2008 Annual report - Sappi

Corporate governance // continued
Audit committee
The audit committee was established in 1984 and assists the
board in discharging its duties relating to the:
• safeguarding of assets;
• oversight role for the risk management function;
• operation of adequate systems, and control processes;
• reviewing of financial information and the preparation of
accurate financial reporting in compliance with all applicable
legal requirements and accounting standards;
• oversight of the external auditors’ qualifications, experience
and independence;
• oversight of the performance of the internal and external
audit functions; and
• monitoring of compliance with applicable external legal and
regulatory requirements.
In terms of the South African Corporate Laws Amendment Act,
which came into effect during the financial year, the audit
committee is required to perform certain duties, including the
nomination for appointment of an independent auditor and the
determination of the independence of the auditor. The audit
committee monitors the qualifications, expertise, resources and
independence of both the internal and external auditors and
assesses annually the auditors’ performance and effectiveness.
The audit committee approves the external auditor’s
engagement letter, nature and scope of the audit and the audit
fee. The audit committee can confirm that it is satisfied with the
independence of the external auditor for the 2008 financial year.
The audit committee oversees the financial reporting process
and is concerned with compliance with accounting policies,
group policies, legal requirements and internal controls within
the group. It reviews compliance with the group’s code of
ethics and ensures facilities are in place to enable employees
to submit concerns confidentially or anonymously, and
ensures independent investigations are conducted where
necessary. The audit committee consists of five independent,
non-executive directors and has satisfied its responsibilities for
the year in terms of the mandate. The adequacy of the mandate
is reviewed and reassessed annually and several changes were
made during 2008 to accommodate requirements of the
Corporate Laws Amendment Act. The audit committee meets
with senior management, which includes the chief executive
officer and the chief financial officer, at least four times a year.
The external and internal auditors attend these meetings and
have unrestricted access to the committee and its chairman.
The external and internal auditors meet privately with the audit
committee on a regular basis. The audit committee chairman is
available at the annual general meeting. Regional committees
exist in the three major regions and are chaired by independent
non-executive directors. These committees have a mandate
from the group’s audit committee, to whom they report on a
regular basis and they meet at least four times per year. These
regional committees assist the Sappi Limited audit committee
in the discharge of its duties, particularly as regards the
requirements of the Corporate Laws Amendment Act, such as
the review of the performance, independence and effectiveness
of the auditors as well as the review of the financial information
and systems of internal controls of all major operations
throughout the group. Dr D Konar has been designated as
the audit committee financial expert as required by the
Sarbanes-Oxley Act of 2002.
Human resources committee
The responsibilities of the Human resources committee are,
inter alia, to determine the group’s human resource policy
and strategy, assist with the hiring and setting of terms and
conditions of employment of executives, the approval of
retirement policies and succession planning for management
and the chief executive officer as well as employment equity
and transformation in South Africa. The human resources
committee consists of three independent non-executive directors
and the independent non-executive chairman of the group (who
serves as chairman of the committee).
Management representation at meetings is by way of invitation
and not as members of the committee. This representation
includes the chief executive officer of the group as well as the
group head of human resources.
Compensation committee
The compensation committee ensures that the compensation
philosophy and practices of the group are aligned to the strategy
and performance goals. It reviews and agrees compensation
of executive directors and senior executives. It also reviews
and agrees executive proposals on the compensation of nonexecutive
directors for approval by the Board and ultimately by
shareholders. The compensation committee consists of five
independent non-executive directors (one of whom serves as
chairman). Directors’ emoluments are disclosed in the notes 34
to 36 of the group annual financial statements.
Management representation at meetings is by way of invitation
and not as members of the committee. This representation
includes the chief executive officer of the group as well as
the group head of human resources. For further details on
compensation and management incentives at Sappi please
refer to the Compensation report on pages 70 to 71.
Nomination and governance committee
The nomination and governance committee considers the
leadership requirements of the group and identifies and
nominates suitable candidates for appointment to the board
for board and then shareholders’ approval. It reviews the
composition of the board and performs regular self evaluations
of the board and the various board committees. This evaluation
66