corporate governance
The Board operates within a unitary structure that provides interaction among all Board members in the decision-making process
INTRODUCTION
In a drive to reflect the enshrined principles of sustainable development and the recommendations of the Corporate Practices and Conduct as set out in the King II Report on Corporate Governance, Pebble Bed Modular Reactor (Pty) Limited has actively pursued the creation of a corporate governance structure to guide its strategic direction, operational effectiveness, performance measurement and accountability.
The company has developed a governance framework to enable objectivity and performance management. Furthermore, the company acknowledges that systems of corporate governance should be reviewed regularly to ensure they are sound, consistent with world-class standards and relevant to the business of the company.
BOARD COMPOSITION
The appointment of the Board of Directors is conducted by the shareholder of the company, which is in line with the provisions of an investor Co-operation Agreement between the shareholder and other joint venture parties that contribute to the funding of the company. This ensures representation of such funding parties on the company’s Board. The Board operates within a unitary structure that provides interaction among all Board members in the decision-making process on strategy, planning, performance, allocation of resources business ethics and communication with stakeholders. A basic principle within the governance framework is to ensure that the Board is of appropriate size and composition, with the right skills and resources and, that there is an appropriate election and tenure procedure.
The following table reflects the company’s Board of Directors and changes that took place for the period April 2006 to March 2007:
| The present directors are: | Date of appointment | Date of change | Change |
| A Ruiters | 27 May 04 | n/a | n/a |
| JM Kriek | 18 Aug 04 | n/a | n/a |
| RM Adam | 12 May 06 | 12 May 06 | Appointment |
| TG Cable | 25 Feb 06 | n/a | n/a |
| A Conradie (Alternate) | 27 Feb 06 | 25 Jul 06 | Resignation |
| EL Johnson (Alternate ) | 01 Mar 07 | 1 Mar 07 | Appointment |
| U Khumalo | 14 Feb 06 | n/a | n/a |
| D Lipman (Alternate) | 25 Feb 06 | 28 Feb 07 | Resignation |
| RA Matzie | 22 May 01 | n/a | n/a |
| GB Mehlomakulu | 12 May 06 | 12 May 06 | Appointment |
| L Milne | 12 Jun 06 | 12 Jun 06 | Appointment |
| XH Mkhwanazi | 12 May 06 | 12 May 06 | Appointment |
| RK Morathi | 01 May 05 | n/a | n/a |
| CS Neethling | 25 Feb 06 | n/a | n/a |
| AW Paterson | 12 May 06 | 30 Nov 07 | Resignation |
| PH Readle* | 12 May 06 | 12 May 06 | Appointment |
| R Schumacher (Alternate) | 01 Mar 07 | 01 Mar 07 | Appointment |
| JA Thomson | 12 May 06 | 12 May 06 | Appointment |
| L Toyi (Alternate) | 12 May 06 | 12 May 06 | Appointment |
Note:
* Resigned February 2006 (Nominated by BNFL in May 2002. Re-appointed by SA government from May 2006).
With the exception of the Chief Executive and Chief Financial Officer, all members of the company’s Board are non-executive directors. All Board committees comprise a majority of non-executive directors.
BOARD FUNCTIONS
The Board provides strategic direction and leadership and formally delegates duties to management through various structures, including responsibility and accountability for operations to the Executive Management Committee, as well as other structures such as the Audit, Risk and Finance Committee, the Human Resources and Remuneration Committee, the Technical Committee and the Safety, Health and Environmental Quality Committee. The Board committees are selected according to the skills sets required so that they are able to fulfil their functions.
The Board acts as the accounting authority of the company in terms of the Public Finance Management Act No 1 of 1999, as amended (PFMA). With the guidance of the Company Secretary, the Board also has the duty of ensuring that the company complies with all the relevant laws, regulations and codes of good business practice. The Board approves the mission, strategy, goals, operating policies and priorities of the company and monitors compliance with policies and achievement against objectives.
Specific responsibilities of the Board are governed by the Companies Act No 61 of 1973, as amended, as well as the PFMA.
The Board meets on a quarterly basis. The Board also meets by means of special board meetings if and when necessary to attend to other urgent company matters which cannot be dealt with at regular board meetings. The following table reflects the number of Board and Board Committee meetings for the period April 2006 to 31 March 2007.
Attendance at Board for the period May 2006 to March 2007| 12 May | 1 Sept | 25 Oct | 30 Nov | 1 Mar | |
| Directors | 2006 | 2006 | 2006 | 2006 | 2007 |
| RM Adam |  |
|
|
|
|
| TG Cable | |
|
|
|
|
| U Khumalo | • | |
|
|
|
| JM Kriek | |
|
|
|
|
| RA Matzie | |
|
|
|
|
| GB Mehlomakulu | |
• | |
|
• |
| L Milne | + | |
|
|
|
| XH Mkhwanazi | |
|
|
|
• |
| RK Morathi | |
|
|
• | • |
| CS Neethling | |
|
|
|
|
| AW Paterson | |
|
|
++ | |
| PH Readle | + |
|
|
|
|
| A Ruiters | |||||
| (Chairman) | |
|
|
|
|
| JA Thomson | |
• | • | • | |
|
Attendance |
| • |
Absence with apology |
| + |
Appointments: L Milne – 12/06/2006 PH Readle – 12/05/2006 |
| ++ |
Resignation: AW Paterson – 30/11/2006 |
BOARD COMMITTEES
Board committees assist the Board in discharging its responsibilities. This assistance is rendered in the form of recommendations and reports submitted to Board meetings, ensuring transparency and full disclosure of Board committees’ activities. Each committee operates within the ambit of its defined terms of reference that set out the composition, roles, responsibilities, delegated authority and requirements for convening meetings.
The Audit, Risk and Finance Committee
The Audit, Risk and Finance Committee are an important element of the Board’s system of monitoring and control. This committee considers the company’s risk management policy and strategy and reviews the integrity of the risk management process and significant risks facing the company. It monitors compliance with relevant legislation and ensures an appropriate system of internal control is maintained to protect the company’s interests and assets. It reviews the activities and effectiveness of the internal audit function. It is also responsible for evaluating the independence, objectivity, and effectiveness of the external auditors and for reviewing accounting and auditing concerns identified by internal and external audit. This committee reviews the accuracy, reliability and credibility of statutory financial reporting and recommends the annual financial statements and annual report of the company, as presented by management and reviewed by external auditors, for approval by the Board. The head of the internal audit department and external auditors have unrestricted access to the Chairman of this committee and Chairman of the Board.
| Committee | 10 May | 28 Aug | 23 Oct | 27 Nov | 27 Feb |
| member | 2006 | 2006 | 2006 | 2006 | 2007 |
| TG Cable | |
|
|
|
|
| JM Kriek | |
|
|
|
|
| L Milne | + | |
|
|
|
| RK Morathi | |||||
| (Chairman) | |
|
|
|
|
| CS Neethling | # | |
• | |
• |
|
Attendance |
| • | Absence with apology |
| # | Represented by A Conradie (alternate director) |
| + | Appointment – 12/06/2006 |
Human Resources and Remuneration Committee
The objective of the committee is to guide the Board in establishing formal and transparent procedures for human resources and remuneration policies in the company. The committee also makes recommendations to the Board in respect of human resources related issues such as employment equity, retention strategies and skills development.
| Committee | 11 May | 28 Aug | 27 Nov | 27 Feb |
| member | 2006 | 2006 | 2006 | 2007 |
| TG Cable | • | • | • | |
| JM Kriek | |
|
|
|
| RK Morathi | + |
|||
| CS Neethling (Chairman) | |
|
|
|
| PH Readle | |
|
|
|
|
Attendance |
| • | Absence with apology |
| + | Appointment: 27/02/2007 |
Legal and Commercial Committee
The purpose of the committee is to ensure the integrity of the company’s legal and commercial processes such as adherence to policies and procedures, applicable legislation and good commercial and ethical practice. The aim of the committee is to provide confidence to the Board that appropriate mechanisms are in place within the company that ensure due process is followed in the approval of all legal documents and contracts.
| Committee | 10 May | 29 Aug | 24 Oct | 28 Nov | 28 Feb |
| member | 2006 | 2006 | 2006 | 2006 | 2007 |
| TG Cable | |
|
|
|
|
| U Khumalo | #1 | |
|
|
• |
| JM Kriek | |
|
• | • | |
| CS Neethling | #2 | |
• | |
• |
| AW Paterson | |
• | • | ++ |
|
| PH Readle | |||||
| (Chairman) | |
|
|
|
|
|
Attendance |
| • | Absence with apology |
| #1 | Represented by L Toyi (alternate director) |
| #2 | Represented by A Conradie (alternate director) |
| ++ | Resignation – 30/11/2006 |
| + | indicates resignation a committee member on 30 November |
Technical Committee
The objective of the committee is to interrogate and ensure that the design, safety and engineering aspects of the PBMR demonstration module and the fuel are of the highest quality and complies with international best practice. This committee also reviews and make recommendations to the Board pertaining to the following:
- nuclear licensing strategies to ensure consistency with the safety aspects of PBMR;
- international nuclear safety events, issues, trends and new initiatives, and their applicability to PBMR;
- PBMR potential safety performance compared with international benchmarks;
- international and/or external safety assessments and peer reviews of the design, safety and engineering aspects of design, any recommended corrective actions and progress in achieving corrective actions;
- sensitivity to the environment;
- national and international nuclear policy;
- any issue that would normally be presented to the Board or a committee of the Board in terms of the potential impact on nuclear safety.
| Committee | 9 May | 30 Aug | 29 Nov | 27 Feb |
| member | 2006 | 2006 | 2006 | 2007 |
| RA Matzie (Chairman) | |
|
|
|
| JM Kriek | • | #1 | • | • |
| RM Adam | • | ++ | ||
| V Harvey | #2 | |
|
++ |
| U Khumalo | • | |
• | |
| JS Thompson | + |
• | ||
| GB Mehlomakulu | + |
|
||
| XH Mkhwanazi | |
|
• | • |
|
Attendance |
| • | Absence with apology |
| + | Appointment – 29/11/2006e |
| ++ | Resignations: |
| RM Adam – 30/08/2006 | |
| V Harvey – 27/02/2007 | |
| #1 | Represented by L Milne |
| #2 | Represented by L Toyi |
Safety, Health, Environment and Quality Committee (SHEQ)
The purpose of this committee is to review and make recommendations to the Board pertaining to the following:
- SHEQ, security and regulatory framework and related nuclear issues to ensure compliance with legal and customer requirements;
- implementation of best practices and latest trends from both national and international sources as applicable to the company;
- management’s views on identified and potential risks of SHEQ, security and regulatory framework and related nuclear issues as applicable to the company;
- internal and/or external assessments and peer reviews of the SHEQ, security and regulatory framework and related nuclear issues and management systems;
- internal adverse SHEQ, security and regulatory framework and related nuclear trends.
| Committee | 28 Nov | 28 Feb |
| member | 2006 | 2007 |
| RM Adam (Chairman) | |
|
| JM Kriek | |
|
| RA Matzie | • | |
| GB Mehlomakulu | |
• |
| PH Readle | |
|
| JA Thomson | |
|
|
Indicates attendance |
| • | Indicates absence with apology |
ETHICS AND INTEGRITY
The company is committed to the highest standards of ethical behaviour in all its actions and decisions. This expectation and commitment is realised through a code of ethical conduct, supported by clear policies and procedures and an ethics programme linked to the company’s entire value chain. This cover such issues as bribery and corruption, fraud, compliance and discrimination and include a commitment to conducting our business with due regard to the interests of all our stakeholders and the environment.
DISCLOSURE AND COMMUNICATION
The company continually strives to ensure that reporting and disclosure to stakeholders is relevant, clear and effective. The company currently reports to its shareholder by means of the annual general meeting of the company. The company also submits quarterly reports to the Department
of Public Enterprises as required in terms of the PFMA. All operational reporting and strategic direction is obtained from the company’s Board, being the authority entrusted by the shareholder to deal with the company, its strategic direction and the execution thereof.
ASSURANCE
PBMR’s legal governance and compliance is fundamental to providing assurance in terms of SHEQ, risk management and internal audit. In our quest to provide the necessary assurances, PBMR’s executive management and employees are continuously assessing, managing, monitoring, reporting and improving the process. Facilitated workshops, training and support is provided for the process and responsibilities are included in – and reviewed through – performance compacts and service level agreements.
Risk management
The PBMR Board is accountable for the process of risk management and the systems of internal control. These are reviewed regularly for effectiveness. Appropriate risk and control policies are established and communicated by management throughout the company. The PBMR Board retains ultimate control through the final review and adoption of key risk factors affecting the company. Risk management is an ongoing process and is focused on identifying, assessing, managing and monitoring all known forms of significant risks across the company. The company has put systems in place to review the efficiency and effectiveness of preventative and corrective controls. Management is involved in a continuous process of implementing and improving systems and procedures to ensure effective mechanisms for identifying and monitoring risks in all areas such as contracting, statutory compliance, operations, technology and skills development.
Our governance framework and maturity management process encapsulates our risk management framework. A diagram reflecting the processes and parties involved is depicted below.
The evolving South African regulatory framework of relevance comprises legal and technical requirements in the form of codes and standards of various kinds, as well as the roles and responsibilities of the different entities and regulatory bodies.
PBMR has developed a register that encapsulates the regulatory and legal framework within which the company operates. This register is used as an important input to risk studies and to ensure compliance with all relevant laws, regulations and other requirements. The early (prior to procurement of fissile material) inclusion of this framework into the risk management philosophy ensures that the
PBMR enterprise-wide risk management framework is sufficiently robust to manage risks in this environment, going forward.
As a state-owned enterprise, PBMR and its Board are in support of the Department of Public Enterprises’ (DPE) risk management framework guidelines and will be reporting as per the framework requirements. This will assist DPE in effectively executing its oversight responsibility, whilst recognising the risk management responsibility and independence of the PBMR Board.
Public Finance Management Act
Implementation, training and awareness
PBMR complies in all significant respects with the provisions of the PFMA. During the review period, training was provided to all employees to create awareness of and provide guidance regarding the application of the PFMA. Non-compliance of the Act is dealt with in terms of PBMR’s existing disciplinary procedures.
Losses through criminal conduct and irregular, fruitless and wasteful expenditure
No significant fruitless and wasteful expenditure was incurred during the period.
Internal audit
The PBMR Board is accountable for the company’s system of internal control, designed to provide reasonable assurance against material misstatement and losses. Management has the responsibility for maintaining a sound system of internal control and for reviewing its effectiveness.
The internal audit function is responsible for assisting the Board and management in monitoring the effectiveness of the company’s risk management process. It maintains sound practice by evaluating those controls continuously to determine their efficiency and effectiveness, and recommending corrective actions and suggested enhancements.
The controls subject to evaluation encompass the information management environment, the reliability and integrity of financial and operating information, the safeguarding of assets, and the effective and efficient use of the company’s resources.
The control philosophy across the enterprise contains self-monitoring mechanisms that are practiced by all levels of line management and are verified by internal audit.
The purpose, authority and responsibility of the internal audit function are formally documented in the internal audit charter. A risk-based internal audit plan is used to direct the efforts and priorities of the internal audit function. Audit plans are updated as appropriate to ensure they are responsive to changes in the business environment. Significant findings are reported to the Audit, Risk and Finance Committee and follow-up audits are conducted in areas where significant internal control weaknesses are found.
The internal audit function is fully supported by the Board and Audit, Risk and Finance Committee, and has full, unrestricted access to all organisational activities, records, property and personnel.
Safety, health, environment and quality (SHEQ)
Legal fulfilment of all statutes and regulations is germane to the company business of ensuring safety, health and environmental compliance.
Safety, health and environmental management systems are implemented throughout the company in accordance with the requirements of international and national regulatory requirements. The management systems not only address requirements but also provide values for employee behaviour in creating a culture of “safety first”.
The commitment of the company executive ensures that the quality management system meets all requirements to maintain certification under the ISO 9001: 2000 standard.
“ Commitment to achieving certification under the international standards for occupational health and safety and environmental management has been realised during the latter part of 2006.”
As a core function of the Corporate SHEQ Department, internal audits were conducted to verify the ability of the company to meet customer and regulatory requirements and to determine the effectiveness of the quality management system. The internal audit programme was fully implemented ensuring that every PBMR department was audited at least once during the year. A number of significant management and technical processes was also audited. The results of internal audits indicate that the quality management system is generally effective. A total of 32 internal audits were performed resulting in the raising of 46 findings altogether. Corrective action is currently in progress and has resulted in the effective close out of 23 of these findings.
The demand for the qualification of suppliers has increased due to increased activity in the programme for the qualification and placing of contracts. This resulted in the performance of 22 audits to verify compliance of the supplier’s quality management system with PBMR requirements.
