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INTEGRATED RESULTS PRESENTATION
KING III APPLICATION
 
 

King III application register - 2014

Eskom Holdings SOC Ltd

 King III Exceptions & Explanations Register - 2014
Main Category Sub category King III Principle Response   Comment
Board composition Board composition Procedures for appointments to the board are all of the following:  
- formally set out in a policy;             
- transparent; and
- a matter for the board as a whole (although the board may be assisted by the nomination committee) or the Minister as applicable.
Needs improvement   Procedure for appointment of non-executive directors is determined by the shareholder through the Department of Public Enterprises (DPE) and implemented by the DPE. The transparency thereof can be improved. The procedure for appointment of executive directors is determined by the shareholder and implemented by Eskom in accordance with its recruitment policy.
Board composition Board composition Before candidates are nominated for board appointments, there are procedures in place to investigate the candidates' backgrounds or legal exclusions from membership inspected and applied. Needs improvement   Non-executive directors are appointed by the shareholder. The timing of the vetting process can be improved. The recruitment process for executive directors conducted by Eskom includes a background check.
Board composition Board composition Non-executive directors* agree all of the following in their letters of appointment:         
- the directors' code of conduct;     
- the duties that are expected from each director;        
- the remuneration for holding office as director; and          
- the terms of directors' and officers' liability insurance.
Needs improvement   The shareholder appoints the director and issues the letter of appointment. It does highlight the directors' duties but the code of ethics, board charter and insurance policy of the SOC, as well as the determination of remuneration, are provided after the letter of appointment has been issued and the SOC has been informed of the appointment.
Board composition Board composition The board ensures that inexperienced directors are developed through mentorship programmes. No   There is no formal mentorship programme but mentorship does take place through more experienced directors sharing their experience with less experienced directors.   
Board role and duties Risk The board monitors that risks are taken within the entity’s tolerance and appetite levels Needs improvement   The introduction of the Eskom Risk Appetite & Tolerance Statement and Profile will improve the board’s ability to monitor that risks are taken with the levels defined therein.
Board role and duties Risk Risks are prioritised and ranked in order to focus responses and interventions to those risks outside the board’s tolerance limits. Needs improvement   Application of the Eskom Risk Appetite & Tolerance Statement will enable improved focus of responses to risks outside the board’s tolerance levels.
Board role and duties Risk Management demonstrates to the board that the risk responses provide for the identification and exploitation of opportunities to improve the performance of the entity. Needs improvement   The Eskom Integrated Risk methodology provides for identification and responses to opportunities.  The new levels of risk appetite and tolerance will enable improved exploitation of opportunities. A risk report is tabled on a regular basis at the Exco, Audit and Risk committee and Board and opportunities and threats are discussed.
Board role and duties Compliance The board continually monitors the entity’s voluntary compliance with applicable laws, rules, codes and standards. Needs improvement   Exco and the Board Audit & Risk Committee regularly receive self-assessment reports on the status of compliance from divisional and functional compliance officers on a cycle basis and receive a consolidated assessment report at least twice a year from the Group Compliance Office, including on selected voluntary codes and standards (e.g. King III, ISO standards).
Board role and duties Compliance The risk of non-compliance is identified, assessed and responded to through the risk and management process Needs improvement   The identification and assessment of laws is done primarily through the compliance management process after which the risks are logged, responded to and tracked through the general risk management process. In this regard integration is steadily being improved and control mechanisms updated to enhance the management of compliance risks and general compliance reporting.
Board role and duties Compliance Management has established the appropriate structure to educate, train, communicate about, and measure compliance Needs improvement   A set of formalised guiding documents have been implemented to guide the requirements associated with Compliance management  Training employees on specific compliance requirements is not done on a systematic basis and is affected by capacity constraints . KPI measurement is currently on a voluntary basis. Both are expected to move to a more formalised process in FY2014/15
Board role and duties Compliance The compliance function has adequate resources to fulfil its duties. Needs improvement   Resources are currently stretched and available capacity as well as competence needs to be augmented.
Board role and duties Compliance The board receives assurance on the effectiveness of the internal controls intended to ensure compliance with laws, rules, codes and standards. Needs Improvement   Capacity constraints affect the ability to carry out routine monitoring and reviews and thus impact on the ability to provide regular assurance. Consolidated reports on compliance maturity and status are presented regularly to the Audit and Risk committee. The maturity of the compliance structures is improving and consequently the degree of assurance provided on the effectiveness of compliance controls is also steadily improving.  This is on-going.
Remuneration Remuneration Non-executive directors' fees comprise both a base fee and an attendance fee per meeting. Explained   The 2007 shareholder’s remuneration guidelines do not provide for this.  The new shareholder’s remuneration standards do and Eskom is in the process of aligning its policy to the new standards.
Remuneration Remuneration The shareholder passes a non-binding advisory vote on the entity's remuneration policy every year or if not a company, it is approved by the Minister. Needs Improvement   A remuneration policy for the Board is being developed. The shareholder approves the remuneration of the Board members at the AGM.
Governance office bearers Chairman There is succession planning in place for the chairman. Explained   The chairman is appointed by the shareholder. The DPE considers the succession of the chairman as well as all directors.
Governance office bearers CEO The CEO is not a member of the remuneration committee. Explained   The remuneration role is included in the People & Governance committee. The chief executive is a member of the committee but recuses himself when his remuneration is discussed or if there is an actual, perceived or potential conflict of interest.
Governance office bearers CEO The CEO is not a member of the nomination committee. Explained   The nomination role is included in the People & Governance committee. The chief executive is a member of the committee but recuses himself when board nominations are made or if there is an actual, perceived or potential conflict of interest. He contributes to the nomination and appointment of senior executives.
Board role and duties Ethical leadership The board ensures that ethical risks and opportunities are assessed (i.e. identified and evaluated in terms of probability and impact) and that an ethics risk and opportunity profile is compiled. Needs improvement   The outcome of the current Eskom Fraud Risk Assessment will enhance efforts to improve the assessment of ethical risks and opportunities
Accountability Stakeholder relations The gap between stakeholders' perceptions and the performance of the company is measured and managed to enhance or protect the entity's reputation. Needs improvement   A measurement tool has been developed and is being piloted.
Accountability Stakeholder relations Management develops a strategy and formulates policies for the management of the relationship with each stakeholder grouping. Needs improvement   Stakeholder strategy, policies, procedures and a process control manual are in place. Eskom’s Stakeholder Relations function is being strengthened in order to intensify stakeholder engagement, advocacy and strategic dialogue.
Accountability Integrated reporting and disclosure The remuneration report discloses both the nature and period of restraint provided for in executive service contracts. Explained   Restraint agreements are not applicable.
Accountability Integrated reporting and disclosure The entity discloses in the Integrated Report details of where the limits of risk appetite (willingness to tolerate risk) exceed, or deviate materially from, the limits of the company’s risk tolerance (ability to tolerate risk). No   The recently approved Risk Appetite & Tolerance Profile and Statement will drive the assessment of instances where the extent to which risk appetite and tolerance levels have been exceeded or materially deviated from.  Disclosure will be made in future reports if the company’s risk appetite exceeded its risk tolerance levels.
Accountability Integrated reporting and disclosure The integrated report discloses details of how the board has satisfied itself that risk assessments, responses and interventions are effective. Needs improvement   Risk responses to material issues and risk are detailed.  Disclosure in the integrated report will be improved.
Accountability Integrated reporting and disclosure The board discloses in the integrated report its views on the effectiveness of the entity’s risk management process Needs improvement   Whilst the risk management process is described in the integrated report, the Board’s view on its effectiveness will be included in future.
Accountability Integrated reporting and disclosure The integrated report includes reasons for refusals of requests for information that were lodged with the entity in terms of the Promotion of Access to Information Act, 2000. (Only applicable in the event of any such refusals during the reporting period.) Explained   The report on section 32 of PAIA is included in the Integrated Report. The nature and volume of PAIA requests and the percentage of refusals and their complexity prevents comprehensive disclosure in the Integrated Report
Board committees Remuneration committee All members of the remuneration committee are non-executive directors and a majority of the members is independent. Explained   The People & Governance committee includes the remuneration role.  The chief executive is a member of the committee but he recuses himself if there is an actual, perceived or potential conflict of interest.
Board committees Audit Committee The audit committee does both the following: considers and satisfies itself of the suitability of the expertise and experience of the financial director every year; and reviews the finance function every year. Explained   The finance division is reviewed through the process of both internal and external audit.  The assessment of the finance director is done by the CE and People and Governance Committee.
Board committees Risk committee Both the following statements are true: membership of the risk committee includes executive and non-executive directors; and members of senior management and independent risk management experts are invited to intend, if necessary. Explained   The audit committee which comprises only independent, non-executive directors in accordance with the Companies Act, is also responsible for risk. Executive directors and senior management attend the Audit and Risk committee meetings as officials.
Board committees Nomination committee The nomination committee identifies and participates in selecting board members Explained   The shareholder identifies, selects and appoints non-executive directors.  The People & Governance committee is entitled to make proposals to the shareholder and   assists the board with the identification and selection of executive directors.
Board committees Nomination committee The nominations committee oversees a formal succession plan for the board, CEO and certain senior executive appointments. Explained   The shareholder attends to succession planning for non-executive directors.  The People & Governance committee oversees the succession plans for the CEO and senior executives.
Board committees Nomination committee The nomination committee makes recommendations for appointment as director based on all of the following: knowledge and experience gap on the board; integrity of the candidate; and skills and capacity of the candidate. Explained   The board makes recommendations to the shareholder on the skills gap. Knowledge, experience, integrity and capacity of potential directors is determined by the shareholder
Board committees Nomination committee The nominations committee establishes procedures for appointments to the board and ensures that these are properly carried out. Explained   The shareholder appoints non-executive directors. The People & Governance committee ensures that there procedures in place for the appointment of executive directors. 
Board committees Nomination committee The nomination committee ensures that new directors have not been declared delinquent or are not serving probation in terms of section 162 of the Companies Act. Explained   Non-executive directors are vetted and appointed by the shareholder.  The People & Governance committee oversees the vetting (including s162) of executive directors.
Board committees Nomination committee The nomination committee presents the shareholder or board with suitable candidates for election as audit committee members Explained   The board recommends audit committee members to the shareholder.
Board committees Nomination committee The nomination committee evaluates whether audit committee members collectively have the required level of qualification and experience. Explained   The board evaluates the qualification and experience of audit committee members.
Board committees Nomination committee The nomination committee comprises the board chairman and non-executive directors Explained   The People & Governance committee includes the nomination role.  The chief executive is a member of the committee but he recuses himself if there is an actual, perceived or potential conflict of interest.
Group governance Group governance The holding entity board consults with the chairman of the board of the subsidiary entity or division and its nomination committee prior to nominating a representative director. Explained   The shareholder’s MoI template, which applies to Eskom and its subsidiaries, sets out the process for the appointment of directors in SOCs.