| Stage of maturity | Comments | |
| Principle per King III | ||
| Ethical leadership and corporate citizenship | 3 | Applied |
| Effective leadership based on an ethical foundation | 3 | Applied |
| Responsible corporate citizen | 3 | Applied |
| Effective management of the Group’s ethics | 3 | Applied |
| Board and Directors | ||
| The Board is the focal point for and custodian of corporate governance | 3 | Applied |
| Strategy, risk, performance and sustainability are inseparable | 3 | Applied |
| The Board and its directors should act in the best interests of the Group | 3 | Applied |
| Elect a Chairman of the Board who is an independent non-executive director | 2 | Note 1 |
| The Board comprises a balance of power, with a majority of non-executive directors | 3 | Applied |
| Directors should be appointed through a formal process | 3 | Applied |
| Formal induction and ongoing training and development of directors should be conducted through formal processes | 3 | Applied |
| The Board is assisted by a competent, suitably qualified and experienced Company Secretary | 3 | Applied |
| Remuneration of each individual director and certain senior executives is disclosed | 3 | Applied |
| The Group’s remuneration policy is approved by Italtile shareholders | 3 | Applied |
| Audit Committees | ||
| Effective and independent Audit Committee | 3 | Applied |
| Chaired by an independent non-executive director | 3 | Applied |
| Responsible for overseeing of internal audit | 3 | Applied |
| Integral component of the risk management process | 3 | Applied |
| Oversees the external audit process | 3 | Applied |
| Reports to the Board and shareholders on how it discharged its duties | 3 | Applied |
| The governance of risk | ||
| The Board is responsible for the governance of risk and setting levels of risk tolerance | 3 | Applied |
| The Audit and Risk Committee assist the Board in carrying out its risk responsibilities | 3 | Applied |
| The Board ensures that risk assessments and monitoring are performed on a continual basis | 3 | Applied |
| Frameworks and methodologies are implemented to increase the probability of anticipating unpredictable risks | 3 | Applied |
| Management implements appropriate risk responses | 3 | Applied |
| Sufficient risk disclosure to stakeholders | 3 | Applied |
| The governance of Information Technology | ||
| The Board is responsible for information technology (IT) governance | 3 | Applied |
| IT is aligned with the performance and sustainability objectives of the Group | 3 | Applied |
| The Board should delegate to management the responsibility for the implementation of an IT governance framework | 2 | Partially applied |
| IT assets are managed effectively | 3 | Applied |
| The Audit and Risk Committee assists the Board in carrying out its IT responsibilities. | 3 | Applied |
| Compliance with laws, codes, rules and standards | ||
| The Board ensures that the Group complies with relevant laws | 3 | Applied |
| The Board and directors have a working understanding of the relevance and implications of non-compliance | 3 | Applied |
| Compliance risk forms an integral part of the Group’s risk management process | 3 | Applied |
| Internal audit function | Note 2 | |
| Effective risk-based internal audit function | 3 | Applied |
| Internal audit should follow a risk-based approach to its plan | 3 | Applied |
| Written assessment of the effectiveness of the Group’s system of internal control and risk management | 3 | Applied |
| Internal audit is strategically positioned to achieve its objectives | 3 | Applied |
| Governing stakeholder relationships | ||
| Appreciation that stakeholders’ perceptions affect a company’s reputation | 3 | Applied |
| Management to proactively deal with stakeholder relationships | 3 | Applied |
| There is an appropriate balance between its various stakeholder groupings, in the best interests of the Group | 3 | Applied |
| Equitable treatment of shareholders | 3 | Applied |
| Transparent and effective communication to stakeholders | 3 | Applied |
| Integrated reporting and disclosure | ||
| The Audit and Risk Committee ensures the integrity of the Group’s integrated annual report | 3 | Applied |
| Sustainability reporting and disclosure is integrated with the Group’s financial reporting | 3 | Applied |
Note 1:
Following the untimely death of the Italtile Group’s Chief Executive Officer, Mr G P E Ravazzotti, Mr G A M Ravazzotti, formerly Non-executive Chairman, assumed the role of Executive Chairman tasked with all management functions and the day to day affairs of the business. The Board is aware that the appointment of an Executive Chairman could result in actual or perceived conflicts of interest and in order to mitigate any such conflicts of interest and having regard to the recommendations set out in King III, S M du Toit was appointed as lead independent non-executive director to the Board (refer to paragraph on lead independent director here).
Note 2:
The internal audit function is an integral part of the Group finance function.
Board of directors
A formal Board charter, as recommended by the King Codes, has been adopted. The charter includes a code of ethics to which all directors subscribe. Procedures exist in terms of which unethical business practices can be brought to the attention of the Board by directors.
Composition of the board
The Board comprises two executive directors, an executive chairman and four non-executive directors of which three are independent.
The directors are individuals of a high calibre with diverse backgrounds and expertise, facilitating independent judgement and broad deliberations in the decision-making process.
Classification of directors
The basis on which directors have been classified in terms of their independence in this report is as follows:- Executive directors are employed in a full-time capacity by Italtile;
- Non-executive directors are those who, while not in the full-time employment of the Group, are members of the Management Committee or who have been nominated by a shareholder owning more than 20% of the Group; and
- Independent non-executive directors are all other directors irrespective of the period during which they have been members of the Board.
No director has an automatic right to a position on the Board. All directors are required to be elected by the shareholders at an annual general meeting on a rotational basis.
Board responsibilities
The Board is responsible to shareholders for the conduct of the business of the Italtile Group, which includes providing Italtile with clear strategic direction. The schedule of matters reviewed by the Board includes:- Approval of the Group’s strategy and annual budget;
- Overseeing Group operational performance and management;
- Ensuring that there is adequate succession planning at senior levels;
- Overseeing director selection, orientation and evaluation;
- Approval of major capital expenditure or disposals, material contracts, material acquisitions and developments;
- Reviewing the terms of reference of Board committees;
- Determining policies and processes which seek to ensure the integrity of the Group’s risk management and internal controls;
- Maintaining and monitoring the Group’s systems of internal control and risk management;
- Communication with shareholders, including approval of all circulars, prospectuses and major public announcements;
- Approval of the interim statement and integrated annual report and accounts (including the review of critical accounting policies and accounting judgements and an assessment of the Company’s position and prospects); and
- Approval of dividends.
The Board retains full and effective control over the business of Italtile. The Board has defined levels of materiality through a written delegation of authority, which sets out decisions the Board wishes to reserve for itself. The delegation is regularly reviewed and monitored.
Division of responsibility
The Company conducts an annual evaluation of its Board, Board Committees and individual directors, and is confident that there is an appropriate balance of power and authority on the Board.
The division of responsibilities maintains a balance of power and authority on the Board.
Term of office
The three executive directors have a fixed term of employment. In accordance with the Company’s Memorandum of Incorporation, all directors are subject to retirement by rotation and re-election by shareholders at least every three years. If requested to serve a further term, those retiring directors may offer themselves for re-election by shareholders. Any director appointed during the year must retire at the annual general meeting held immediately after his or her appointment.
Board meetings
The Board meets at least every quarter or more frequently if circumstances require.
At the meetings, the Board considers both financial and non-financial qualitative information that might have an impact on the Group’s stakeholders.
Prior to every Board meeting, each director receives an information pack which provides background information on the performance of the Group for the year to date and any other matters for discussion at the meeting.
Board members have full and unrestricted access to relevant information, management, and the Company Secretary, and may, at the cost of the Group, seek independent professional advice in the fulfilment of their duties.
Details of attendance at Board meetings are set out below:
| Board member | Attendance at meetings in 2012 |
| G A M Ravazzotti# | 5/5 |
| P D Swatton# | 5/5 |
| P Langenhoven# | 3/5 |
| S M du Toit | 5/5 |
| S I Gama | 4/5 |
| A Zannoni | 4/5 |
| S G Pretorius | 5/5 |
Board appointment policy
The Board evaluates its composition each year to ensure an appropriate mix of skills, experience, professional and industry knowledge to meet the Company’s strategic objectives. Demographic representation is also a consideration. New directors are subject to a “fit and proper” test. An induction programme is available to incoming directors, providing guidance on their responsibilities. The appointment of the directors is approved at the annual general meeting of shareholders.
None of the directors have entered into service contracts or standard letters of appointment with Italtile.
Lead independent director
King II emphasised that there should be a clear division of responsibilities at the head of the Company, ensuring a balance of power and authority, so that no one individual has “unfettered powers of decision-making” (Code 2.3.1). This points strongly to having an independent non-executive chairman.
However, King III recognises that a company may have sound reasons for appointing a chairman who does not meet all the criteria for independence, but should be prepared to justify its decision. In such circumstances, King III as well as the JSE Listings Requirements advocate that the appointment of a lead independent director (“LID”) can assist the Board in dealing with any actual or perceived conflicts of interest that arise in these or future circumstances.
Per King III, the main function of an LID is to provide leadership and advice to the Board, without detracting from the authority of the chairman, when the chairman has a conflict of interest. The LID should at all times be aware that his/her role is that of support to the chairman and Board and not in any way to undermine the authority of the chairman. The LID should also chair those Board meetings which deal with the succession of the chairman and the chairman’s performance appraisal.
Having regard to these recommendations set out in King II and King III, S M du Toit serves as lead independent non-executive director to the Company’s Board.
Board committees
The Board has established three committees to which it has delegated specific responsibilities in meeting its corporate governance and fiduciary duties. These committees operate within written terms of reference approved by the Board. These are:- Audit and Risk Committee;
- Remuneration and Nominations Committee; and
- Social and Ethics Committee.