| Corporate governance |
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| The AngloGold group
subscribes to a policy of global best practice in business management
and corporate governance.
Introduction With a production base spanning four continents and an exploration programme encompassing ten countries on four continents, and shareholders in all the major share trading centres, AngloGold Limited is a global company. Its primary listing is on the JSE Securities Exchange South Africa which requires that all companies listed on that exchange comply with the Code of Corporate Practices and Conduct as set out in the King Report on Corporate Governance issued in South Africa in November 1994. The company's ordinary shares have secondary listing status on the stock exchanges in London and Paris, as well as being quoted in Brussels in the form of International Depositary Receipts and in New York in the form of American Depositary Shares. The company has a full compliance listing on the Australian Stock Exchange for its shares in the form of CHESS Depository Interests (CDIs). With effect from 1 January 2000, AngloGold implemented the recommendations of the Turnbull Report on Internal Control: Guidance to Directors on the Combined Code - Principles of Good Corporate Governance and Code of Best Practice which consolidated the guidelines and codes developed by the Cadbury, Greenbury and Hempel committees in the United Kingdom. Over the past seven years, the King Committee has been working, together with numerous local and international bodies, to formulate further recommendations for the maintenance and improvement of standards of corporate governance in South African companies and their associates in conformity with international best practice. Since the issue of the second King Report for public comment in July 2001, the King Committee has received an unprecedented number of submissions from numerous countries, professional bodies, non-government organisations and government, necessitating an extension of the date for the release of the second report to 26 March 2002. The company has taken careful note of the new recommendations contained in this report. A great deal of the company's practices are already in line with these requirements. However, attention will be given during the remainder of 2002 to those recommended practices in the second King Report which still need to be adopted by the company. Board of directors The company has a unitary board structure of 15 directors, comprising four executive directors and 11 non-executive directors. Six of the non-executive directors, being Mrs E le R Bradley, Dr V K Fung and Messrs F B Arisman, C B Brayshaw, R P Edey and T J Motlatsi, are independent of management. The five remaining non-executive directors, namely Messrs A W Lea, W A Nairn, N F Oppenheimer, J Ogilvie Thompson and A J Trahar, are directors of AngloGold's ultimate holding company, Anglo American plc. The non-executive directors derive no benefits from the company for their services as directors other than their fee which is fixed by the shareholders in general meeting. The non-executive directors, the majority of whom are independent, are of a high calibre and sufficient number for their independent views to carry significant weight in the board's deliberations and decisions. The four executive directors are Messrs J G Best, finance, D L Hodgson, chief operating officer, K H Williams, marketing, and the chairman and chief executive officer, R M Godsell. Any governance concerns arising out of the combined role of chairman and chief executive officer are sufficiently mitigated by a strong and independent element on the board, and the presence on the board of an independent deputy chairman, Mr R P Edey. The directors are committed to the principles of corporate discipline, transparency, independence, accountability, responsibility, fairness and social responsibility. Full details regarding changes in the company's directorate, emoluments paid to directors, directors' interests in shares of the company and the interest of executive directors in shares of the company granted in the form of options are disclosed on pages 61 to 63. Details of directors and alternate directors presently constituting the board appear on pages 44 and 45. There are no contracts of service between any directors and the company or any of its subsidiaries that are terminable at periods of notice exceeding one year and requiring payment of compensation. All directors are subject to retirement by rotation and re-election by shareholders at least once every three years in accordance with the company's articles of association. In addition, all directors are subject to re-election by shareholders at the first annual general meeting following their appointment. The appointment of new directors is approved by the board as a whole. The names of the directors submitted for re-election are accompanied by sufficient biographical details in the notice of the annual general meeting to enable shareholders to make an informed decision in respect of their re-election. The board retains full and effective control over the group, meeting five times a year with additional meetings being arranged when necessary, to review strategy, planning, operational and financial performance, acquisitions and disposals, major capital expenditure, stakeholder communications and other material matters reserved for its decision. The board is also responsible for monitoring the activities of executive management within the group. Board meetings are held in South Africa and internationally. Where directors are not able to attend personally, telephonic or video conference facilities are made available to include them in relevant proceedings and permit participation in decisions and conclusions reached. The directors have access to the advice and services of a managing secretary, as well as a company secretary, who are both responsible to the board for ensuring compliance with procedures and regulations of a statutory nature. Directors are entitled to seek independent professional advice concerning the affairs of the group at the group's expense, should they believe that course of action would be in the best interest of the group. Board Committees The board has established a number of standing committees in which,
with the exception of the Executive Committee, the The following information reflects the composition and activities of these committees: Executive Committee The board has delegated authority to run the day-to-day affairs of the company to an Executive Committee comprising the four executive directors. The committee meets regularly to review operations and performance, develop strategy and policy proposals for consideration by the board and to implement its directives. To assist it in the execution of certain of its duties and functions, the committee has established two sub-committees, namely an Operations Committee and a Strategic Committee. Operations Committee The objective of this sub-committee is to oversee the implementation of the company's strategic objectives and review operational performance in detail. Members of the sub-committee are appointed by the Executive Committee and include the executive officers responsible for the various regional operations, together with the executive officers responsible for human resources, corporate affairs, exploration, technology, safety, health and environment, business planning and any senior managers of the company as determined by the Executive Committee. The names of the executive officers appear on page 45. The sub-committee meets under the chairmanship of the chief operating officer on a regular basis. Strategic Committee The objective of this sub-committee is to develop a coherent dialogue and consensus on the strategic direction of the company. Members of the sub-committee are appointed by the Executive Committee and include all members of the Operations Committee, as well as senior managers as determined by the Executive Committee from time to time. The sub-committee meets under the chairmanship of the chief executive
officer on a regular basis.
Mr R P Garnett resigned from the committee on 30 July 2001 and Mr P G Whitcutt was appointed in his place with effect from 25 October 2001. The committee comprises only non-executive directors. Its primary responsibility is to assist the board of AngloGold in carrying out its duties relating to accounting policies, internal control, financial reporting practices, and identification of exposure to significant risks. To assist the Audit Committee in discharging its responsibilities, internal audits are performed at all of the group's operating units and function under the control of, and report to, the group's internal audit manager. The internal audits are performed by teams of appropriate, qualified and experienced employees. The primary mandate of the group's internal auditors is to examine, review and evaluate the effectiveness of the applicable operating activities, the attendant business risks and the systems of internal operation and financial control, so as to bring material deficiencies, instances of non-compliance, high-risk exposure and development needs to the attention of the group internal audit manager and operational management for resolution. The group internal audit manager reports on an administrative basis to the finance director and functionally to the Audit Committee. The company's Audit Committee has access to all records of the internal audit team. The Audit Committee meets five times a year with the external audit partner, the group's internal audit manager and the finance director to review the audit plans of the internal and external auditors, to ascertain the extent to which the scope of the audit can be relied upon to detect weaknesses in internal controls and to review the quarterly and half-yearly financial results, the audited preliminary announcement of the annual results and the annual financial statements prior to approval by the board. The group's internal audit manager and the external audit partner have unrestricted access to the chairman of the committee and, where necessary, to the chairman of the board and chief executive officer. All important findings arising from audit procedures are brought to the attention of the committee and, if necessary, to the board. The chairman of the Audit Committee is also the chairman of the
Treasury Committee whose function is to review and recommend to the
Executive Committee all treasury counterparts, limits, instruments and
hedge strategies. The Treasury Committee meets on a monthly basis.
The company is committed to promoting an organisational culture which
provides all employees with opportunities to progress to their optimal
levels of career development. To ensure that the company achieves its
employment equity objectives and the proper implementation of its
strategies, the Employment Equity Committee, comprising the chief
executive officer and three non-executive directors, meets four times a
year.
Mr M W King and Dr J W Campbell resigned from the committee on 16 May 2001 and 30 July 2001 respectively. Messrs A W Lea and W A Nairn were appointed to the committee with effect from 30 January 2002. Composed of the finance and marketing directors and non-executive
directors, the committee meets as and when required for the purpose of
assessing capital projects and ensuring that investments, disinvestments
and financing proposals are in accordance with the company's primary
objective of creating wealth for its shareholders on a sustainable
long-term basis.
Mrs E le R Bradley was appointed chairman of the committee pursuant to Dr V K Fung's resignation from this position on 30 July 2001. The primary objective of the Market Development Committee is to
extend the influence of the company as a major global gold company, in
the development of a broader gold business both nationally and
internationally. This committee, which meets four times a year, is
composed of the chief executive officer, the marketing director and four
non-executive directors.
Mr D M J Ncube resigned from this committee and Mr A J Trahar was appointed in his stead on 30 July 2001. The committee, consisting entirely of non-executive directors, meets as and when required but at least on an annual basis. The Remuneration Committee is primarily responsible for approving the remuneration policies of the company and the terms and conditions of employment of executive directors and officers, including the determination of salaries, performance-based bonuses and the administration of the company's Share Incentive Scheme. Safety, Health and Environment Committee W A Nairn (Chairman) Mr W A Nairn was appointed chairman on Mr D M J Ncube's resignation from the committee on 30 July 2001. The company attaches great importance to the safety and health of its employees and to the environment at large. One of the prime objectives of this committee is the elimination of all accidents of a mining nature. The committee conducts on-site inspections in regard to matters of serious concern. Through a comprehensive environmental policy, the committee assesses the impact that the company's international operations might have on the environment. The committee, which meets on a quarterly basis, comprises the chief executive officer and two non-executive directors. Annual financial statements The directors are required by the South African Companies Act, 1973, to maintain adequate accounting records and to prepare annual financial statements which fairly present the state of affairs of the company and the AngloGold group at the end of the financial year, and the results of operations and cash flows for the year, in conformity with generally accepted accounting practice. In preparing the annual financial statements reflected in United States dollars and South African rands on pages 64 to 118, the group has complied with South African Statements of Generally Accepted Accounting Practice and International Accounting Standards and has used appropriate accounting policies supported by reasonable and prudent judgements and estimates. The directors are of the opinion that these financial statements fairly present the financial position of the company and the group at 31 December 2001, and the results of their operations and cash flow information for the year then ended. The directors have reviewed the group's business plan and cash flow forecast for the year to 31 December 2002. On the basis of this review, and in the light of the current financial position and existing borrowing facilities, the directors are satisfied that AngloGold is a going concern and have continued to adopt the going-concern basis in preparing the financial statements. The external auditors, Ernst & Young, are responsible for independently auditing and reporting on the financial statements in conformity with South African Auditing Standards. Their unqualified report on these financial statements appears on page 47. As part of its listing on the New York Stock Exchange (NYSE), the company is registered with the United States Securities and Exchange Commission (SEC). To comply with requirements for reporting by non-US companies registered with the SEC, the company is preparing a set of financial statements in accordance with US Generally Accepted Accounting Principles which will be available from The Bank of New York to holders of the company's securities listed in the form of American Depositary Shares on the NYSE. Copies of these particular financial statements will also be available to stakeholders and other interested parties upon request to the company's corporate office or its contacts as listed on inside back cover. Risk management and internal control The board is responsible for the total risk management process within the group. Management is accountable to the board and has established a group-wide system of internal control to manage significant group risks. This system supports the board in discharging its responsibility for ensuring that the wide range of risks, associated with the group's international operations, are effectively managed in support of the creation and preservation of shareholder wealth. The management of risk encompasses all significant business risks, including operational risk, which could undermine the achievement of business objectives. The board has approved the level of acceptable risk and required that operations manage and report in terms thereof. Issues and circumstances, which could give rise to material adverse reputational considerations, are also considered to be unacceptable risk. There is clear accountability for risk management. The requisite risk and control capability is assured through board control and appropriate management selection and skills development. Managers are supported in giving effect to their risk responsibilities through sound policies and guidelines on control management. Continual monitoring of risk and control processes, across significant risk areas, provides the basis for regular and exception reporting to the audit and executive committees. For key risk areas, group risk owners have been appointed and board policies issued. The risk assessment and reporting criteria are designed to provide the board with a consistent, group-wide perspective of the key risks. The system of internal control, which is embedded in all key operations, provides reasonable assurance, rather than absolute assurance, that the group's business objectives will be achieved within the risk tolerance levels defined by the board. Regular management reports, which provide a balanced assessment of key risks, are an important component of board assurance. Additional sources include assertions by divisional heads as well as board committees established to focus on specific risks such as safety, health and environment and capital investment. The board also receives assurance from the Audit Committee which derives its information, in part, from regular internal and external audit reports throughout the group on risk and internal control. The company seeks to have a sound system of internal control, based on the group's policies and guidelines, in all material associates and joint ventures. Where this is not possible the directors, who are represented on the boards of these entities, seek assurance that significant risks are being managed. In conducting its annual review of the effectiveness of risk management, the board considers the key findings from the ongoing monitoring and reporting process, management assertions and independent assurance reports. The board also takes account of material changes and trends in the risk profile and considers whether the control system, including reporting, adequately supports the board in achieving its risk management objectives. During the course of the year the board considered the group's responsiveness to changes within its business environment and systems of control. The board is satisfied that there is an ongoing process for identifying, evaluating and managing the significant risks faced by the group. Company secretarial function Appointment and removal of the managing secretary and company secretary are matters for the board. Both these officials are required to provide the directors of the company, collectively and individually, with guidance as to their duties, responsibilities and powers. They are also required to ensure that the directors are aware of all laws, legislation, regulations and corporate governance issues relevant to, or affecting the company and reporting at any meetings of the shareholders of the company or of the company's directors, any failure to comply with such laws, legislation, regulations or corporate governance issues. The managing secretary and company secretary are also required to ensure that minutes of all shareholders' meetings, directors' meetings and the meetings of the various committees of the board of directors are properly recorded in accordance with section 242 of the Companies Act. These minutes are circulated to members of the board. Insider trading No employee may deal directly or indirectly in AngloGold ordinary shares on the basis of unpublished price-sensitive information regarding its business or affairs. No director or officer of the company may trade in these shares during a closed period determined by the board. A list of persons regarded as officers for this purpose has been approved by the board and is revised from time to time. Closed periods are operated prior to the publication of the quarterly and year-end results. Where appropriate, the closed period is also extended to include other sensitive periods. Employee participation The company has in place a variety of strategies and structures, which are designed to promote employee participation. These strategies and structures are further developed and adapted from time to time to meet variations in operational requirements and to accommodate changing circumstances. Management and employee representatives meet in formal and informal forums at company and operational levels to share information and to address matters of mutual interest. Relations with shareholders It is the policy of the company to pursue dialogue with institutional and private investors. In addition to the facilities offered by the corporate secretarial department and the company's share registrars, AngloGold has established a strong team of investor relations and communications contacts in South Africa, the United Kingdom, Europe, the United States and Australia to maintain contact with members of the investing communities and the media around the world. The company encourages shareholders to attend its general meetings, which provide opportunities for shareholders to ask questions of the board, including the chairmen of the various standing committees of the board. International media and investor briefings are held when the company's results are announced at quarterly intervals. The company also has a website containing up-to-date information. Equally high value is placed on the process of internal communication to all employees at the company's operating units. Code of ethics Progress is being made with regard to the compilation of a revised code on ethical standards for application within the societies in which the company operates worldwide. All directors and employees are required to maintain the highest ethical standards in ensuring that the group's business practices are conducted in a manner in which, in all reasonable circumstances, is above reproach. Dematerialisation of shares In November 2001, AngloGold commenced non-certificated dealings under the STRATE (Share Transactions Totally Electronic) programme on the JSE Securities Exchange South Africa. Shareholders on the South African register of members were sent, with the June 2001 quarterly report, a fully explanatory letter on how the new system would operate. |
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