governance - woolworths holdings limited

corporate
governance
Directors’ statement
The directors subscribe to the values of the principles of good corporate governance as contained in
the King report and are committed to applying these principles to ensure that sound governance is
practiced consistently. The principles, which encompass discipline, transparency, independence,
accountability, responsibility, fairness and social responsibility, are incorporated in the vision and the
strategy of the group.
The directors are of the opinion that the group complies, in all material respects, with the principles
incorporated in the Code of Corporate practices and conduct as set out in the first King Report and
the requirements of the JSE Securities Exchange South Africa.
The directors have noted the recommendations of the second King Report on corporate governance
which became effective on 1 March 2002, and are working towards embracing the expanded
principles, compliance with which will be reported on in the 2003 annual report.
This philosophy is reflected in the structure of the board and its sub-committees as detailed below:
Board of directors
The group has a unitary board structure consisting of five executive directors, three independent
directors and two non-executive directors.The board is headed by a non-executive chairman whose
role is separate from that of the chief executive officer.
The non-executive directors are based locally and internationally and are actively involved in the affairs
of the group and bring strong independent judgement and a global view to the deliberations of
the board.
To ensure that directors are free from conflict of interest, they are obliged to disclose their
shareholding in the group, their other directorships and any transactions that may give rise to a
potential conflict of interest.
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The board meets on a quarterly basis and is responsible for retaining full and effective control over
the company, giving and monitoring the group's strategic direction, and considering financial and other
matters having a material effect on the group.
The directors recognise their responsibility to report and communicate matters of material
significance to all stakeholders.
In accordance with the articles of association of the group, all directors are subject to retirement by
rotation and re-election by shareholders at least once every three years.
The directors have unlimited access to the advice and services of the company secretary and, in
appropriate circumstances, may seek professional advice on matters concerning the affairs of the
group, at its expense.
Specific responsibilities have been delegated to board committees with defined terms of reference.
The current board committees are:
Audit committee
The audit committee, chaired by an independent non-executive director, consists of two independent
directors and, with the appointment of R Schur on 1 July 2002, two external representatives with
extensive financial experience.The composition of the audit committee is shown on pages 5 and 61
of the report.The committee meets at least four times a year and is charged with considering and
making recommendations to the board on issues relating to the appointment and retention of
external auditors, the audit fees, interim and annual financial statements disclosure, internal audit and
the effectiveness of internal control. The external and internal auditors have unrestricted access to
the chairman of the audit committee and attend the audit committee meetings.
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The main objectives of the committee include:
• Assisting directors in fulfilling their
responsibilities of ensuring that the system of
internal controls, accounting practices,
financial reporting and auditing processes are
functioning effectively;
• Facilitating the effective communication
between the board of directors, management
and the external auditors;
• Facilitating the credibility, objectivity and
reliability of published financial reports and
ensuring that the financial statements comply
with Generally Accepted Accounting
Practices, thereby providing an objective,
independent forum for the resolution of
significant accounting and reporting related
matters; and
• Supporting overall effectiveness of corporate
governance
Remuneration committee
The remuneration committee, chaired by the
chairman of the board, is made up of four nonexecutive
directors, two of whom are
independent. The details of the committee
members are reflected on pages 5 and 61 of
the report.The committee meets at least four
times a year. In order to advise on
remuneration of the executive directors, the
chief executive officer attends the meetings by
invitation.
The main objectives of the committee include;
•To approve an overall remuneration strategy
for the directors and executive management;
• Ensuring that the remuneration strategy
is market related and competitive to
guarantee the ability to attract, retain and
energise high quality staff at all levels in the
group and drive the desired behaviour to
achieve the overall strategy;
• Considering the relationship which the group
wishes to establish between executive
remuneration and the remuneration of its
other employees; and
•To review succession plans for directors and
executive management.
The remuneration of non-executive directors is
determined in accordance with the articles
of association.
The chairman and the chief executive officer
recommend to the board the fees to be paid
to non-executive directors and members of
the committees of the board.
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Share dealing committee
The share dealing committee approves all share dealing by directors and senior management.
The committee is made up of a non-executive director, the chief executive officer and the company
secretary.
Restricted period
The group operates a restricted period prior to the publication of its interim results and annual results.
During the restricted period, the directors and officers may not deal in the shares of the group.
Additional restricted periods are enforced as necessary.
accountability
Internal control
The directors acknowledge their ultimate responsibility for the internal, financial and operating controls
and the monitoring of their effectiveness.These systems are designed to provide reasonable, but not
absolute assurance, against material misstatement and loss.
Ethical behaviour, compliance with legislation and sound accounting practices, underpin the internal
control process.
Senior executive management is responsible for the design, maintenance and on-going
appropriateness of the various control measures. Even effective systems of internal, financial and
operating controls, no matter how well designed, have inherent limitations, including the possibility of
circumventing or overriding such controls. Effective systems of internal, financial and operating controls,
therefore, aim to provide reasonable assurance of the reliability of financial information and, in
particular, the preparation of financial statements.
The group maintains internal, financial and operating controls that are designed to provide reasonable
assurance regarding;
• the safeguarding of assets against unauthorised use or disposition;
• compliance with statutory laws and regulations; and
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corporate governance

• the maintenance of proper accounting
records and the adequacy and reliability of
financial information.
The external and internal audit functions assist
in providing the board and senior executive
management with monitoring mechanisms for
identifying risks and assessing controls
appropriate to managing such risks.
The board of directors has not been made
aware by senior executive management or
internal audit that the systems are not
appropriately designed to provide reasonable
assurance that the assets are safeguarded
against material loss or unauthorised use and
that transactions are properly authorised
and recorded.
A risk based review and testing to ensure that
the group maintained adequate accounting
records and effective systems of internal
controls was carried out internally. Appropriate
accounting policies, supported by sound and
prudent managerial judgements and estimates,
have been consistently applied.
Internal audit
Internal audit provides independent, objective
assurance and consulting services designed to
add value and improve the operations of the
group. It assists the board to accomplish its
objectives, by bringing a systematic, disciplined
approach to evaluate and improve the
effectiveness of internal control.
Internal audit has a board-approved charter in
line with the Standards for the Professional
Practice of Internal Auditing of The Institute of
Internal Auditors. The head of internal audit
reports to the audit committee and is
responsible for preparing an internal audit
coverage plan based on the major risks.
Internal audit also works in conjunction
with the external auditors to ensure
optimal coverage.
External audit
The external auditors are engaged to express
an opinion on the financial statements. They
review and test the systems of internal financial
control and the information contained in the
financial statements to the extent necessary to
express their audit opinion.
Risk management
Risk management encompasses the ongoing
identification, assessment and monitoring of
all forms of risk. Woolworths has a risk
management committee which meets regularly
to assess and evaluate the effectiveness of
current policies and procedures and to adapt
these in line with risks associated with the
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operating environment. Financial and treasury
risks are managed through policies and
procedures approved by the audit committee.
Risk, manifested through HIV/AIDS, crime and
security and business continuity, is managed
through well defined policies and procedures.
relationships and reporting
Communication
The group acknowledges its obligation to
stakeholders to present a comprehensive,
objective and balanced assessment of its
performance.This is achieved through periodic
discussion of relevant information internally
and externally via different channels of
communication, which include electronic media
and presentations to focus groups of the
investment community.
Employee communication and
participation
Woolworths believes in broad communication
on issues of importance to employees and
the business to create and promote a culture
of regular, honest and open internal
communication so that staff will understand the
business objectives and know how to live the
brand values.
Woolworths engages with employees in a
variety of consultative forums to encourage
a participatory approach on matters of
joint interest.
Diversity
Woolworths believes in a diverse workforce
and embraces the principles of employment
equity to achieve an appropriate balance for
the group. The group has demonstrated its
commitment to employment equity by
adopting a diversity statement forming the
basis for implementation.
Corporate social responsibility
Woolworths is committed to the economic,
environmental and social development of the
communities in which it operates. Financial and
non-financial contributions are made through
a social investment programme. These
contributions not only seek to support
communities, but to develop and empower
them to become self-sustainable. Woolworths'
philosophy with regard to corporate social
investment is that people help people,
therefore, the involvement of our employees in
these programmes forms an integral part of
the company's sustainability and development
effort. Details of social investment activities of
Woolworths are summarised in the chief
executive officer's report.
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corporate governance
Environment
The group recognises that its operational activities have an impact on the environment and has
adopted an environmental strategy aimed at reducing the detrimental impact our processes and
products on the environment. The details of the environmental activities are contained in the chief
executive officer's report.
Occupational health and safety
Woolworths is committed to an integrated occupational health and safety programme which enables
monitoring and effective measuring of compliance and supports a safe working environment.
Ethical and moral behaviour
The group is committed to the highest levels of professionalism and organisational integrity in its
business dealings with stakeholders. A code of ethics, informed by the principles, norms and values that
the group promotes for the guidance and conduct of business activities and internal and external
relations, has been formally adopted. Employees and suppliers are required to adhere to these defined
standards of behaviour in all their business dealings.
country road
Country Road observes the highest standards of corporate governance and has established codes and
procedures to govern the conduct of its activities and people in accordance with Australian standards.
Country Road operates its own audit and remuneration committees in which directors of
Woolworths Holdings Limited are represented, the details of which are contained in that group's
financial statements.
A code of conduct sets out the principles and standards to be met and emphasises that all officers
and employees are expected to act in accordance with the law and the highest standards of propriety.
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