We view corporate governance as a lever for value creation. Our approach is based on the values and principles that underpin our daily activities: responsiveness, collaboration, transparency, integrity and accountability. This encompasses a commitment to excellence in corporate governance standards that is fundamental to the sustainability of our business.
In line with its charter, the board acts as the focal point for and custodian of corporate governance by conducting its relationships with management, shareholders and other stakeholders on sound corporate governance principles.
Hyprop welcomes King IV, as the new code shifts from a compliance-based, quantitative mindset to a qualitative one that enhances the value-creation process. King IV has motivated management to ask the following governance questions:
- Does the company nurture an ethical culture?
- How does the company classify good performance?
- Do our board and senior management have effective control over the business?
- Is there legitimacy in all our business activities with stakeholders?
- Does the company nurture and generate sustainable value creation?
The board is committed to applying the recommendations of King IV, complying with the JSE Listings Requirements and Companies Act, and incorporating relevant best governance practice. The board ensures it acts in the best interest of the company at all times.
In line with King IV's 'apply and explain' approach, the directors disclose the extent to which Hyprop applies the King IV principles to create and sustain value for stakeholders over the short, medium and long term.
Key practices to maintain good corporate governance include:
- The board charter is in place, and is reviewed annually
- The board meets at least four times a year, with special meetings scheduled if required
- The board has unrestricted access to all company information, records, documents and property, subject to a board-approved process.
Hyprop directors and members of board committees (audit and risk, remuneration and nomination, social and ethics) may take independent advice in the performance of their duties (at company cost), after following a board-approved procedure.
Please view the full King IV principles report online (www.hyprop.co.za).
The Hyprop board
- The board evaluates and approves group strategy, scrutinises group performance and measures executive management's performance against key performance deliverables
- There is a clear division of responsibilities at board level, to ensure that no one director has unfettered power of decision making
- The board promotes transformation, gender diversity and succession planning to ensure sustainable leadership structures
- It provides guidance and advice on the group's financial, audit, governance and risk management controls
- The board reviews the remuneration process (specifically at senior level)
- It discloses the credentials of individual directors to enable shareholders to make their own assessment
- Real or perceived conflicts of interest are disclosed to the board and managed appropriately.
Composition of the board
- In determining the optimal number of directors to serve on the board, the remuneration and nomination committee considers the knowledge, skills and experience of individuals. At present, the size of the board is considered appropriate given Hyprop's scale and geographical diversification. This is reviewed periodically against the size of the company and its needs
- Hyprop's board comprises 10 directors: six independent non-executives, two non-executives and two executives. The classification of directors is based on an annual assessment of their independence
- The board has two executive directors, namely the CEO and FD
- Requirements to ensure gender and race diversity achieve desired levels are being considered.
- Ethan Dube resigned from the board effective 1 December 2016
- Nonyameko Mandindi joined the board as an independent non-executive director on 8 May 2017.
The chairman of the board
- The chairman is an independent non-executive director, appointed in June 2013
- He is not a former CEO
- There is a formal description of the role of the chairperson: his role is separate from that of the CEO. He provides leadership and guidance to the board and encourages deliberations on all matters requiring directors' attention
- Succession planning is in place for this role.
- Non-executive directors have diverse backgrounds in commerce and industry. Their collective experience enables them to provide sound, objective judgement in decision making
- At least one-third of directors retire by rotation every year, in line with Hyprop's Memorandum of Incorporation (MOI)
- An agreement with all non-executive directors covers compliance with the directors' code of conduct, contributions expected and remuneration and the terms of the directors' and officers' liability insurance provided by the company
- Directors' code of conduct is addressed in the board charter
- Independent non-executive directors serving for over nine years are subject to rigorous review by the board to ensure their continued independence
- The independence of non-executive directors classified as such is annually evaluated by the board.
- Directors have access to experts and other parties for assistance in carrying out their duties if required
- The board ensures that inexperienced directors are developed through mentorship programmes
- Continuing professional development programmes are implemented as required
- Directors are also encouraged to enhance their professional development in their personal capacity
- The board ensures directors are regularly briefed on changes in risks, laws and the business environment
- A formal induction programme is in place for new directors. This includes a briefing by the chairman, CEO, FD and Hyprop's JSE sponsor. New directors are introduced to key senior management at company and shopping centre levels, and site visits to shopping centres are facilitated.
Dealing in securities
- The board complies with the JSE Listings Requirements' restrictions on trading in Hyprop's shares by directors, the company secretary and affected employees in closed periods (as defined)
- In conjunction with the FD and JSE sponsor, the board ensures trades in Hyprop shares by these individuals are disclosed on SENS
- In line with company policy, directors and senior employees with access to Hyprop's financial results and other price-sensitive information are barred from dealing in its shares for specified periods before relevant announcements are released on SENS
- All directors and affected employees are notified before the company enters a closed period.
Conflicts of interest
- As per the code of ethics and conduct, directors must declare to the chairman and company secretary their shareholdings, additional directorships and any potential conﬂicts of interest
- A process is in place to ensure that directors' conﬂicts of interest are fully disclosed as required.
- CIS Company Secretaries Proprietary Limited is an independent practice providing services to numerous JSE-listed companies
- The board is satisfied that the company secretary and its representative, Gillian Prestwich, are sufficiently qualified and skilled to act in accordance with, and advise directors on, the recommendations of King IV, the Companies Act and other relevant regulations and legislation
- The board reviews the relationship between the company secretary and itself as well as its committees annually
- The board has determined that the company secretary is independent from management and does not take on any management or executive duties on its behalf or for any subsidiary company
- The company secretary is not a director of Hyprop or a material shareholder in the company or any subsidiary, and has no major contractual relationship with the company or any director. Accordingly, the board is satisfied that the company secretary maintained an arm's length relationship with all directors in the year under review.
Functions of the company secretary
- Guiding directors, collectively and individually, on their duties, responsibilities and powers
- Providing information on legislation, regulations and relevant matters of ethics and good corporate governance
- 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 annual general meeting
- Filing annual and other returns with the Companies and Intellectual Property Commission (CIPC) in terms of the Companies Act.
Board appointment process
- With support from the remuneration and nomination committee, the board is responsible for new appointments, using a formal and transparent process to identify and select candidates
- The board and nomination committee annually reviews the composition of the board, considering the balance of skills, experience, background, culture, race and gender required to drive Hyprop's operational progress and sustainable transformation, as well as other relevant factors, including diversity and regulatory compliance, before an appointment is made
- In terms of Hyprop's MOI, the appointment of new directors is confirmed by shareholders at the next annual general meeting
- In executing its mandate for director appointments, the board (advised by the nomination committee) will:
- Continuously evaluate the progress and effect of initiatives to promote diversity on the board
- Evaluate criteria for nominating and appointing directors. The committee considers and recommends to the board for approval any changes to targets for achieving diversity on the board.
Rotation of directors
- Hyprop's MOI stipulates that one-third of directors retire by rotation after a three-year term. If eligible, these directors will offer themselves for re-election.
- 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 satisfied that the depth of skills among current directors meets succession requirements. Succession planning at management level is actively monitored by management and communicated to the board.
- The board is satisfied that all independent non-executive directors meet the independence criteria of King IV
- Board effectiveness is evaluated annually through a questionnaire assessment conducted by the investor relations executive. Results are reviewed by the chairman; any identified issues are appropriately addressed and discussed with the board. The board and committees were evaluated in May 2017.
- These assessments ensure that the board is held accountable for ethical and effective leadership.
Access to information
- Directors have unrestricted access to the advice and services of the company secretary and to company records, information, documents and property. Non-executive directors have full access to the external and internal auditors, and to management. All directors are entitled, at Hyprop's expense, to take independent professional advice on any matters concerning the affairs of the company (in terms of an approved procedure).
Information and technology governance
The board, through the audit and risk committee, is responsible for governing relevant information and technology risks:
- The board recognises that this is an integral part of the company's approach to governance. Executive management is tasked with managing IT risks, with oversight from the audit and risk committee
- Hyprop understands that opportunities and risks related to IT can affect value creation. The board is mindful of the importance of safeguarding company information and intellectual capital, and ensures that appropriate technology architecture is maintained to protect information
- A governance framework supports effective management of IT resources and facilitates achieving the company's strategic objectives to create value and mitigate associated risks
- The board reviews and identifies opportunities for improved efficiencies and value creation that technology can add to the business. Equally, it is conscious of risks that may affect the security of classified information and intellectual capital
- The human resources executive is responsible for IT and has the appropriate levels of knowledge and experience. She interacts regularly with the audit and risk committee and executive management on IT governance matters.
Access to the board
- Shareholders can provide recommendations or direction to the board at the annual general meeting, one-on-one meetings and investor presentations, and through investor polls.
- The board is satisfied that all the board committees have fulfilled their responsibilities during the year, in terms of their approved charters. Each committee's performance is reviewed annually
- The need for additional committees is evaluated regularly. Hyprop's remuneration and nomination committees are combined. Discussions on nomination matters are led by the board chairman
- The chairs of the committees provide feedback to the board regularly. In addition, the chairman of the board and committee chairs attend Hyprop's annual general meeting to answer questions from stakeholders.
Board committee members
|Audit and risk||Social and ethics||Investment||Remuneration and nomination|
|Lindie Engelbrecht (chair)(1)
Investor relations manager
|Mike Lewin (chair) (1)
Investor relations manager
Human resources executive
|Pieter Prinsloo (chair)
(chair(1), remuneration matters)
Gavin Tipper (chair(1), nomination
Human resources executive
|(1)||The chairs of these committees are all independent non-executive directors|
Please view committee charters online.
The audit and risk committee
- The committee comprises independent non-executive directors with the necessary financial literacy, skills and experience to execute their duties effectively
- The committee is satisfied that it has fulfilled its responsibilities as per its terms of reference
- Ensures that Hyprop has established appropriate financial reporting procedures and that these are operating effectively
- Oversees cooperation between external and internal audit to avoid overlapping audit scope
- Approves the external auditors' terms of engagement and remuneration
- Recommends to shareholders the appointment, reappointment and removal of external auditors
- Has an independent oversight role, making recommendations to the board for its consideration and final approval. It does not assume the functions of management, which remain the responsibility of executive directors and senior management
- Adopts and oversees an appropriate risk management policy, aligned with industry practice
- The board's responsibility for risk governance is expressed in its charter as well as the risk policy and plan. The risk policy includes: the company's definitions of risk terms and risk management; risk management objectives; risk approach and philosophy; and various responsibilities and ownership for risk management in the company. The committee monitors this process on behalf of the board and assesses risks, supporting sustainable value creation for the company
- The board sets the company's level of risk tolerance annually
- The risk matrix is prepared by the CEO, in conjunction with the FD and investor relations executive, and tabled to the committee
- The risk assessment process addresses risks affecting Hyprop's various income streams, critical dependencies, sustainability, and the legitimate interests and expectations of stakeholders.
For detail on the role and mandate of this committee, please refer to its charter online.
The social and ethics committee
- The committee comprises three members, one independent non-executive director and two executive directors
- Given Hyprop's operations and size, the committee is satisfied with its current composition. It may consider appointing an additional non-executive director as member
- The committee is satisfied that it fulfilled its responsibilities in line with its terms of reference.
The committee monitors the group's activities in terms of social, environmental and economic development, including:
- Good corporate citizenship – promoting ethical leadership, integrity and anti-corruption, sustainability and value creation, equality, preventing discrimination and corporate social responsibility
- Environmental impact – as a landlord, Hyprop has a low environmental impact, and aims to reduce this further in its daily operations. The committee reviews the environmental policy biannually and reports to the board
- Stakeholder relations – ensuring that all communication to stakeholders is transparent, true and conforms to the Companies Act
- Human capital – labour and employment, education and skills development
- Transformation – broad-based black economic empowerment and employment equity.
Stakeholder value creation and sustainability drive Hyprop's strategy and daily operations. Management continuously reviews operations and seeks innovative technologies to reduce an already low environmental footprint.
The group considers itself a good corporate citizen, as reflected in its initiatives to preserve environmental resources for the wider community through many Hyprop Foundation projects, as well as the low turnover of our employee base.
The committee monitors compliance with Hyprop's code of conduct and ethics and other relevant social, ethical and legal requirements, as well as best practice. It reports to shareholders on matters in its mandate at the annual general meeting and via the integrated annual report.
For detail on the role and mandate of this committee, please refer to its charter online.
The remuneration and nomination committee
- Chaired by an independent non-executive director, and comprises non-executive directors with a majority of independent non-executives
- Reviews and recommends to the board the company's remuneration philosophy and policies for directors and employees
- Oversees implementation of the remuneration policy on behalf of the board
- Ensures that the remuneration strategy reflects the interests of stakeholders, is comparable to the sectoral remuneration environment, and complies with relevant principles of good governance
- Ensures that stakeholders can make informed assessments of reward practices and governance processes
- Ensures that salary structures and policies motivate employees to deliver on company strategies and goals, and are linked to realistic performance objectives that support sustainable long-term growth
- Considers whether the objectives of the remuneration policy have been achieved
- Ensures that the ratio of fixed and variable pay - in cash, benefits and shares - is aligned with the company's strategic objectives
- Reviews the effectiveness of recorded performance measures that govern vesting of incentives
- Ensures that all benefits, including retirement benefits and other financial arrangements, are justified and correctly valued
- Considers the performance of the chief executive officer and financial director, when determining their remuneration
- Advises on the remuneration of non-executive directors
- Selects an appropriate peer group when comparing remuneration levels
- Oversees preparation of the remuneration report in the integrated annual report, to ensure it is accurate, complete and transparent, and clearly explains how the remuneration policy has been implemented.
New appointments and re-election of non-executive directors
- The board, supported by the remuneration and nomination committee, is responsible for appointing non-executive directors
- Identifying and selecting candidates is conducted in a formal and transparent manner. Non-executive directors and the committee consider the required blend of skills and experience to drive the company's strategic objectives, operational progress and transformation goals, considering diversity and regulatory compliance
- The appointment of new directors is confirmed by shareholders at the first annual general meeting following their appointment
- The company's MOI provides for one-third of the non-executive directors to retire by rotation after a three-year term. If eligible and available, these directors will offer themselves for re-election in line with the MOI
- Interim appointees retire at the next AGM, when they may make themselves available for re-election
- As appropriate, the board, through the nomination committee, proposes their re-election to shareholders. There is no limit on the number of times a non-executive director may seek re-election.
External advisers to the committee
The committee uses the services of independent advisers as needed. During the year, these advisers supplied data and advice on market practice and governance and analyses on certain performance measures.
Board and committee meetings
The board meets at least four times a year, with ad hoc meetings as required. Relevant notice of meetings and documentation is provided to directors timeously, ensuring that they can make well-researched and reasoned decisions.
The investment committee meets as required.
Attendance at board and committee meetings for the review period (1 July 2016 to 30 June 2017) is shown below.
|Board||Audit(1)||Risk(1)||Remuneration and nomination||Social and ethics||Investment|
|Independent non-executive directors|
|GR Tipper (board chairman)(4)||4/4||5/5||3/3||3/3||2/2(8)||3/3|
|PG Prinsloo (CEO)||4/4||5/5(8)||3/3||3/3(8)||2/2||3/3|
|LR Cohen (FD)||4/4||5/5(8)||3/3||2/3(8)||2/2||3/3|
|(1)||During the year, the risk and audit committees were combined into one committee|
|(2)||Chair audit and risk committee|
|(3)||Chair remuneration committee|
|(4)||Chair nomination committee|
|(5)||Chair social and ethics committee|
|(6)||Resigned 1 December 2016|
|(7)||Appointed 8 May 2017|
Compliance with laws, rules, codes and standards
- The board monitors the company's compliance with applicable laws, regulations, codes and standards
- It ensures that applicable laws are understood for the obligations they create, as well as the rights and protections they afford. Where required, directors have access to independent experts
- The board has discharged its responsibility to ensure an effective compliance framework by:
- Establishing appropriate structures, including training programmes, stakeholder communication channels and compliance measurement systems
- Tasking compliance to the national legal executive, compliance officer, investor relations and human resources executives, supported by the company's sponsor
- Areas of non-compliance are formally highlighted through the risk management process, supervised by the audit and risk committee
- Periodically discussing the long-awaited property sector charter, particularly transformation and related issues.
As Hyprop is a listed REIT, it is required to comply with the JSE Listings Requirements and rules specific to REITs in South Africa, along with country-specific legislation and standards:
- Basic Conditions of Employment Act 75 of 1997
- Broad-based Black Economic Empowerment Act 53 2003
- Companies Act 71 of 2008
- Compensation for Occupational Injuries and Disease Act 130 of 1993
- Competition Act 89 of 1998
- Constitution of the Republic of South Africa 108 of 1996
- Consumer Protection Act 68 of 2008
- Electronic Communication Act 36 of 2002
- Employment Equity Act 55 of 1998
- Financial Intelligence Centre Act 38 of 2001
- Financial Markets Act 19 of 2012
- Income Tax Act 58 of 1962
- King III and King IV
- Labour Relations Act 66 of 1995
- National Environmental Management Act 107 of 1998
- Occupational Health and Safety Act 85 of 1993
- Promotion of Access to Information Act 2 of 2000
- Property charter
- Protection of Personal Information Act 4 of 2013
- Protected Disclosures Act 2C of 2000
- Securities Services Act 36 of 2004
- Skills Development Act 97 of 1998
- Tobacco Products Control Act 83 of 1993
- Unemployment Insurance Act 63 of 2001
- Value Added Tax Act 89 of 1991
There were no material compliance issues during the year.
Hyprop has not been party to anti-competitive behaviour or monopoly practices during the period under review.
Documents available online
- Board charter
- Audit and risk committee charter
- Investment committee charter
- Remuneration and nomination committee charter
- Social and ethics committee charter
- Code of conduct and company policy
- Employment equity policy and plan
- Memorandum of Incorporation
- Gender diversity policy