The Board of Directors and Board committees

Board of Directors

Old Mutual Life Assurance Company (South Africa) Limited (OMLACSA) has a unitary board which comprises six independent non-executive directors (43% of the Board), five non-executive directors (36% of the Board) and three executive directors (21% of the Board). The Board oversees the general governance of the Old Mutual businesses. It provides guidance, input and advice on strategy, budgets and business plans, and monitors investment performance provided to clients.

 During the year there were several additions and changes to the Board of Directors: 

• Jim Sutcliffe, Chief Executive Officer of Old Mutual plc, took over as Chairman of OMLACSA from Mike Levett who retired with effect from 14 April 2005.
   
• Gloria Serobe from Old Mutual’s empowerment partner, WIPHOLD, joined the Board on 4 August 2005. She joins Professor Jakes Gerwel, who is Chairman of empowerment partner, Brimstone, and also Chairman of the Environment Committee.
   
• Professor Wiseman Nkuhlu, previously part of the Presidency and Lead Manager of the New Partnership for Africa’s Development (NEPAD), joined the Board with effect from 1 January 2005.
   
• Bob Head was appointed to the Board on 9 November 2005, subsequent to assuming his position as Group Director, Southern Africa.
   
• Departures from the Board included Wallace Mgoqi, who left the Board in February 2005, Murphy Morobe, who took up a communications role in the Presidency from April 2005, and Peter Moyo, who resigned in October 2005.

The Board composition at the end of December 2005 was: 

• Black: 35%
   
• Women: 14%
   
• Black women: 6%

Board committees

The Board delegates certain responsibilities to a number of committees, each with expertise in a specific area.

These committees are independent of Old Mutual’s management and are chaired by independent or non-executive directors. All Board committees have formally delegated terms of reference and report to the Board as required. The committees are supported by the Company Secretary and can take independent professional advice when necessary.

The Board committees that undertake specific work of the Board and that met during 2005 were:

• The Audit, Risk and Compliance Committee;
   
• The Environment Committee;
   
• The Remuneration Committee; and
   
• The Corporate Governance and Nomination Committee.

The selection of new Board members is a matter for the entire Board, assisted by the Corporate Governance and Nomination Committee. New members undergo a formal orientation programme which is supervised by the Company Secretary. The orientation programme seeks to familiarise new Board members with company policies, operations, management, strategy, and their fiduciary duties.

Best practice

The Board endeavours to operate within accepted best practice in terms of rotation, retirement age, and the required functions of committees. The Board conducts regular self-assessment surveys which the Corporate Governance and Nomination Committee utilises in making recommendations to the full Board, to enable its optimal performance. All directors have access to management, the Company Secretary, and to information needed to carry out their duties effectively. The Company Secretary provides support to the Board to ensure the proper administration of Board proceedings.

Chairman and Managing Director

The roles of Chairman and Managing Director are separate. The Managing Director and his two deputies head the company’s Management Executive Committee, through which executive management creates and monitors corporate operational plans and strategies in cooperation with the Board.

A summary follows of the members of the Board of Directors, their Board committee memberships, and attendance at both Board and Board committee meetings.

A summary of the members of the Board of Directors, their Board committee memberships, and attendance at full Board and Board committee meetings:

Key:

1. Audit, Risk and Compliance Committee
2. Remuneration Committee
3. Corporate Governance and Nomination Committee
4. Environment Committee
5. Director of Old Mutual plc

Notes:

• Mr Morobe retired from the Board and resigned from the Environment Committee and Corporate Governance and Nomination Committee with effect from 14.4.2005.
   
• Mr Levett retired from the Board and resigned from the Corporate Governance and Nomination Committee with effect from 14.4.2005.
   
• Mr Moyo resigned from the Board and the Environment Committee with effect from 31.10.2005.
   
• Mr Head became a Board member and was appointed to the Remuneration Committee with effect from 9.11.2005.
   
• Mrs Serobe became a Board member with effect from 4.8.2005 and was appointed to the Audit, Risk and Compliance Committee with effect from 9.11.2005.
   
• Dr Mgoqi retired from the Board and resigned from the Environment Committee with effect from 16.2.2006.
   
• Mr Hanratty was appointed to the Environment Committee with effect from 9.11.2005.

Governance functions in Old Mutual (SA)

Critical to the governance of Old Mutual (SA) are the following functions: 

• Risk Management is conducted through the Enterprise Risk Management (ERM) office, which oversees risk management processes at both the strategic and business-unit levels. Line managers have a role to play and are responsible for identifying, evaluating and managing risks in their business, in collaboration with the ERM office.
   
• The Old Mutual Compliance function aims to ensure that Old Mutual (SA) adheres to the legislation and regulations that govern the business. Stakeholders need assurance that the company offers clients the appropriate financial advice, ensures that their policies will be honoured, their pensions safeguarded, and their investment returns maximised. The Compliance function thus plays a critical role in upholding the reputation of the organisation by ensuring that Old Mutual (SA) conducts its business in accordance with both the spirit and the letter of the law.
   
• Internal Audit is an independent function which reports to the Audit Committee and focuses on risks that could adversely affect the achievement of business objectives. This focus helps managers achieve their objectives by looking for, and suggesting, operational improvements in the control environment.
   
• Forensic Services relies largely on education and activities that increase the levels of awareness within the organisation regarding governance best practice. The service offers comprehensive “whistle-blowing” channels within the organisation to combat fraud and other white-collar crimes. Staff members can report criminal behaviour to Group Forensic Services via the Tip-offs Anonymous Hotline, a dedicated e-mail service, or in person.
   

Increasing awareness of corporate governance

Over the last three years, special emphasis has been placed on communicating the requirements for stringent corporate governance within the organisation and embedding good governance within everyday business practices.

During 2005, three specific campaigns were mounted through internal communication channels.

The War On Corruption campaign, part of the ongoing Do The Right Thing – It’s About Our Future! governance communication strategy, set out to draw attention to white-collar crimes such as bribery, dishonesty and fraud. The campaign coincided with the promulgation of The Prevention and Combating of Corrupt Activities Act 12 of 2004.

Former President Nelson Mandela is pictured here with outgoing OMLACSA Chairman Mike Levett and his wife Jill (bottom left), and incoming Chairman Jim Sutcliffe and his wife Sharon (bottom right).

Also in response to the above-mentioned Act, the company unveiled new policies on Conflicts of Interest and Gifts. Both policies set out to protect the company, the client and employees against misplaced charges where a gift was given or received transparently and in good faith, or where a conflict-of-interest situation was properly disclosed and approved. The policies accomplish this by making clear what is acceptable and what is not. For instance, as a general principle, staff may not accept gifts that have an estimated monetary value of more than R500.

Responding to the prevalence and growth of identity theft in South Africa and as part of the organisation’s fiduciary duties towards clients, Old Mutual Group Forensic Services led a comprehensive education campaign to protect client confidentiality, and to warn staff of identity theft. A sustained multimedia campaign spearheaded by a poster and pamphlet campaign explained how identity theft occurs, how to prevent it, and what the consequences of the crime are.

Litigation

In 2005, Old Mutual (SA) was not involved in any material litigation where the company stood accused of acting immorally, unethically, or to the detriment of any community, shareholders or policyholders. Neither was the company in breach of any statutory or regulatory obligations. It was only involved in legal matters believed to arise from, or connected to, normal business practices. These include reclaiming monies owed to the company or defending claims that are deemed to be fraudulent.

Old Mutual (SA) was party to an insurance sector agreement with National Treasury that resulted from a series of rulings against it by the Pension Funds Adjudicator. The company made a R716 million financial provision to address early termination values for retirement annuities and endowment policies. Old Mutual (SA) welcomes this development as a way to continue to add value to policyholders’ investments.

Political party donations

Old Mutual (SA) does not make donations to political parties.

Old Mutual (SA) as shareholder

Generally, the company has a policy to vote by proxy at all annual general meetings of companies in which it is invested. Where a matter is contentious, an Old Mutual (SA) representative is present to represent the company. The matters to be voted are assessed in advance of each meeting, and there may be times when the company will vote against resolutions.

Broadly, when it comes to placing new shares under the unlimited control of a company's directors, Old Mutual (SA) follows a policy of not accepting a resolution that gives unrestricted control to directors, and prefers to limit that control to a percentage of the company’s unissued shares.

Old Mutual (SA) shareholder participation

Investors in Old Mutual plc are invited to interact with the company at the Annual General Meeting (AGM). The company also welcomes direct engagement with shareholders outside the AGM.

Subsequent to the announcement of the Old Mutual empowerment transaction, Gloria Serobe joined the Board of Old Mutual Life Assurance Company (South Africa).

Len Konar is also a member of the Board and chairs the Audit, Risk and Compliance Committee.

Regulations and guiding principles

Several sets of regulations and principles are relevant to the Group. The most important of these are:

• The King II Report on Corporate Governance in South Africa;
• The Turnbull Report and listing requirements in the United Kingdom.

The King II Report deals with a wide range of corporate governance issues, including ethics, compliance, risk management, financial disclosure, and the roles and responsibilities of the various governance officers within a company. It also deals with the broader issues of social and environmental responsibility.

The report advocates an integrated approach to corporate governance, aimed at protecting the interests and rights of all stakeholders. Old Mutual (SA) recognises the King II guidelines and aims to implement them throughout the business, wherever the principles and guidelines have relevance.

Corporate citizenship governance

During 2003, the Environment Committee of the Board and the management of Old Mutual (SA) approved the Old Mutual Transformation Matrix. The Matrix comprises various measures/indicators of the company’s extensive transformation programme and underpins the Old Mutual Transformation Strategy.

The Matrix is made up of measures contained in the Financial Sector Charter, the Global Reporting Initiative (GRI) guidelines, and indicators already developed as part of the Old Mutual Corporate Citizenship Transformation Programme.

The Old Mutual Group Internal Audit division has audited the reporting process for the previous two reports, its comments have been noted, and some suggestions incorporated in the compilation of the present Corporate Citizenship Report.

It is expected that a similar process will be followed in 2006 to ensure continued rigour in the compilation of the Corporate Citizenship Report.

The Corporate Citizenship Report is signed off by the group executive leadership and the Environment Committee of the Board.

Those sections of the report that provide required detail on Black Economic Empowerment will be consolidated into the Old Mutual Financial Sector Charter Report and Scorecard and submitted to the Financial Sector Charter Council.

Governance at Old Mutual (SA)