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Governance of the business

This overview serves as an introduction to all the strategic themes and their material issues. It deals with how all important issues at Altron are governed.

Establishing materiality through inclusivity

ALTRON’S STRATEGIC THEMES INTEGRATE ALL ISSUES ACROSS THE BUSINESS

In terms of the King Report on Governance for South Africa, 2009 (King III), the board needs to look beyond the interests of the company and shareholders, taking into account the concerns and issues of its wider stakeholder environment, such as customers, suppliers, employees and broader society. Altron understands the importance of balancing long-term social, environmental and economic interests with the principle need to maximise the profits of the company.

Thus, an important development for Altron in the year under review has been the consolidation of business issues into a single list with clear lines of accountability from board level down. Last year’s annual report was an amalgam of strategic philosophies, focus areas, growth drivers and sustainability issues. These various items are now integrated into a single list of eleven strategic themes describing the long-term sustainability of Altron’s business.

Following the materiality principle of the Global Reporting Initiative (GRI), the eleven strategic themes are subdivided into a list of some 45 issues deemed material to the business and its stakeholders. GRI indicators relevant to these issues have been applied to measure the group’s progress towards sustainability. In accordance with the ‘apply or explain’ philosophy of King III, this report explains where the group falls short in applying these indicators, or has used other methodologies to manage and report on these issues. Systems are continually being developed to enable the group to further improve on its application level going forward.

GOVERNANCE

Altron is governed by a unitary board and board committees established to govern specific material issues within the company’s eleven strategic themes. The governance bodies accountable for each strategic theme are listed below.

GOVERNING BODIES RESPONSIBLE FOR ALTRON’S ELEVEN STRATEGIC THEMES

Strategic themes	Governance body

External factors	Board, risk management committee, audit committee
Products and services	Board, risk management committee
Income and growth	Board, audit committee
Business partner relationships	Board, risk management committee
Costs and cash management	Board, audit committee
Customer relationships	Board, risk management committee
Human capital	Board, risk management committee, remuneration committee, human capital committee, transformation committee, nomination committee
Transformation	Board, risk management committee, transformation committee, human capital committee
The environment	Board, risk management committee
Business conduct in foreign operations	Board, risk management committee
Corporate governance	Board, risk management committee


	ENGAGEMENT WITH INVESTOR COMMUNITY ON SUSTAINABILITY MATTERS

In November 2009, the Altron group company secretary engaged with Altron’s major institutional investors regarding the positive role which business sustainability plays in society, reducing impact on the environment and improving prospects for the company over the long term.

Discussion items:

>	The identification by investors of key long-term issues affecting the company and how Altron manages these.
>	The influence of the UN Principles for Responsible Investment (PRI) on investing approach.
>	The value of listing on the JSE SRI.
>	Altron’s management of its impact on the environment.
>	Relevance of sustainability issues to investors and their investing mandates.

All investors visited were appreciative of Altron’s initiative to engage on the subject, and most recognised Altron’s leadership in this regard. There was a wide range of awareness and interest, and all investment managers are becoming increasingly concerned with sustainability issues. For some this is due to pressure from clients.

Most investors are informed by the UN PRI and some apply their own responsibility principles, including social and environmental concerns, as part of their mandates. Few took cognisance of the JSE SRI. Specific issues noted were transformation, succession planning and the family ownership structure of Altron.* One significant shareholder called for more transparency on performance against measurable indicators, with a strong emphasis on social and environmental reporting.

*	This is not envisaged to change in the medium to long term as the Venter family retains control of the Altron group through the ordinary shares. Liquidity is created by the ‘N’ shares.

STAKEHOLDER ENGAGEMENT TO ESTABLISH MATERIAL ISSUES

The reasonable expectations and interests of a wide range of stakeholders inform the strategic themes and issues Altron deems material to its long-term sustainability. Engagement with stakeholders takes a variety of forms, from structured surveys, to one-on-one business dealings, to legislative forums. Important stakeholders which the company engages with are listed in the table of material issues at the front of this integrated annual report, with a more detailed description of stakeholder engagement in the introduction to each strategic theme and, in most cases, in the discussion of the material issues themselves. Page or web references to the full report on the web allow the reader to obtain more detail about specific concerns and the company’s response to them. An overview of stakeholder engagement follows.

Shareholders and investors

Altron manages a dedicated programme to engage with analysts, investors and individual shareholders. Twice a year the group’s results are presented to the investor community. Structured feedback is received annually through an independently conducted analyst poll. In November 2009, the group company secretary paid a visit to major investors in Pretoria and Cape Town to understand their opinion on sustainable business development across the triple bottomline (see accompanying summary).

Further detail regarding this and other forms of shareholder engagement can be found in the full governance report at www.altron.com/CRreport/index.htm

Customers and business partners

Business-to-business dealings are characterised by close relationships, especially for our ‘top ten’ customer relationships, which are monitored by the newly created position of group alliances manager. In the retail environment, systemic feedback is obtained through call centre monitoring, while satisfaction surveys and popular customer feedback websites provide further channels for identifying and responding to customer concerns.

Employees

Altron engages with its employees across a range of important issues, including performance, shortage of skills, transformation, health and safety and HIV/Aids. At certain operations, engagement takes place partially through unions, but most engagement takes place through structured forums, such as, among others, the transformation committee. These are highly active and raise a number of concerns and expectations. Altron has conducted employee satisfaction surveys previously, but not in the year under review. Recent retrenchments have intensified engagement with employees, as mandated by legislation and the Council for Conciliation, Mediation and Arbitration (CCMA) process.

Regulators

Altron maintains regular dialogue with significant industry regulators, in particular ICASA (the regulator for the South African communications sector), the Department of Communications, NERSA (the National Energy Regulator of South Africa) and the Department of Trade and Industry (dti). This year, Altron is implementing a government relations strategy to deal meaningfully with the dti and other relevant government departments. Altech’s success in championing the liberalisation of the telecommunications industry in 2008 is one example of the advocacy role that the Altron group plays in its relevant sectors.

Wider society

A number of issues are raised by societal expectations of good corporate behaviour, and Altron engages actively across a broad range of channels to ensure the company understands its impacts and the expectations of different stakeholder groupings.

Historically disadvantaged citizens are represented through the dti Codes of Good Practice (dti CoGP), and Altron engages with suppliers for preferential procurement, small businesses for enterprise development, as well as with communities and NGOs around its social investment.
The environment is represented by proxy stakeholders, most notably government and the legislative environment, but also through engagement with international codes and standards, as well as other stakeholders with an interest in Altron’s response to environmental concerns.
Ethics, corruption, fraud and competitive practices are all issues that affect wider society and are often reflected in the media, with which Altron engages continuously and proactively. Government and the legislative environment provide strict guidelines and laws prescribing corporate behaviour.

INDEPENDENT RATING OF COMPLIANCE WITHCORPORATE GOVERNANCE PRINCIPLES

The board is satisfied that Altron has made every practical effort to comply with all material aspects of King II during the review period, and has noted the new recommendations contained in King III, which came into force and being on 1 March 2010, and will ensure that the appropriate principles and guidelines are applied.

In 2009, the company engaged Corporate Governance Accreditation (Pty) Limited (CGA) to again independently verify Altron’s corporate governance procedures and policies. All areas of governance are covered by a gap analysis. As a signatory to the United Nations Principles of Responsible Investment, CGA takes cognisance of these guidelines when reviewing the client’s environmental and social awareness as part of the integrated sustainability criteria.

Altron addressed the governance deficiencies recognised in 2008 relating to stakeholder relations and integrated sustainability. CGA also noted Altron’s progress made in inculcating the group’s ethics policies and codes enterprise-wide. As a result of this continuous improvement, Altron again – and for the second year running – qualified for and was awarded a Gold Certificate, achieving a score in excess of 80%.

During the past year, an internal audit was conducted on the secretarial departments of Altron, Altech, Bytes and Powertech regarding all statutory forms and registers, as well as company returns, with a ‘good’ rating being obtained for each of these entities.

For further information regarding the governance bodies responsible for overseeing Altron’s 11 strategic themes referred to above, please refer to the full governance report which is available on Altron’s website www.altron.com/CRreport/index.htm

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