Corporate Governance

Ethics

Hospitality has adopted a Code of Ethics which is binding on the directors and employees of the group. The Code of Ethics is underpinned by a number of supporting policies including the conflicts of interest and share dealing policies. Hospitality is committed to conducting its business, internally and externally, in an open, honest, fair and transparent manner, so as to uphold its reputation as a responsible and ethical corporate citizen. Hospitality subscribes to the following values and principles:

  • Honest, open, transparent and timeous communication with its shareholders and stakeholders;
  • Fair and honest business dealings;
  • Avoiding conflicts of interest and declaring them when they arise in accordance with the company’s conflict of interest policy;
  • The execution of duties by directors and employees in an ethical and honest manner and never to the detriment of the company’s reputation;
  • Avoiding personal gain through the use of company property;
  • Avoiding the use of corporate information for any purpose other than that for which it was intended, and keeping information confidential;
  • Adhering to the practice of sound corporate governance, the company’s policies and procedures and any laws applicable to the company;
  • Encouraging the reporting of illegal and unethical behaviour;
  • Respecting and not purposefully compromising its natural environment; and
  • Having respect for the human rights and dignity of all directors and employees whatever their race, religion or gender.

The breach of this policy could result in disciplinary action and ultimately the termination of employment. In addition, certain transgressions may also be criminal in nature and could expose the executor to criminal prosecution. A whistle blowing process has been introduced. For the period under review, no incidents have been reported through the available whistle blowing channels.

Remuneration Report

The purpose of the company’s remuneration policy is to:

  • Attract, reward and retain executives and staff of the requisite calibre, with the appropriate knowledge, attributes, skills and experience to allow them to add meaningful value to the company;
  • Align the behaviour and performance of executives with the company’s strategic goals, in the overall interests of shareholders and stakeholders; and
  • Promote a culture that supports enterprise growth and innovation with appropriate short- and long-term rewards that are fair and reasonable.

Executive directors and staff

  • Basic remuneration
    Annual salaries are structured on a cost-to-company basis, are guaranteed and are benchmarked each year against the industry and independent market data. For purposes of comparisons to market, the median level of remuneration for a specific position is used as the point of departure.
  • Annual short-term scheme/Bonus payments
    The annual criteria for payment of a short-term incentive are assessed on both company and individual performance and capped at two-thirds of the basic remuneration at executive director level and at a maximum of two months’ basic salary at staff level. Qualifying targets are based on appropriate performance measures such as for example performance to budget, cost control, performance evaluations and the achievement of specific objectives set for the particular year.
  • Long-term incentives/Participation in share incentive schemes
    A long-term incentive scheme is to be investigated.

Non-executive directors

Hospitality’s remuneration mix for non-executive directors consists of either:

  • a basic fee in the form of an annual retainer; or
  • a per meeting fee for actual attendance.

The chairman of the board and chairmen of the respective board committees are paid higher annual retainers than other board members as compensation for their extra responsibilities. No share options or other incentive awards geared to share price or corporate performance are made to non-executive directors. Non-executive directors’ fees are approved in advance by shareholders by a special resolution at the company’s AGM.

The chief executive officer is employed by Grapnel Property Group (Pty) Limited (Grapnel). Grapnel has seconded the services of the chief executive officer to Hospitality, subject to a three-month notice period, which may not be exercised by either one of Grapnel, Hospitality or the chief executive officer so as to terminate the secondment prior to 30 June 2012. The secondment agreement contains a restraint of trade clause. The deputy chief executive officer and the financial director are both full-time salaried employees of HPF Management (Pty) Limited, a wholly-owned subsidiary of Hospitality. Their employment contracts are subject to three and two months’ notice periods, respectively, and do not include restraints of trade. The termination of an executive director’s contract of employment will result in a concomitant termination of his board appointment.

Non-executive directors are not subject to fixed terms of employment and, as such, no service contracts have been entered into with Hospitality.

Company Secretary

The board of directors have direct access to the Company Secretary who provides guidance and assistance in-line with the requirements outlined in the Act, King III and the JSE requirements.

The Company Secretary, where necessary, arranges training on changing regulations and legislation and could involve the company’s sponsors, auditors or organisations such as the Institute of Directors.

Delegation of Authority

The formal delegation of authorities is set out in the terms of reference of each sub-committee. Authority limits to conduct the daily operations of the company have been approved by the board and management acts within these authorities.

Dealing in the linked units of Hospitality

Hospitality has established a share dealing policy in line with the JSE requirements and the Security Services Act, 36 of 2004, which prohibits any director or staff member of the group who may have access to confidential information from dealing, directly or indirectly, in the linked units of the company during restricted periods. This includes any price sensitive period as determined by the board, any period where the linked units are trading under cautionary and the periods between the end of the interim and annual reporting periods and the announcement of the financial results for such respective periods on SENS.

During unrestricted periods, no director is allowed to trade in the linked units of the company without obtaining the requisite pre-approval.

Internal Controls

The executive management team acts independently from the hotel operators and reports directly to the chief executive officer and ultimately to the board. The executive team is represented by the chief executive officer and financial director at each audit committee meeting and has unrestricted access to the chairman of the board and the audit committee. The policies and processes relating to financial risk management are set out on pages 93 to 97 of the 2011 integrated report.

Communication and Investor Relations

Hospitality meets regularly with institutional investors and investment analysts and gives annual presentations on the company and its performance. The company communicates with the broader investor community via press releases and direct interviews.

Hospitality’s website http://www.hpf.co.za is used as a tool in communicating with its stakeholders. The annual general meeting is an ideal opportunity for unitholders to engage with the directors and management team and unitholders are encouraged to attend this event.