QUESTION 3

The King IV code identifies 16 principles that guide aspirations in terms of governance practices. Identify ten (10) principles and discuss whether the MTN Group has substantially applied the King IV principles.

QUESTION 4

Discuss the three dimensions of the triple bottom line and, using evidence from the case, indicate whether MTN succeeds in addressing all three dimensions.

SECTION C

30 Marks

CASE STUDY

Read the following case study and respond to the following questions

Corporate governance at MTN Background MTN is a mobile telecommunications operator at the forefront of technological and digital changes. Established in South Africa at the dawn of democracy as a leader in transformation, MTN has grown rapidly by investing in advanced communication infrastructure and by harnessing the talent of its people. MTN now offers voice, data and digital services to retail customers in the over 20 countries in which its operations have telecoms licences. In 2016, MTN employed 18 931 employees in 24 countries and paid its employees R9 billion in wages and salaries for that particular financial year.

Corporate governance at MTN

MTN strives to establish a compliance culture, which encourages an understanding by all the group's subsidiaries that "a sound compliance environment is our licence to business" especially because the MTN Group operates in markets with high regulatory risk. The board remains committed to good governance and international best practice standards. It is committed to ensuring an unequivocal tone from the top that requires a commitment by all directors and employees to the values of integrity, transparency and uninterrupted oversight over the company. This is to ensure that MTN monitors and addresses all governance issues within its operating units.

In 2017, the company focused on reviewing its application and adherence to the 17 King IV principles. In 2018, there was a continued focus on addressing any gaps identified in terms of King IV. The board is satisfied, however, that MTN has substantially applied the King IV principles.

Board of directors The board is responsible for the adoption of strategic plans, the monitoring of operational Performance and management, and the development of appropriate and effective risk management policies and processes. The board oversees and monitors the execution of the strategy by Management, ensuring that the company delivers on its strategic objectives. The board holds an annual strategy review session with management to interrogate the suitability of the strategy and provides guidance on the way forward. MTN acknowledges that diversity gives the board the benefit of different perspectives and ideas. The company has a unitary board, consisting of an appropriate mix of knowledge and skills. The board has executive and non-executive directors (including independent non-executive directors) who represent a broad spectrum of demographic attributes and characteristics. MTN has adopted a diversity component, which is included in the directors' appointment policy. The revised policy takes into consideration various categories of diversity as shown in the graphics that follow. The diverse perspectives of directors allow for proper strategic oversight as well as robust deliberation during board meetings. Since race and gender are important attributes that contribute to a balanced composition of the board, the board recognises the need to improve the representation of women and to ensure that an appropriate mix of races is represented on the board. Directors engage regularly with the group secretary for governance and regulatory advice. She also ensures the proper administration of the board and adherence to sound ethical practices. The performance of the group secretary, as well as her relationship with the board, is assessed on an annual basis by the nominations committee and the board. The assessment considers the Competency, qualifications and experience of the group secretary and whether she maintains an arm's-length relationship with the board. For the reporting period, the board is satisfied that she is suitably qualified and her relationship with the board is adequate to ensure her independence from director influence or conflict of interest.

Board committees The board has delegated its authority to various board committees with the mandate to deal with governance issues and report to the board on their activities on a quarterly basis. Each committee operates under terms of reference that set out roles and responsibilities, composition and scope of authority. These are reviewed on an annual basis. The board was satisfied that in 2017 the committees effectively discharged their responsibilities, in accordance with their respective terms of reference.

Risk management, compliance and corporate governance committee The committee works to improve the efficiency of the board and assist it in discharging its duties, which include identifying, considering and monitoring risks affecting the company and ensuring compliance with prevailing legislation and other statutory requirements, including corporate governance frameworks. Social and ethics committee

The committee performs an oversight and monitoring role to ensure that MTN's business is conducted in an ethical and properly governed manner. It also monitors the development or review of policies, governance structures and existing practices. The committee's responsibilities include holding the group president and CEO accountable for MTN's ethics performance monitoring activities regarding legislation and codes of good practice ensuring good corporate citizenship including promoting equality; preventing unfair discrimination and fraud, bribery and corruption; deterring human rights violations; and contributing to community development ensuring sound consumer relations to monitor the impact of MTN's activities and that of its products and services overseeing meaningful broad-based black economic empowerment (BBBEE) in MTN South Africa.

Audit committee The audit committee assists the board in discharging its duties by monitoring the strength of the operational, financial and control processes. These include internal financial controls and ensuring that assurance services and functions enable an effective control environment and that these support the integrity of information produced in compliance with applicable legal and regulatory requirements. Remuneration and human resources committee The committee oversees the formulation of a remuneration philosophy and human resources approach. This is to ensure that MTN employs and retains the best human capital possible for its business needs and maximises the potential of its employees. Although the board has entrusted its authority to key individuals and committees there are a few matters that are reserved for the board's deliberation and conclusion.

Business practices and ethics In 2017, the board continued to strive to ensure that ethics formed the foundation of how MTN operates and that corporate governance best practices were adhered to. With the application of the new King IV principles the directors enhanced their oversight of ethics by being more proactive in dealing with it. To this end, the CEOs of all the operating entities were each required to present a report to the social and ethics committee on their plans regarding the further entrenchment of ethics, as well as key challenges and achievements. It was evident that the operating companies still faced obstacles which slowed their progress in ethics management; however, the process has been more closely monitored by the board. As a result of its oversight, the board recognises that a lack of resources, language and cultural barriers and changing the mindset of some employees need to be focus areas going forward. Despite the setbacks highlighted above, each operating company continues to strive to further entrench ethics and has taken a firm stance against bribery and corruption. Each company is supported by ethics champions who provide effective guidance, encourage employees to report all instances of fraud through the whistleblowing hotline and ensure that the company's ethics are efficiently implemented and reported to the group's social and ethics committee on a quarterly basis. The board also continues to manage conflicts of interest and ensures that the interests of the company are always at the forefront in all decision-making processes. The company also continues to safeguard the interests of stakeholders, such as the community, employees, customers and suppliers, by monitoring MTN's activities with regard to social and economic development, corporate citizenship, consumer relationships, the environment, health and public safety and labour and employment matters.

Monitoring, oversight and risk management MTN's corporate governance structure ensures effective internal controls and monitors the management of significant matters. Both the audit committee and the risk management, compliance and corporate governance committee provide an environment in which challenging issues can be considered and monitored. As required by principle 11 of King IV, the strategic and operational risk management framework of the company focuses on various risks that could affect the company's customer experience, operational agility, cost competitiveness and stakeholder confidence. This is done through a robust risk methodology that analyses not only

what the company does, but also how it is done, to guarantee sustainable economic viability, make the most of market opportunities and serve a rapidly changing market. Performance management The board stresses the importance of promoting a healthy workplace environment, which embraces ethics and compliance through established policies based on the values of integrity, leadership, innovation, relationships and 'can do' attitude as well as the vital behaviours. It promotes targeted results in a transparent and systematic manner, which ensures that the company's employees are productive, provide efficient services and demonstrate the required knowledge, skills, behaviour, competencies and engagement to perform their duties to the best of their ability. MTN's remuneration philosophy is aligned to the BRIGHT strategy and directly linked to each employee's key performance indicators (KPIs). These KPIs are measured through the performance management system. In 2018, MTN provided shareholders with an implementation report to illustrate how the remuneration philosophy for directors and prescribed officers is implemented. Like any organisation, there are instances of unsatisfactory employee performance; however, MTN endeavours to address such issues expeditiously through internal company procedures in line with the disciplinary process and its performance management system. Disclosure, reporting and transparency Disclosure, reporting and transparency are fundamental components of MTN's corporate governance framework. The company aims to be transparent and accountable to stakeholders to enable them to make an informed decision about their association with MTN. The group has dedicated individuals that manage the annual integrated report and other reports issued to stakeholders, ensuring that the reports inspire trust and confidence in the company. MTN endeavours to provide timeous disclosure, especially regarding material issues; the company continues to review its policies and procedures that govern the provision of timeous, correct and complete information to stakeholders. MTN endeavours to provide information in a manner that gives all stakeholders equal access and ensures that there is no stakeholder that is treated favourably over others. In 2017, the board reiterated that all matters must be provided to stakeholders in compliance with the law and applicable regulations. Accordingly, MTN strives to disclose material or price-sensitive information in a readily understandable language, to stakeholders, the public and regulators. Stakeholder engagement and communication The board values MTN's stakeholders and endeavours to take their concerns and interests into account when making business decisions. This not only enables it to anticipate and manage risk effectively, but also assists the company in identifying new business opportunities and in establishing solid relationships with MTN's stakeholders. It also makes it easier for the company to deliver on its objectives and benefit from ideas for products or services that address stakeholder needs, and at the same time allows MTN to reduce costs and maximise value. In order to ensure greater accountability, the company has a stakeholder-conscious governance model that places emphasis on dialogue and responding to stakeholder concerns and interests. Information and technology governance MTN acknowledges that information and technology are integral strategic assets to enable the delivery of 'a bold new digital world' to our customers. MTN's commitment to sound governance is evident in our continuing efforts to embed the King IV principles and recommendations, with specific focus on technology governance through the establishment of various responsibilities, processes and supporting governance structures. In 2017, MTN further strengthened their information security function, with enhanced tools and more resources. The Group continued to implement their new security plan, which aims to use security as a business enabler, by creating trust in the digital world and proactively managing cyber and privacy risk. Social investments and sustainability MTN foundations have been established across the Africa and the Middle East. MTN uses their ICT expertise and resources to improve access to education and healthcare, to develop entrepreneurs and enterprise, and identify national priority areas for special attention. Improving communities' access to education and helping young people become economically active is a top CSI priority for the Group. Harnessing MTN's core ICT capabilities, they are able to develop education programmes that bridge the digital divide and change lives for the better. MTN looks for ways to provide the most vulnerable and needy in society with access to healthcare. The interventions MTN is a part of range from arranging free cataract operations to providing access to basic medical support through mobile clinics. Enabling economic self-sufficiency is fundamental to the Group's enterprise development interventions.

MTN assists in developing entrepreneurs and small businesses through skills development and funding. Lastly, the Group conservatively uses, reduces, re-uses and recycles resources for environmental impact mitigation. MTN applies the precautionary principle towards environmental management, and its operations are compliant to national laws and regulations. Some of MTN's operations have attained or are working towards ISO 14001 certification.