Corporate governance

Approach

Our approach to corporate governance is based on the values and principles that underpin the day-to-day activities of our group responsiveness, collaboration, transparency, integrity and accountability. This encompasses a commitment to excellence in governance standards, which we regard as fundamental to the sustainability of the group’s performance.

Applying governance principles

The board is committed to applying the recommendations of King III, complying with JSE Listings Requirements and the Companies Act, as well as incorporating relevant standards of best practice. In line with King III’s “apply or explain” approach, the directors disclose the extent to which Hyprop applies these corporate governance principles to create and sustain value for stakeholders over the short, medium and long term, and explain any instances of non-compliance. The King III application is on page 67 and in our online report.

In October 2013, Hyprop elected to participate in the Institute of Directors Southern Africa’s (IoDSA) governance assessment instrument, achieving the highest application score of AAA (below and online). There is scope to improve our application in terms of independent assurance.

Assessing our governance As convener of the King committee and custodian of the King reports, one of IoDSA’s main objectives is to promote corporate governance by enabling the application of King III. In line with this, and to create a credible and general benchmark to measure application, the IoDSA developed an online tool to: Evaluate implementation of governance structures and processes as recommended by King III Track progress on implementing King III Provide a simplified framework for the board for a risk-based review of applying King III Facilitate a meaningful scoring mechanism for an organisation’s adoption of King III Provide a framework for independently assuring governance Give holding companies a concise view of subsidiaries’ governance status, where applicable Provide an audit programme for internal and external service providers Offer a reporting benchmark to stakeholders, fit for peer-to-peer comparison of organisations, enhancing confidence in governance reporting The assessment instrument covers main governance categories of: Board composition Remuneration Governance office bearers Board role and duties Accountability Board committees Group boards Performance assessment

Ethical leadership

Hyprop’s board aims to integrate responsible corporate citizenship into the company’s investment strategy and daily operations to ensure its sustainability. In line with its charter, the board is the guardian of the group’s values and ethics. The board strives to lead by example and to embody the values set out in our code of conduct and ethics, http://www.hyprop.co.za/pdf/policies/hyprop-code-conduct-2013.pdf. As a business imperative, the directors strive to ensure that Hyprop conducts its business with the utmost integrity towards all stakeholders.

The social and ethics committee of the board monitors compliance with Hyprop’s code of conduct and ethics and other relevant social, ethical and legal requirements, as well as best practice. The committee’s purpose is to ensure we meet our responsibilities to stakeholders. It reports to unitholders on matters within its mandate at the annual general meeting and via this integrated report.

We monitor ethical behaviour through the Hyprop ethics line, an independent hotline operated by an external provider. They provide a regular call analysis to enable Hyprop to investigate all allegations timeously. Formal reports on matters that may impact financial reporting are submitted to the audit committee. Only two reports were received during the period, which were addressed.

2014 governance developments
	Participated in IoDSA’s governance assessment — achieved overall AAA score, indicating the highest application of the principles and recommendations of King III
	Audit committee constituted solely of independent board members
	Majority of the board is independent
	New appointment improved diversity

The chairmen of key committees — audit, remuneration and nomination – are all independent non-executive directors. Hyprop is making progress in improving the representivity of its board.

Composition of the board

Hyprop’s board comprises 11 directors: six independent non-executives, three non-executives, and two executive directors.

The non-executive directors have diverse backgrounds in commerce and industry. Their collective experience enables them to provide sound, objective judgement in decision making. They review and ratify Hyprop’s strategy, in addition to monitoring the group’s performance and that of executive management against key performance indicators. Specifically they provide opinions and advice on the group’s financial, audit, governance and risk management systems and controls. To ensure sustainable leadership, they also review transformation and succession planning at senior level and provide input on the remuneration process.

All directors are free of conflict in fulfilling their duties, and the constructive debate at meetings contributes to informed decisions.

The position of chairman is currently held by an independent non-executive director, Gavin Tipper, whose role is clearly defined and separated from that of the CEO, Pieter Prinsloo. Similarly, the responsibilities of CEO and financial director are strictly separated from those of non-executive directors to ensure that no single director can exercise unilateral decision making. The chairman provides leadership and guidance to the board and encourages proper deliberation on all matters requiring directors’ attention, while obtaining input from other directors. The CEO and financial director are responsible for implementing strategy and operational decisions.

Non-executive directors are not involved in the daily operations of the company.

Changes to the board

During the year, the only change to the directorate was the appointment of Thabo Mokgatlha as independent non-executive director and as a member of the audit committee, effective 28 August 2013.

Board appointment process

The board, supported by the remuneration and nomination committee, is responsible for new appointments. The process of identifying and selecting candidates is formal and transparent. The board and committee consider the blend of skills and experience necessary to drive the company’s operational progress and sustainable transformation, and other relevant factors, including diversity and regulatory compliance.

Our induction process includes a briefing by the chairman, CEO, financial director and our sponsor, Java Capital. New appointees are also introduced to key senior management at company and shopping centre levels and site visits to the shopping centres are facilitated.

The appointment of new directors is confirmed by shareholders at the first annual general meeting following their appointment, in terms of the memorandum of incorporation.

Rotation of directors

The company’s memorandum of incorporation provides for one-third of directors to retire by rotation after a three-year term of office. Being eligible, the directors in question will offer themselves for re-election.

Directors standing for re-election by rotation at the upcoming annual general meeting are LR Cohen, KM Ellerine, S Shaw-Taylor and GR Tipper.

Succession planning

The remuneration and nomination committee is responsible for ensuring adequate succession planning for directors and management, and that all committees are appropriately constituted and chaired. The board is comfortable that the depth of skills meets current board succession requirements.

Director development

To the extent necessary, directors have access to experts and other parties in carrying out their duties. In addition, directors are encouraged to undergo continuing professional development in their personal capacity.

Company secretary

Following the acquisition of Probity Business Services (Proprietary) Limited by Computershare Investor Services (Proprietary) Limited (Computershare), CIS Company Secretaries (Proprietary) Limited, a subsidiary of Computershare, was appointed as Hyprop’s company secretary with effect from 2 June 2014.

CIS Company Secretaries (Proprietary) Limited is an independent practice providing services to numerous JSE-listed companies. The board is satisfied the company secretary and its representative, Neville Toerien, maintain an arm’s-length relationship with the board at all times and are sufficiently qualified and skilled to act in accordance with, and update directors in terms of, the recommendations of King III and other relevant regulations and legislation.

The role and functions of the company secretary include:
	Guiding the directors, collectively and individually, on their duties, responsibilities and powers
	Providing information on laws, legislation, regulations and matters of ethics and good corporate governance relevant to the company
	Properly recording the minutes of meetings, including attendance registers, resolutions, directors’ declarations of personal and financial interests and all notices and circulars issued by the company
	Preparing the notice of the annual general meeting
	Assuming responsibility for filing annual and other returns in terms of the Companies Act

The company secretary keeps the board updated on developments relating to ethics, governance and regulations. The board then reviews any changes and appropriate measures are implemented to comply with best practice and support sustainable performance.

Performance self-assessment

The performance of the board, and that of statutory and subcommittees of the board, is evaluated regularly.

The scope of the board effectiveness assessment includes assessing the board itself, and reviewing individual directors’ performance and contributions. Board subcommittees will be evaluated during the course of the next financial year and the board performed a self-assessment in July 2014.

The board is satisfied that all independent non-executive directors meet the criteria of King III.

Access to information

Access to the advice and services of the company secretary and to company records, information, documents and property is unrestricted. Non-executive directors have unfettered access to the external and internal auditors, and to management, at any time. All directors are entitled, at Hyprop’s expense, to seek independent professional advice on any matters concerning the affairs of the company.

Access to the board

Shareholders are able to provide recommendations or direction to the board at the annual general meeting, one-on-one meetings, investor presentations and through investor polls.

Dealing in securities

The board complies with the JSE Listings Requirements that restrict trading Hyprop’s shares by directors, the company secretary and employees during defined closed periods. In terms of the code of ethics and conduct, directors are required to declare to the chairman and company secretary their shareholdings, additional directorships and any potential conflicts of interest. In conjunction with the financial director and sponsor, they ensure any required disclosure on trades in Hyprop shares is published on SENS. Directors and senior employees with access to the company’s financial results and other price-sensitive information are barred from dealing in Hyprop’s shares for specified periods preceding relevant announcements. A notification is sent to all directors and affected staff alerting them that the company is entering a closed period.

Post-year-end, Kevin Ellerine, through his associate, acquired 10 000 Hyprop shares on 4 September 2014 and a further 10 000 Hyprop shares on 10 September 2014. Louis Norval, through his associate, disposed of 119 035 Hyprop shares on 19 September 2014.

Board committees

Please see the outline of board committees on page 63.

The board is satisfied that all committees fulfilled their responsibilities during the year. Each committee operates under an approved charter which is reviewed annually.

The need for additional committees is evaluated regularly. Hyprop’s remuneration and nomination committees are combined. Discussions on agenda items related to nomination committee matters are chaired by the chairman of the board, Gavin Tipper.

There is transparency and full disclosure from board committees to the board. Committee chairmen provide the board with a verbal report on recent committee activities and the minutes of committee meetings are available. In addition, the chairman of the board and chairmen of the audit, remuneration and nomination committees attend the company’s annual general meetings to answer questions from stakeholders.

Board and committee meetings

The board meets at least four times a year, with ad hoc meetings when necessary. Relevant information is supplied timeously in advance, ensuring directors can make well-researched and reasoned decisions.

The investment committee meets on an ad hoc basis as and when necessary.

Details of attendance at board and committee meetings for the review period (1 July 2013 to 30 June 2014) are shown below.

Compliance with laws, rules, codes and standards

The national legal executive and executive management ensure the company complies with all current regulations and legislation. In doing so they liaise closely with the company’s sponsor. Areas of non-compliance are formally tabled through the risk management process under the supervision of the risk committee.

No areas of non-compliance were identified during the year. Hyprop has established a board subcommittee to monitor progress against the property sector charter, with particular focus on transformation.

Legislations/regulations with which the company is required to comply include:
	Property sector charter
	Basic Conditions of Employment Act 75 of 1997
	Companies Act 71 of 2008
	Compensation for Occupational Injuries and Disease Act 130 of 1993
	Competition Act 89 of 1998
	Employment Equity Act 55 of 1998
	Labour Relations Act 66 of 1995
	Occupational Health and Safety Act 85 of 1993
	Value Added Tax Act 89 of 1991
	Financial Intelligence Centre Act 38 of 2001
	Consumer Protection Act 68 of 2008
	Safety at Sports and Recreational Events Act 2 of 2010
	South African Securities Services Act 36 of 2004
	Income Tax Act 58 of 1962
	Promotion of Access to Information Act 2 of 2000
	Protection of Personal Information Act 4 of 2013

As Hyprop is a listed REIT, it is required to comply with the JSE Listings Requirements and rules that are specific to REITs in South Africa.

Anti-competitive behaviour

Hyprop has not been party to any legal actions for anti-competitive behaviour or monopoly practices during the period.