in the group are prepared and updated three times annually by a dedicated risk management department, with assistance from specialist external consultants where necessary. Risk is also considered from a group perspective, with the group risk register and mitigating actions monitored by the executive leadership team and overseen by the Audit and Risk committee.
For larger business entities in the group, independent risk engineering consultants grade each operation against international risk standards for fire, security, engineering, commercial crime, contingency planning and mining, as well as environmental risk, to monitor whether current practices meet the set criteria and are being maintained. Input is obtained from various risk management committees comprising representatives from senior management. On completion and review of these processes, insurance cover is taken out on insurable risks where considered appropriate. In addition to these processes, other risks deemed relevant to the Assore group are presented to the Audit and Risk committee, which is provided with the opportunity to comment and provide input on the assessments which are tabled. The assets of the group are included in a comprehensive insurance programme, with an independent valuation of fixed assets occurring every three years.
The respective risk management committees are also responsible for ensuring that appropriate financial and insurance mechanisms are integrated into the risk plan and that the group is protected against catastrophic risk. The group risk management process includes an ongoing review of compliance with relevant legislation and standards in the following areas (refer "Group sustainability performance"):
- Environmental rehabilitation management.
- Health and safety management.
- Human resource management.
- Quality of products and management systems.
Details of the principal risks to which the group is exposed are included in this report.
PRINCIPLE 12: The governing body should govern technology and information in a way that supports the organisation setting and achieving its strategic objectives
The management of information technology (IT) falls within the remit of the CEO, who chairs regular meetings of the IT Steering committee (IT Steerco). The IT Steerco consists of senior staff members of the group, who receive representations from the chief information officer (CIO) on pertinent IT issues. The purpose of the IT Steerco is to address the appropriateness and relevance of the IT infrastructure, monitor and further the progress of major IT projects, information and cyber security, the design and maintenance of disaster recovery procedures, and related staffing and administrative issues. The IT Steerco seeks external advice when required. Matters of relevance to the business are communicated by the CEO to the Audit and Risk committee or the board, where appropriate. In addition, the IT systems are subjected to a detailed annual external audit, the results of which are reported on to the Audit and Risk committee for attention and action where necessary. Disaster recovery (DR) for remote operations are catered for by means of daily back-ups of electronic information and media, which are physically housed in a building separate from where the IT hardware is located. The group has also replicated its hardware environment in a separately housed DR area.
PRINCIPLE 13: The governing body should govern compliance with applicable laws and adopted, non-binding rules, codes and standards in a way that supports the organisation being ethical and a good corporate citizen
The board has delegated the responsibility for oversight of legal compliance, covering operational, trade, labour and regulatory areas to the Social and Ethics committee, from which management receives any guidance deemed necessary for the fields appropriate to its terms of reference. Suitably qualified consultants have been appointed to ensure that legal compliance is maintained in the business sectors in which the group operates. Management of compliance by the group is effected through senior staff members, who report to executive board members responsible for safety, health, environment and quality (SHEQ), and issues pertaining to contracts, human resource issues, procurement and information technology. Due to the importance attached to compliance with competition law requirements, the group operates a competition law compliance programme and has ensured that all senior staff members are familiar with the requirements of the Competition Act. The Audit and Risk committee ensures that matters having significant levels of risk material to the group receive the appropriate attention, and that adequate provision and appropriate disclosure are made for known and determinable exposures.
Safety, health and environmental (SHE) legal compliance audits are conducted on an ongoing basis for all significant operations. In addition, a high-level compliance review is conducted every second year for the group's other operations, the results of which are noted at meetings of the SEC.
The size of the group, as well as the experience of the executive directors and senior management, afford management the opportunity to resolve disputes in these areas. External legal counsel is consulted when considered necessary to ensure the appropriateness of the methods adopted to resolve issues.
PRINCIPLE 14: The governing body should ensure that the organisation remunerates fairly, responsibly and transparently to promote the achievements of strategic objectives and positive outcomes in the short, medium and long term
The remuneration policy of the group aims to ensure that all staff are remunerated fairly and in accordance with the levels of responsibility they assume in performing their duties. In applying the policy the following factors are taken into account:
- both mining and the marketing and selling of commodities, whether locally or internationally, are long-term businesses, and certain essential skills are required to ensure the sustainability of the group's operations through the various international commodity and economic cycles to which the group is exposed;
- the sustainability of the group's business depends on it being able to attract and retain individuals with appropriate skills, knowledge and experience in all aspects of the group's activities, particularly where long-term contracts are involved;
- the group's products are sold internationally and locally and the customer base has to be managed carefully to ensure profitability and sustainability; and
- the measurement of the group's achievements against its stated performance objectives (refer "Our strategy"), which takes into account changes in economic factors beyond the control of management.
Determination of remuneration
The remuneration of the group executive directors and management (the executive) is determined by the Remuneration committee, applying the group's policy on remuneration. The executive in turn determine the remuneration of the group's employees in conjunction with the Human Resources department and the relevant departmental heads. Independent remuneration consultants are employed when considered necessary.
The levels of remuneration are benchmarked annually against remuneration paid to executives in other listed companies in the resources sector and, where appropriate, against levels of remuneration paid within the relevant professions of individual employees. The remuneration of directors and senior staff depends on the size and complexity of the operations of the group and the level of professional input required within the business environment concerned, and has due regard to the calibre, expertise and seniority of the person required for the position.
All employees are remunerated on the basis of a fixed salary and variable bonus awards. Bonus awards are made to all staff and are based on the performance of the group and the successful achievement of its long-term strategic objectives. Limited reliance is placed on the achievement of short-term performance indicators in determining group and individual levels of remuneration, with emphasis being placed rather on contribution to group effort and achievement in the long term. Bonuses are determined on the basis of the results and performance of the group for the year in question, taking into account conditions applicable in the particular commodity cycle, and are reviewed and approved by the Remuneration committee. The impact on earnings per share after taxation for the year of the bonuses paid to executive directors of Assore was 29 cents (FY18: 25 cents), amounting to 0,50% (FY18: 0,50%) of earnings per share. The group does not operate a share incentive scheme or share option scheme for executive directors or senior staff. However, these members of staff are the beneficiaries of certain performance bonus arrangements and incentive schemes.
In order to incentivise and create value for the group's employees, the group operates a dividend and equity participation scheme through the Assore Employee Trust (refer "Black economic empowerment status report"), whereby non-managerial staff who do not participate in pre-existing incentive schemes or performance bonus arrangements participate in dividends declared by Assore as well as in the growth in Assore's share price over a predetermined vesting period. Directors and senior staff do not participate in this scheme.
None of the executive directors has signed a service agreement (fixed term or otherwise) with the group. Accordingly, there are no contractual or financial obligations on the group in the event of premature termination of employment.
Non-executive directors are remunerated by means of annual fees, payable quarterly, which are not dependent on attendance at meetings. Fees for non-executive directors are reviewed regularly and are adjusted whenever necessary taking into account the remuneration of non-executive directors of companies with similar complexity profiles in the South African resources sector, and the degree of skill, time and experience required to discharge their duties.
The board acknowledges the requirements of King IV for shareholders to pass a non-binding advisory vote on the company's remuneration policy on a bi-annual basis. The group, however, requires shareholders to pass a non-binding advisory vote in this respect on an annual basis. The advisory endorsement was passed by 94,00% of the voting shares at the previous AGM held on 30 November 2018. The implementation of directors' remuneration is set out in the consolidated annual financial statements, for which shareholders are require to pass a non-binding advisory vote at the AGM. In the event that the non-binding advisory vote is voted against by 25% or more of the votes exercised at the AGM, the Remuneration committee will review the remuneration policy and/or its implementation, as appropriate. Directors' fees are approved by means of a special resolution as required by section 66(9) of the Companies Act, No 71 of 2008, as amended (the Companies Act). Details of these procedures and relevant information are set out in the Notice of annual general meeting.
PRINCIPLE 15: The governing body should ensure that assurance services and functions enable an effective control environment, and that these support the integrity and information for internal decision-making and of the organisation's external reports
The various levels of assurance obtained by the group is set out in "Assurance".
Internal audit has adopted its terms of reference from the Audit and Risk committee (the committee), and all internal audit work is undertaken based on the ongoing risk assessment process which is presented annually by internal audit to the committee, to ensure that the focus of the internal audit activities are optimised and integrated with the external audit function (refer "Risk management" and "Internal audit and internal control"). The internal audit functions of Assore and Assmang are outsourced (refer "Assurance"), and the responsible senior executive on the engagement has direct access to the chairman of the committee.
Independent meetings are conducted with external audit in order to exchange views on the risk environment to which the group is exposed, as well as on issues that may have a bearing on the external audit process and internal audit objectives based on fieldwork performed by them. Internal audit provides assurance to the board and the committee on an annual basis that the internal and financial controls have not revealed any significant breakdown in internal controls or corporate governance principles or any issues that require the attention of the committee. The committee, having due regard to materiality and the nature of the business, is satisfied that the internal controls were effective and operated as designed for the period under review. In addition, the committee, having reviewed the reports tabled by internal and external audit at its meetings, and having invited enquiries of the attendees at its meetings, is not aware of any breakdowns of internal controls or corporate governance that resulted in, or could lead to, material financial losses, fraud or material errors during the year under review.
The interim results of Assmang and Dwarsrivier, which generate the majority of the group's earnings, are reviewed and reported on by its external auditors in terms of ISRE 2410 - Review of Interim Financial Information Performed by its Independent Auditor of the Entity, prior to the publication of the group's interim results. The committee, after due enquiry of external and internal audit, has satisfied itself as to the appropriateness of the expertise, the adequacy of the finance function and the experience of the senior members of management responsible for the financial function.
The board, through its Audit and Risk Committee, is responsible for ensuring the implementation of appropriate internal controls, which are reviewed regularly for efficiency and effectiveness, taking into account the risk profile of the group (refer to "Risks and opportunities"). These controls are designed to manage the risk of failure of internal controls and provide reasonable assurance that there are adequate systems of internal control and appropriate corporate governance procedures in place. As with all management systems, the assurance which is provided is not absolute and the risk of failure cannot be eliminated entirely. Internal auditors monitor the operation of the internal control systems and governance processes and, after discussion with management, report findings and recommendations to the Audit and Risk committee. Corrective action is taken to address control deficiencies as and when they are identified. Material issues of compliance are among standard items on the agenda of the Audit and Risk committee, and minutes of these meetings are made available to internal audit. The heads of the outsourced internal audit functions have access to the chairman of the Audit and Risk committee throughout the year. Nothing has come to the attention of the Audit and Risk committee or the board to indicate that any material breakdown in the effective functioning of internal controls or corporate governance procedures has occurred during the year under review.
Representatives of the internal audit firms are invited to attend Audit and Risk committee meetings and, where areas of new risk are identified, such as initiation of capital projects or new systems of internal control or IT systems implementation, separate independent investigations take place on an ad hoc basis in addition to the programmed reviews referred to in this report.
PRINCIPLE 16: In the execution of its governance role and responsibilities, the governing body should adopt a stakeholder inclusive approach that balances the needs, interests and expectations of material stakeholders in the best interest of the organisation over time
All decisions made by the board and management take into account the interests of stakeholders. These processes are covered in more detail in the "Sustainability report", which is located under the "Annual reports" tab on the group's website, www.assore.com.