Principle
number |
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Description |
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Application |
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| Chapter 1: Ethical leadership and corporate citizenships |
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| 1.1 |
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The board should provide effective leadership based on an ethical foundation. |
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In accordance with the board charter the board is the guardian of the values and ethics of the group and provides effective leadership on an ethical foundation. The group’s code of ethics sets out the company’s commitment to the highest level of ethical conduct, fair dealing and integrity in business practice as an operational imperative. The board charter governs the board’s activities. |
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| 1.2 |
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The board should ensure that the company is and is seen to be a responsible corporate citizen. |
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Hyprop’s board is the focal point for good corporate citizenship and sets the values to which the company adheres. The board aims to integrate responsible corporate citizenship into the company’s growth strategy and daily operations in order to ensure sustainability. The social & ethics committee, a new subcommittee of the board, reflects Hyprop’s commitment to responsible corporate citizenship. The group has adopted the principles of the Global Reporting Initiative (GRI) which guide it in its corporate responsibility. |
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| 1.3 |
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The board should ensure that the company’s ethics are managed effectively. |
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In accordance with the board charter the board ensures that the company’s ethics are managed effectively. The social and ethics committee assists the board with the oversight of social and ethical matters in respect of the group. Hyprop’s code of ethics, to which all members of the board, management and employees of the group are required to adhere, promotes and enforces ethical business practices. |
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| Chapter 2: Boards and directors |
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| 2.1 |
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The board should act as the focal point for and custodian
of corporate governance. |
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In accordance with the board charter, the board acts as the focal point for, and custodian of,
corporate governance by managing its relationship with management, the unitholders and other
stakeholders of the group along sound corporate governance principles. |
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| 2.2 |
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The board should appreciate that strategy, risk,
performance and sustainability are inseparable. |
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The board, in accordance with the board charter, is responsible for aligning the strategic
objectives, vision and mission with risk and performance. The group’s formalised risk
management process takes into account the full range of risks including strategic and
operational risk encompassing performance and sustainability. A social and ethics committee
is in place which is responsible for sustainability issues. |
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| 2.3 |
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The board should provide effective leadership based on an
ethical foundation. |
|
In accordance with the board charter the board is the guardian of the values and ethics of
the group and provides effective leadership on an ethical foundation. The group’s code of ethics sets out the company’s commitment to the highest level of ethical conduct, fair dealing
and integrity in business practice as an operational imperative. The board charter governs the
board’s activities. |
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| 2.4 |
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The board should ensure that the company is and is seen
to be a responsible corporate citizen. |
|
Hyprop’s board is the focal point for good corporate citizenship and sets the values to which
the company adheres. The board aims to integrate responsible corporate citizenship into the
company’s growth strategy and daily operations in order to ensure sustainability. The social and ethics committee, a new subcommittee of the board, reflects Hyprop’s commitment to
responsible corporate citizenship. The group has adopted the principles of the Global Reporting
Initiative (GRI) which guide it in its corporate responsibility. |
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| 2.5 |
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The board should ensure that the company's ethics are
managed effectively. |
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In accordance with the board charter the board ensures that the company’s ethics are managed
effectively. The social and ethics committee assists the board with the oversight of social and
ethical matters in respect of the group. Hyprop’s code of ethics, to which all members of the
board, management and employees of the group are required to adhere, promotes ethical
business practices. A fraud hotline was introduced during the year where employees and the
public can report any acts of fraud and unethical behaviour. |
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| 2.6 |
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The board should ensure that the company has an
effective and independent audit committee. |
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During the year Gavin Tipper was appointed as an independent non-executive director and
a member of the audit committee. The audit committee now comprises three independent
non-executive directors in line with King III guidelines. They will be elected by unitholders at the
annual general meeting. |
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| 2.7 |
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The board should be responsible for the governance of risk. |
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The risk committee is responsible for overseeing the group’s risk management programme.
The committee reports directly to the board which retains ultimate responsibility for the
control and management of risk.
It is responsible for reviewing and assessing the company’s risk control systems and ensures that
risk policies and strategies are effectively managed. Specifically the role of the committee is to
assist the board in ensuring that:
| • |
the company has implemented an effective policy and plan for risk management that will
enhance its ability to achieve its strategic objectives; |
| • |
and the disclosure regarding risk is comprehensive, timely and relevant. |
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| 2.8 |
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The board should be responsible for information
technology (IT) governance. |
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The board through the risk committee is responsible for effectively managing relevant IT risks. |
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| 2.9 |
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The board should ensure that the company complies with
applicable laws and considers adherence to non-binding
rules, codes and standards. |
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In accordance with the board charter the board ensures that Hyprop complies with applicable
laws and considers, with the assistance of the risk committee, adherence to non-binding rules
and standards. |
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| 2.10 |
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The board should ensure that there is an effective
risk-based internal audit. |
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KPMG was appointed in 2011 to provide an outsourced internal audit function, which is
risk-based. The internal auditor reports directly to the audit committee and attends all the
committee meetings. |
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| 2.11 |
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The board should appreciate that stakeholders`
perceptions affect the company's reputation. |
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Hyprop recognises that engaging with individuals or groups enhances the operations of
the company and better enables it to manage risk and reputation. Investor relations and
stakeholder engagement are key focus areas for the board. |
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| 2.12 |
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The board should ensure the integrity of the company's
integrated report. |
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The board’s audit committee oversees integrated reporting and is responsible for
recommending the integrity of the integrated report to the board. |
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| 2.13 |
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The board should report on the effectiveness of the
company's system of internal controls. |
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The audit committee is responsible for overseeing internal audit, including the appointment of
the internal audit function, monitoring its performance and approving the internal audit plan.
Further the committee ensures that the internal audit function is subject to an independent
quality review, as and when the committee determines it appropriate. Internal audit is
outsourced and independent. It assists management in assessing whether or not systems of
internal control are adequate and effective. Internal audit prepares a plan aligned to the key
risks of the company. |
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| 2.14 |
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The board and its directors should act in the best interests
of the company. |
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The board acknowledges its role as a trustee on behalf of the unitholders. In accordance with
the board charter it acts in the best interests of the group by ensuring that individual directors
adhere to legal standards of conduct; are permitted to take independent advice in connection
with their duties following an agreed procedure; disclose real or perceived conflicts to the
board and deal with them accordingly; and deal in securities only in accordance with the policy
adopted by the board. |
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| 2.15 |
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The board should consider business rescue proceeding or
other turnaround mechanisms as soon as the company is
financially distressed as defined in the Act. |
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The board, in accordance with the board charter, is responsible for commencing business rescue
proceedings should circumstances warrant it. The audit committee reviews the going concern
principle, as well as the solvency and liquidity principle as set out in the Companies Act,
Chapter 1, Part A, Section 4. |
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| 2.16 |
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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. |
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The Chairman of Hyprop is an independent non-executive director. |
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| 2.17 |
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The board should appoint the chief executive officer and
establish a framework for the delegation of authority. |
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The board has appointed Pieter Prinsloo as CEO and has approved a framework for the
delegation of authority. |
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| 2.18 |
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The board should comprise a balance of power, with a
majority of non-executive directors. The majority of
non-executive directors should be independent. |
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Following the appointment to Hyprop’s board of Gavin Tipper in March 2012 and Jabu Mabuza
in June 2012, 50% of the non-executive directors are categorised as independent. This brings the
balance of independent non-executives on the board closer to King III requirements. |
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| 2.19 |
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Directors should be appointed through a formal process. |
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In accordance with the board charter a formal and transparent process is in place for appointing
directors. The remuneration and nomination committee assists with the process of identifying
suitable candidates to be proposed to the unitholders. |
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| 2.20 |
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The induction of and ongoing training and
development of directors should be conducted
through formal processes. |
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In accordance with the board charter a formal induction programme is established for new
directors. Inexperienced directors are developed through mentorship programmes. Continuing
professional development programmes are implemented which ensure that directors receive
regular briefings on changes in risks, laws and the environment. |
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| 2.21 |
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The board should be assisted by a competent, suitably
qualified and experienced company secretary. |
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The company secretary, Probity Business Services (Pty) Limited, an independent company
secretarial practice, is appointed in compliance with the Companies Act 2008, the JSE Listings
Requirements and the recommendations of King III. The board deems its representative, Neville
Toerien, to be suitably qualified. |
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| 2.22 |
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The evaluation of the board, its committees and the
individual directors should be performed every year. |
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The board was evaluated by individual directors during May 2012. A sub committee assessment
process has been developed and will be implemented during the 2013 financial year. |
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| 2.23 |
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The board should delegate certain functions to well-structured
committees but without abdicating its own
responsibilities. |
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The board delegates certain functions without abdicating its own responsibilities to the
following committees:
| • |
Executive committee |
| • |
audit committee |
| • |
risk committee |
| • |
Investment committee |
| • |
Remuneration and nomination committee |
| • |
social & ethics committee |
| • |
BBBEE committee |
Each of these committees has a formal charter approved by the board and reviewed on a
regular basis. |
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| 2.24 |
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A governance framework should be agreed between the
group and its subsidiary boards. |
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All policies and procedures are communicated to subsidiary boards. |
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| 2.25 |
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Companies should remunerate directors and executives
fairly and responsibly. |
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In accordance with the board charter the board is responsible for ensuring that the
company has an appropriate remuneration strategy in place. The group’s remuneration and
nomination committee has an independent role, making recommendations to the board for
its consideration and final approval ensuring the group remunerates directors (including fees
payable to non-executive directors) and executives fairly and responsibly; and the disclosure of
directors’ remuneration is accurate, complete and transparent. Remuneration is set out in the
Director’s Report. In addition, fees for board and committee members are approved annually at
the annual general meeting. |
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| 2.26 |
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Companies should disclose the remuneration of each
individual director and certain senior executives. |
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The remuneration of directors and key management is disclosed in the Director’s Report on
page 68 and in note 24. |
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| 2.27 |
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Unitholders should approve the company’s remuneration
policy. |
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Full details of the remuneration policy are set out on page 60. Consideration will be given in
future to submitting the remuneration policy to unitholders to consider and endorse, by way of
a non-binding advisory vote, at the annual general meeting. |
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| Chapter 3: Audit committee |
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| 3.1 |
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The board should ensure that the company has an effective and independent audit committee. |
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During the year Gavin Tipper was appointed as an independent non-executive Director and a member of the audit committee. The audit committee now comprises three independent non-executive directors in line with King III guidelines. Their election will be confirmed by unitholders at the annual general meeting. |
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| 3.2 |
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audit committee members should be suitably skilled and experienced independent non-executive directors. |
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Members of the audit committee are all suitably skilled and experienced independent non-executive directors in accordance with the Companies Act. |
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| 3.3 |
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The audit committee should be chaired by an independent non-executive Director. |
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The audit committee is chaired by Les Weil, an independent non-executive Director. |
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| 3.4 |
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The audit committee should oversee integrated reporting. |
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The audit committee charter requires the committee to oversee integrated reporting and provide a comprehensive review of the report. |
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| 3.5 |
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The audit committee should ensure that a combined assurance model is applied to provide a coordinated approach to all assurance activities. |
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The audit committee charter tasks the committee with ensuring that a combined assurance model is applied to provide a coordinated approach to all assurance activities by management, internal and external audit. During the year under review, the audit committee has ensured that the combined model has been consistently applied. |
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| 3.6 |
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The audit committee should satisfy itself of the expertise, resources and experience of the company's finance function. |
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The audit committee considered the expertise, resources and experience of the Financial Director, Laurence Cohen, and concluded that these were appropriate. |
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| 3.7 |
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The audit committee should be responsible for overseeing of internal audit. |
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The audit committee oversees internal controls and internal audit. The audit committee is satisfied that KPMG is independent of the group. |
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| 3.8 |
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The audit committee should be an integral component of the risk management process. |
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The committee specifically oversees financial reporting risks; internal financial controls; fraud risks as it relates to financial reporting; and IT risks as it relates to financial reporting. The risk committee reports directly to the audit committee, which in turn reports to the board. The audit committee reviewed the group’s risk approach and found them to be sound and considered and reviewed the findings and recommendations of the risk committee. |
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| 3.9 |
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The audit committee is responsible for recommending the appointment of the external auditor and overseeing the external audit process. |
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The audit committee nominated to unitholders for appointment Grant Thornton as the external auditors and reviewed and evaluated the conduct of its audit. |
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| 3.10 |
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The audit committee should report to the board and unitholders on how it has discharged its duties. |
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The committee has an independent role with accountability to both the board and unitholders. Hence the committee prepares a report which is included in integrated report on page 40. |
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| Chapter 4: The governance of risk |
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| 4.1 |
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The board should be responsible for the governance of risk. |
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The risk committee is responsible for overseeing the group’s risk management programme. The committee reports directly to the audit committee, which in turn reports to the board, which retains ultimate responsibility for the control and reduction of risk.
It is responsible for reviewing and assessing the company’s risk control systems and ensures that risk policies and strategies are effectively managed. Specifically the role of the committee is to assist the board in ensuring that:
| • |
the company has implemented an effective policy and plan for risk management that will enhance its ability to achieve its strategic objectives; and |
| • |
the disclosure regarding risk is comprehensive, timely and relevant. |
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| 4.2 |
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The board should determine the levels of risk tolerance. |
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The risk committee makes recommendations to the board with regard to risk tolerance levels. The board sets the levels of risk tolerance and limits of risk appetite for the group. |
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| 4.3 |
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The risk committee or audit committee should assist the board in carrying out its risk responsibilities. |
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See 4.1 |
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| 4.4 |
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The board should delegate to management the responsibility to design, implement and monitor the risk management plan. |
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The day-to-day responsibility for risk management remains with management both at an operational and group executive level. |
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| 4.5 |
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The board should ensure that risk assessments are performed on a continual basis. |
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The risk committee ensures that risk management assessments are performed on a continuous basis.
KPMG’s internal audit methodology includes planning, strategic analysis and enterprise risk assessment. |
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| 4.6 |
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The board should ensure that the frameworks and methodologies are implemented to increase the probability of anticipating unpredictable risks. |
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The risk committee monitors the implementation of the policy and plan for risk management taking place by means of risk management systems and processes. |
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| 4.7 |
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The board should ensure that management considers and implements appropriate risk responses. |
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The risk committee ensures that management considers and implements appropriate risk responses. |
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| 4.8 |
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The board should ensure continual risk monitoring by the management. |
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Through the risk committee the board ensures that continuous risk monitoring by management takes place. |
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| 4.9 |
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The board should receive assurance regarding the effectiveness of the risk management process. |
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The company’s risk management process identifies, assesses and monitors risks to which Hyprop is exposed. The Risk committee liaises with the audit committee to exchange information relevant to risk and it expresses the committee’s view to the board on the effectiveness of the system and process of risk management. |
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| 4.10 |
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The board should ensure that there are processes in place enabling complete, timely, relevant, accurate and accessible risk disclosure to stakeholders. |
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The group’s integrated report includes disclosure on in respect of risk management. Refer page 41 |
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| Chapter 5: The governance of information technology |
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| 5.1 |
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The board should be responsible for information technology (IT) governance. |
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The board through the audit and risk committees are responsible for effectively managing relevant IT risks. |
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| 5.2 |
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IT should be aligned with the performance and sustainability objectives of the company. |
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The board has delegated the management of IT to management. The conversion of all sites to a standard property management system is being implemented. |
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| 5.3 |
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The board should delegate to management the responsibility for the implementation of an IT governance framework. |
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Management has the responsibility for the implementation of IT governance. The audit committee and risk committee assess IT governance on a regular basis per the relevant sub committee charters. |
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| 5.4 |
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The board should monitor and evaluate significant IT investments and expenditure. |
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The board monitors and evaluates significant IT investments and expenditures, although the implementation and execution thereof is delegated to management. |
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| 5.5 |
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IT should form an integral part of the company's risk management. |
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The risk committee charter includes terms of reference relating to IT governance. |
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| 5.6 |
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The board should ensure that information assets are managed effectively. |
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The management of IT assets is incorporated into the group’s risk management process. |
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| 5.7 |
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A risk committee and audit committee should assist the board in carrying out its IT responsibilities. |
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See 5.1 above. |
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| Chapter 6: Compliance with laws, codes, rules and standards |
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| 6.1 |
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The board should ensure that the company complies with applicable laws and considers adherence to non-binding rules, codes and standards. |
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In accordance with the board charter the board ensures that Hyprop complies with applicable laws and considers adherence to non-binding rules and standards. |
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| 6.2 |
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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. |
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In accordance with the board charter continuing professional development programmes are implemented which ensure that directors receive regular briefings on changes in laws. |
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| 6.3 |
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Compliance risk should form an integral part of the company's risk management process. |
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Legislative issues are an identified significant risk and addressed as part of the risk management process. |
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| 6.4 |
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The board should delegate to management the implementation of an effective compliance framework and processes. |
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All of Hyprop’s employees are appointed based on their expertise and experience. They are all expected to keep abreast of legislation and compliance requirements that affect their particular area of responsibility. The group has appointed an internal Legal Advisor. |
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| Chapter 7: Internal risk |
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| 7.1 |
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The board should ensure that there is an effective risk based internal audit. |
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KPMG was appointed in 2011 to provide an outsourced internal audit function, which is risk based. |
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| 7.2 |
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Internal audit should follow a risk-based approach to its plan. |
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Internal audit follows a risk based approach in accordance with the audit committee charter. |
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| 7.3 |
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Internal audit should provide a written assessment of the effectiveness of the company's system of internal control and risk management. |
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This was implemented at process level in 2011 and KPMG has progressed this. The group is in the process of implementing various recommendations made by the outsourced internal audit function. |
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| 7.4 |
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The audit committee should be responsible for overseeing internal audit. |
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The audit committee is responsible for overseeing internal audit, including the appointment of the internal audit function, monitoring its performance and approving the internal audit plan. Further the committee ensures that the internal audit function is subject to an independent quality review, as and when the committee determines it appropriate. |
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| 7.5 |
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Internal audit should be strategically positioned to achieve its objectives. |
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Internal audit is outsourced and independent. It assists management in assessing whether or not systems of internal control are adequate and effective. Internal audit prepares a plan based on the areas of operational risks and controls in place. |
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| Chapter 8: Governing stakeholder relations |
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| 8.1 |
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The board should appreciate that stakeholders perception affect a company's reputation. |
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Hyprop recognises that engaging with individuals or groups enhances the operations of the company and better enables it to manage risk and reputation. |
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| 8.2 |
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The board should delegate to management to proactively deal with stakeholder relationships. |
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Hyprop has identified its stakeholders and the channels of communication used for dialogue. These are regularly reported to the Executive committee. The group has recently appointed an internal investor relations function. |
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| 8.3 |
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The board should strive to achieve the appropriate balance between its various stakeholder groupings, in the best interests of the company. |
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The appropriate balance is assessed on a regular basis, with assistance from the Company Secretary and outside advisors where appropriate. |
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| 8.4 |
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Companies should ensure the equitable treatment of unitholders. |
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Unitholders are treated equitably in accordance with various laws and regulations which protect minority interests. |
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| 8.5 |
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Transparent and effective communication with stakeholders is essential for building and maintaining their trust and confidence. |
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The company has a comprehensive stakeholder engagement process in place and communicates with stakeholders in a variety of ways. |
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| 8.6 |
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Transparent and effective communication with stakeholders is essential for building and maintaining their trust and confidence. |
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Disputes with stakeholders are addressed in the appropriate forum and steps taken to ensure that any disputes are resolved effectively, efficiently and expeditiously. |
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| Chapter 9: Integrated reporting and disclosure |
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| 9.1 |
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The board should ensure the integrity of the company's integrated report. |
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The board’s audit committee oversees integrated reporting and is responsible for the integrity of the integrated report. |
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| 9.2 |
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Sustainability reporting and disclosure should be integrated with the company's financial reporting. |
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The Company’s vision and mission statements, strategic objectives and value system are integrated into all policies, procedures, decision-making and operations, with sustainability as the ultimate objective. |
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| 9.3 |
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Sustainability reporting and disclosure should be independently assured. |
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At present the company does not obtain independent assurance. This will be considered in future. |
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