Social & Ethics Committee & Internal Audit

Transcription

1 Social & Ethics Committee & Internal Audit By Andrew Johnston Altron Group Company Secretary 19 August 2011

2 According to recent South African Police Service crime statistics, cases of commercial crime were reported from April 2009 to March last year, a 51,8% rise since Employees committed undetected economic crimes, such as procurement fraud during recessions because companies inadvertently weakened their internal controls 5 July 2011

3 Background - Altron Group - History Founded by Dr Bill Venter in 1965 with 4 people Current revenue of R22.8bn (US$3.4bn) employees Family business second generation Within Top 50 companies on Johannesburg Stock Exchange Operations in Africa, Europe, UK, India, China and Australasia Strong international partnerships with leading multinationals

4 Group structure * CE: Robert Venter 2010 Revenue: R 22.8bn ($3.4bn) * JSE listed * Market cap: R 8.8bn ($1.3bn) Employees: ± 15, % 100% 100% Telecoms, Multi-media, Information Technology (TMT) Market cap: R6.2bn Employees: ±5,500 Revenues: R9.7bn CEO: Craig Venter Information Technology Market cap: N/A Employees: ± 4,800 Revenues: R6.1bn CEO: Rob Abraham Power Electronics Market cap: N/A Employees: ±4900 Revenues R7.2bn CEO: Norbert Claussen Based on share prices on 4 August 2011

5 Our key brands * Swisstech * Joint venture between Powertech and Reunert

6 Altron s Social & Ethics Journey Altron s social and ethics journey began long before King I (1994), King II (2002) and King III (2009) and the Companies Act No 71 of 2008

7 Memos from the Chairman Memos dating back to 1977 evidence strategic work and ethical values and culture Staff Information Notice - Statement of Integrity, 1994 I ask you all to make a personal commitment to follow our Code of Conduct Integrity is the rock upon which we build our business success Nothing not customer service, competiveness, direct orders from a superior or making the numbers is more important than integrity

8 Memos from the Chairman Staff Information Notice Black Empowerment, Strong support for human rights - corporate social responsibility programmes and South Africa s Reconstruction and Development Programme Staff Information Notice Risk Management, 2000 Development of Business Risk Management Division ensuring, among others, that perpetrators of fraud and theft are brought to book with all the might of the justice system Unique and mandatory induction process senior managers and executives required to read scrapbooks since company s inception

9 Altron s Integrated Report 2011 Reflects commitment to the four specific ethical values that reenforces all aspects of corporate governance in Altron s interaction with its stakeholders:- Responsibility Accountability Fairness Transparency

10 Extracts Altron s Mission Statement Preservation of familiness culture Commitment to the transformation process Provide a work environment that attracts, motivates, rewards To integrate sustainable development Is totally committed to quality, best practice Adheres to the highest standards of integrity

11 Current Social & Ethical Management Framework Altron audit committee and financial review & risk committees at sub-holding levels review and monitor compliance with the Code of Conduct and Code of Ethics approve changes to the Codes Altron risk management committee assesses fraud, theft and dishonesty along with reputation management Committees (through chairmen) feedback to the Altron board = item on board agenda (copies of audit and risk committee minutes are included in board packs)

12 Current Social & Ethical Management Framework Altron Code of Conduct forms part of Altron s policy manual, 1987 Adoption of revised Group Code of Ethics Policy, 2009 Establishment of Groups Ethics Office, 2010 Appointment of Ethics Officer, 2010 Establishment of Altron Sustainability Department, 2011

13 Social & Ethical Awareness Tip-Off Tim (Deloitte) Roll out of compulsory Bytes People Solutions training programme; ethics dialogue developed on Altron intranet (e-learning and library) > 450 senior managers exposed to and trained on Code of Ethics will roll down to remaining 12,000 employees Gained valuable insight and revelations as a result of employee engagement

14 Social & Ethical Awareness 2010 Directors Conference Presentation by contractor of The Ethics Institute of South Africa (EthicsSA) on the ethics of doing business Publication of articles (Ethics, CSI, green initiatives) in internal group publications e.g. Altron s Profile magazine, screensavers, poster campaigns, competitions, etc.

15 Extract Profile Magazine

16 Extract Profile Magazine

17 Extract Profile Magazine

18 King III Recommends That the boards of companies should ensure that the company s ethics performance is assessed, monitored, reported and disclosed That the assessing, reporting and disclosures of ethics performance should enable users of ethics reports to form opinions and make decisions based on disclosed and verified information

19 Companies Act 71 of 2008 ( the Act ) Social & Ethics Committees Section 72(4) read in conjunction with regulation 43 of the Act deals with the appointment of social and ethics committees (SEC) To be appointed within 12 months from 1 May 2011 (existing companies) To comprise of not less than 3 directors or prescribed officers of the company, at least one of whom must be a director who is not involved in the day-to-day management of the company s business and must not have been so involved within the previous 3 financial years

20 Practical Considerations (SEC) Who qualifies (see section 72(4) and regulation 43(1) and (2)) public interest score > 500 points Who are prescribed officers? See regulation 38 - What skills? See regulation 43(5) - Diversity? When 30 April 2012 or 12 months (see regulation 43(3) How appointed? Board or shareholders? Initially board thereafter shareholders (regulation 43(2))

21 Practical Considerations (SEC) Fees of members timing AGM approve or ratify Duties of members see regulation 43(5) - Ethics missing! - Left up to mandate and terms of reference - Chairman to report on matters within its mandate at AGM separate report in integrated report? - Altron drafted mandate and terms of reference see EthicsSA website for draft template

22 Role of Internal Audit - Ethics King III (Chapter 7) recommends that:- The key responsibility of internal audit is to the board, its committees, or both, in discharging its governance responsibilities and as a minimum to perform the following functions:- - evaluating the company s governance processes including ethics, especially the tone at the top - performing an objective assessment of the effectiveness of risk management and the internal control framework - systematically analysing and evaluating business processes and associated controls - providing a source of information, as appropriate, regarding instances of fraud, corruption, unethical behaviour and irregularities

23 Role of Internal Audit - Ethics Ethics Institute of South Africa 2. Develop or revise code of ethics & policies 1. Assess ethics risks and opportunities Build an ethical culture 3. Integrate ethical standards 4. Audit, report & disclosure

24 Role of Internal Audit - Ethics Distinction between the role of an internal auditor and an external auditor Internal assessment to evaluate the adequacy and effectiveness of an organisations ethics performance External assessment to verify and provide assurance on the quality of an organisations ethics performance Ethics Institute of South Africa

25 Role of Internal Audit - Ethics Altron adopted a 3 phase approach towards the internal and external assessment of ethics within the organisation - Phase 1 : deals with the 1 and 2 of building an ethical culture. This relates to the assessment of the ethical foundations and building blocks of the organisation, i.e. Code of Ethics, Code of Conduct, ethics awareness campaigns, whistleblowing facilities and procedures, Gifts and Entertainment Policies, etc. - Phase 1 assessed externally by Corporate Governance Accreditation and SustainabilityServices. See AA1000 AS (2008) assurance statement in 2011 Altron integrated report page 104: Altron employs adequate ethics policies, procedures and controls throughout its operations

26 Role of Internal Audit - Ethics - Phase 2 : deals with the 3 and 4 of building an ethical culture. Altron internal audit department responsible for assessing the ethical climate of the organisation and confirming the integration of ethical standards throughout the organisation - An Altron ethics questionnaire has been drafted by the Altron internal audit department with the assistance of EthicsSA to assess, monitor, report/disclose ethics performance

27 Role of Internal Audit - Ethics The questionnaire is divided into five distinct components:- 1. Altron Code of Ethics and Policies 2. Reporting Misconduct 3. The Role of Management 4. The Role of Staff 5. Ethical Culture Will be completed anonymously by employees

28 Role of Internal Audit - Ethics Each question/statement is graded (from an effectiveness perspective) from strongly agree to strongly disagree with not applicable also being an optional answer It is envisaged that questionnaire will be scored into various modes of ethics e.g.:- - Immoral - Reactive - Compliance - Integrity - Totally aligned

29 Role of Internal Audit - Ethics Once the scoring system is developed, it will be possible to measure progress in ethical improvement at operational level Questionnaires will be completed annually and results will be reported to the Altron risk management committee - Phase 3 : deals with the 4 of building an ethical culture, but purely from an external assessment perspective. This includes the external review plus assurance statement regarding the entire ethical process, systems and practices throughout the organisation

30 Role of Internal Audit - Ethics Why the use of internal audit besides King III? - Objective - Independent - Understand risk environment poor ethics is a risk to an organisation reputational damage - Chief audit executive usually an invitee on audit and risk management committees and executive committee - Review company s control environment and provides assurance to the board regarding the effectiveness of the system of internal audit controls and risk management to the company - Skilled in reporting and trusted strategic adviser

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