INTRODUCTION

The Board of Directors is accountable to the Company’s shareholders for ensuring the sound management and long-term success of the Group. This can only be achieved if the Board is supported by appropriate governance processes to ensure that the Group is managed responsibly and with integrity, fairness, transparency and accountability. This Corporate Governance Statement describes the key elements of Mediclinic’s corporate governance framework.

A Group Corporate Governance Manual, dealing with Board practices and Group policies, provides guidance to the company secretaries, boards and management of the Company and its three operating platforms in Southern Africa, Switzerland and the United Arab Emirates to ensure that similar corporate governance practices are followed throughout the Group.

COMPLIANCE WITH UK CORPORATE GOVERNANCE CODE AND LISTING RULES

The Board is committed to maintaining the highest standards of corporate governance and the highest standards of integrity and ethics. The UK Corporate Governance Code (the “UK Corporate Governance Code” or the “Code”), most recently updated in April 2016 by the Financial Reporting Council (the “FRC”) and available on the FRC’s website at www.frc.org.uk, contains a series of broad principles and specific provisions which embody good practice in relation to five key areas: leadership, effectiveness, accountability, remuneration and relations with shareholders. This report, together with the Directors’ Remuneration Report and the various Board committee reports included in this Annual Report, describes how the Board applied the main principles of the Code and complied with its provisions.

During the year under review and up to the date of this report, the Company complied with all the provisions of the UK Corporate Governance Code, other than the exceptions noted below:

  • Provision B.2.1 (regarding the Nomination Committee leading the process for Board appointments and making recommendations to the Board)

    Appointments to the Board are recommended by the Nomination Committee and further details on the Committee and the appointment process can be found on the Nomination Committee Report. In accordance with the Company’s relationship agreement with its principal shareholder, Remgro Limited (“Remgro”), further details of which are provided on the Directors’ Report, Remgro is entitled to appoint up to a maximum of three Directors to the Board. Jannie Durand represents Remgro on the Board of Directors and was appointed by Remgro in the previous reporting period on 15 February 2016. His appointment was therefore not led by the Nomination Committee.

    With the exception of this appointment, made in accordance with the terms of the relationship agreement, the Nomination Committee leads the process for Board appointments and makes recommendations to the Board in accordance with the Code. No new Board appointments were made in terms of the Relationship Agreement during the year under review.

  • Provision D.2.1 (regarding having at least three independent non-executive directors serving on the Remuneration Committee)

    Ian Tyler, who served as an independent non-executive member of the Remuneration Committee, resigned as a Director on 21 February 2017. From the date of his resignation up to the appointment of Seamus Keating as an independent non-executive member of the Remuneration Committee on 17 March 2017, the Remuneration Committee had only two independent non-executive members and did not meet the requirement to have at least three independent non-executive members. The Company fully complied with this requirement apart from this short period between 21 February 2017 and 17 March 2017, during which period no committee meetings were held.

  • Provision E.1.1 (regarding the attendance by the Senior Independent Director (“SID”) of sufficient meetings with a range of major shareholders)

    The Company has not met the requirement that the “SID should attend sufficient meetings with a range of major shareholders to listen to their views in order to help develop a balanced understanding of the issues and concerns of major shareholders”. This provision of the Code, supports the main principle of the Code requiring dialogue with shareholders based on a mutual understanding of objectives and that the Chairman should ensure that all Directors are made aware of their major shareholders’ issues and concerns, with which the Company complies. The Board believes that appropriate mechanisms are in place to engage with shareholders, without the need for the SID to attend meetings with major shareholders. The SID is, however, available to attend such meetings if requested by shareholders. Although the SID and any other Non-executive Directors have the opportunity to attend analyst presentations hosted by the Company, the principal engagement with the capital markets lies mainly with CEO, CFO and the Head of Investor Relations, who provide regular feedback to the Board on investor relations matters, including, inter alia, an overview of meetings held with investors. Refer to the Relations with Stakeholders section of this report for more information on the Company’s shareholder engagement.

In addition to complying with applicable corporate governance requirements in the UK in accordance with its primary listing on the LSE, the Board is also satisfied that the Company meets all relevant requirements of the JSE Listings Requirements and the NSX Listings Requirements as a result of its secondary listings on the JSE, the South African securities exchange, and the NSX, the Namibian securities exchange.

BOARD STRUCTURE AND ROLES

The Board has full and effective control of the Company and all material resolutions are approved by the Board. The Board has adopted a robust corporate governance framework, as summarised in Figure 1, which assists the Board in the exercise of its responsibilities, providing strategic direction to the Company in order to create long‑term shareholder value. A Board Charter sets out the key responsibilities of the Chairman, SID, Non‑executive Directors, Executive Directors, the Chief Executive Officer and the Company Secretary. It further demonstrates the roles of the various Board committees.

Board committees

The Board has delegated authority to the Board committees to carry out certain tasks on its behalf, in order to operate efficiently and give the right level of attention and consideration to relevant matters, while reserving the authority to approve certain key matters, as documented in the Group’s authority levels and reserved matters, which is reviewed annually by the Board. The key responsibilities of the Board committees, namely the Audit and Risk Committee, Remuneration Committee, Nomination Committee, Clinical Performance and Sustainability Committee, Investment Committee and the Disclosure Committee, are summarised in Figure 1. The terms of reference of each Board committee are available on the Company’s website. Reports on the role, composition and activities of the Remuneration Committee, Nomination Committee, Audit and Risk Committee and the Clinical Performance and Sustainability Committee are included in this Annual Report.

During the year, the Board approved the constitution of the Disclosure Committee, previously a management committee, as a Board committee.

Separation of Chairman and CEO roles

There is a distinct division of responsibilities between the Chairman and the Chief Executive Officer, as summarised in Figure 1. The separation of authority, which is set out in writing and agreed by the Board, enhances independent oversight of executive management by the Board and helps to ensure that no one individual on the Board has unfettered powers or authority.

BOARD MEETINGS

Meeting attendance

Individual Directors’ attendance at Board and Board committee meetings is considered as part of the formal annual review of their performance. Where a Director is unable to attend a Board or committee meeting, they communicate their comments and observations on the matters to be considered in advance of the meeting via the Chairman, the SID or relevant Board committee chairman for raising as appropriate during the meeting. The attendance of the Board meetings held during the year under review is set out in Figure 2. The attendance of the Investment Committee and the Disclosure Committee meetings held during the year under review is set out in Figure 3 and Figure 4, respectively.

Notes

1 Biographies of all the current Directors are provided on the Board of Directors page.
2 Since year end, the Board met once and all members attended.
3 Jurgens Myburgh was appointed as an Executive Director and the Chief Financial Officer of the Company on 1 August 2016.
4 Craig Tingle retired as an Executive Director and Chief Financial Officer of the Company on 15 June 2016.
5 Ian Tyler resigned as an Independent Non-executive Director and the SID of the Company on 21 February 2017.
6 The two Investment Committee meetings that could not be attended by Jannie Durand during the year were attended by his alternate, Pieter Uys.
7 Since year end, the Disclosure Committee met four times at which meetings a quorum was present.
8 Alan Grieve was appointed as a member of the Disclosure Committee on 17 March 2017.
9 Gert Hattingh, not being a Board member, was removed as a member of the Disclosure Committee on 30 March 2017 subsequent to the constitution of the committee as a Board committee, previously a management committee.

The attendance of the other Board committee meetings is set out in the reports of the Audit and Risk Committee, the Nomination Committee, the Remuneration Committee and the Clinical Performance and Sustainability Committee included in this Annual Report.

Principal Board activities

Figure 5 outlines a number of specific areas that the Board focused on during the year under review. The Board’s annual agenda plan is designed to ensure that sufficient time is allocated to ensure all necessary matters are addressed. The agendas are adjusted throughout the course of the year, to prioritise issues and ensure focused consideration of strategic priorities. Sufficient time is provided for the Chairman to meet privately with the SID and Non-executive Directors to discuss any issues arising.

BOARD COMPOSITION AND DIVERSITY

The delivery of the Company’s long-term strategy depends on attracting and retaining the right skills across the Group, starting with the Board of Mediclinic. A list of the Company’s current Directors, including their biographies, who were in office during the year and up to the date of signing the financial statements, can be found on the Board of Directors page and the Board Meetings section above.

As at 31 March 2017 and as at the date of this report, the Board comprised the non-executive Chairman, a Non‑executive Director, six Independent Non‑executive Directors, and two Executive Directors from wide‑ranging backgrounds and with varying industry and professional experience. The Company complies with the Code’s recommendation that at least half the Board should be independent.

The Company’s Chairman, Dr Edwin Hertzog, is not considered to be an independent Director given his involvement as Chief Executive of Mediclinic International Limited until his appointment as Chairman in 1992 and his position as non‑executive Deputy Chairman of Remgro Limited, the principal shareholder of the Company. Nonetheless, given his in‑depth industry knowledge and experience, the Board considers it in the best interests of the Company that he serves as Chairman.

Mediclinic recognises the importance and benefits of having a diverse Board and believes that diversity at Board level is an essential element in maintaining a competitive advantage. The Board considers that diversity is not limited to gender and that a diverse Board will include and make good use of differences in the skills, geographic and industry experience, background, race, gender and other characteristics of Directors.

The Board seeks to construct an effective, robust, well balanced and complementary Board, whose capability is appropriate for the nature, complexity and strategic demands of the business. The Nomination Committee leads the process for Board appointments as further detailed in the Nomination Committee Report. The Board and the Nomination Committee actively consider the structure, size and composition of the Board and its committees when contemplating new appointments and succession planning for the year ahead. A range of diversity factors will be taken into account in determining the optimum composition of the Board and its committees, together with the need to balance their composition and refresh this progressively over time.

The Company’s Non-executive Directors come from a wide range of industries, backgrounds and geographic locations and have appropriate experience of organisations with international reach. While the Board recognises that the existing skills and expertise of the current Directors are extensive, the Nomination Committee continues to consider the appointment of additional Independent Non-executive Directors to further strengthen the Board and its committees’ with diverse expertise and to increase the female representation on the Board. No quota regarding gender balance has been imposed; however, the Nomination Committee and Board remain committed to ensuring that the business benefits from a diverse Board. Accordingly, when considering Board appointments and internal promotions at senior level, the Company will continue to take account of relevant voluntary guidelines and the performance of peer companies in fulfilling their role with regards to diversity, whilst seeking to ensure that each post is offered strictly on merit to the best available candidate.

During the year, the Nomination Committee reviewed and updated its Board Diversity Policy. The Board’s diversity policy statement is set out above. For details on the diversity of the Group, including a breakdown by gender, age and race (only for South Africa) on the Board and senior management roles see the Directors’ Report. Figure 6 provides an overview of the Board’s composition and diversity in terms of gender and experience.

INDEPENDENT PROFESSIONAL ADVICE

All Directors may seek independent professional advice in connection with their roles as Directors. All Directors have access to the advice and services of the Company Secretary at the expense of the Company. The Company has provided for both indemnities and directors’ and officers’ insurance to the Directors in connection with their duties and responsibilities.

APPOINTMENT AND TENURE

All Non‑executive Directors serve on the basis of letters of appointment which are available for inspection at the Company’s registered office. The letters of appointment set out the time commitment expected of Non‑executive Directors who, on appointment, undertake that they will have sufficient time to meet their requirements.

The Non‑executive Directors are appointed for a term of three years, subject to earlier termination, including provision for early termination by either the Company or the Non-executive Director on three months’ notice.

DIRECTORS’ INDUCTION AND TRAINING

The Chairman, with the support of the Company Secretary, is responsible for the induction of new Directors and ongoing development of all Directors.

Upon appointment, all Directors were provided with training in respect of their legal, regulatory and governance responsibilities and obligations in accordance with the UK regulatory regime. Jurgens Myburgh, as CFO, and Pieter Uys, as alternate to Jannie Durand, were appointed during the year and have each undertaken a comprehensive Board induction programme tailored to their individual needs and requirements. The induction includes face‑to‑face meetings with executive management and operational site visits to orientate and familiarise them with our industry, organisation, business, strategy, commercial objectives and key risks.

The training needs of the Directors are periodically discussed at Board meetings and briefings are arranged on issues relating to corporate governance and other areas of importance.

The Board is kept up to date on legal, regulatory and governance matters at Board meetings. Additional training is available on request, where appropriate, so that Directors can update their skills and knowledge as applicable.

DIRECTOR ELECTION/RE-ELECTION

In accordance with the Company’s Articles of Association, a Director appointed during the year, should stand for election at the first annual general meeting subsequent to such appoint, and other Directors must retire by rotation and seek re‑election by shareholders every three years. However, the Code requires that all directors of FTSE350 companies should stand for re‑election annually. Accordingly, Jurgens Myburgh, who was appointed as a Director from 1 August 2016, will stand for election at the Company’s annual general meeting to be held on 25 July 2017; and all other Directors will stand for annual re‑election at the meeting. Taking into account the result of an internal Board evaluation which was carried out during the year and following recommendations from the Nomination Committee, the Board considers that all Directors continue to be effective, committed to their roles and have sufficient time available to perform their duties and therefore recommends the election and re‑election of these Directors to the Board.

DIRECTORS’ CONFLICTS OF INTEREST

In accordance with the UK Companies Act and the Company’s Articles of Association, the Board may authorise any matter that otherwise may involve any of the Directors breaching his or her duty to avoid conflicts of interest. The Board adopted a procedure to address these requirements, which includes the Directors completing detailed conflict of interest questionnaires on appointment. The matters disclosed in the questionnaires are reviewed by the Board following the Directors’ appointment and annually thereafter and, if considered appropriate, authorised in accordance with the Act and the Articles. Any new conflicts of interest are disclosed to the Board as soon as they arise, for consideration.

EVALUATION OF THE BOARD, COMMITTEES, CHAIRMAN, INDIVIDUAL DIRECTORS AND THE COMPANY SECRETARY

During the year under review, the Board conducted an evaluation to review performance and effectiveness of the Board, as a whole, the Board Committees, the Chairman, individual Directors and the independence of the Independent Non‑executive Directors. The evaluation process was conducted internally by way of interviews and self‑evaluation questionnaires. The results of the evaluation of the Board committees were considered by the relevant committee prior to their presentation, together with all other evaluations, for discussion at the Board meeting held in March 2017.

An externally facilitated performance evaluation will be conducted next year and every three years thereafter.

Board

The Board self‑evaluation questionnaire was based around the five main principles of the Code, namely: leadership, effectiveness, accountability, remuneration and relations with shareholders. The Board identified no material areas for improvement, but confirmed the need to address the composition of the Board through the appointment of two further Non‑executive Directors, which is currently receiving attention as indicated in the Nomination Committee Report.

Board committees

The results of the self‑evaluation of the Board committees, together with the Committees’ proposed recommendations, were discussed by the Board. Details of the results of the performance evaluation of the Board’s committees and actions planned for the next year are set out in the individual committee reports.

Chairman

Mr Desmond Smith, as the SID, met privately with the Non‑executive Directors to appraise the performance of the Chairman, taking account of the views of the Executive Directors and subsequently discussed the results with the Chairman. A high‑level summary of the evaluation of the Chairman was presented at the Board meeting held in March 2017.

Individual Directors

The Chairman met with each Non-executive Director to discuss their contributions and performance, together with their training and development needs and presented his feedback to the Board. The Board concluded that the individual Directors have fulfilled their duties and provide a valuable contribution to the effective functioning of the Board.

Independence of Directors

The Board considered the independence of the Independent Non-executive Directors, upon recommendation of the SID, taking into consideration all relevant relationships and circumstances. As disclosed earlier in this report, Dr Edwin Hertzog and Jannie Durand are not regarded as independent, owing, respectively, to their previous relationship with the Company and its principal shareholder. The Board considers all the other Non-executive Directors to be independent in character and judgement and free from any business or other relationship or circumstances that could potentially materially interfere with the exercise of their respective and collective independent judgement.

Company Secretary

As part of the annual evaluation of the Board, the Company Secretary was also evaluated. The Board is of the opinion that the Company Secretary is competent and has the requisite qualifications and experience to effectively execute its duties.

ACCOUNTABILITY

Internal controls and risk management

The Group has a comprehensive system of internal controls in place, designed to ensure that risks are mitigated and that the Group’s objectives are attained. The Board recognises its responsibilities to present a fair, balanced and understandable assessment of the Group’s position and prospects. It is accountable for reviewing and approving the effectiveness of internal controls operated by the Group, including financial, operational and compliance controls, and risk management. The Board recognises its responsibility in respect of the Group’s risk management process and system of internal control, and, oversees the activities of the Group’s external auditors and the Group’s risk management function which have been delegated to the Audit and Risk Committee. A review of the Group’s risk management approach is further discussed in the Strategic Report. For detail on the management and mitigation of each principal risk see the section on Risk Management, Principal Risks and Uncertainties. The Group’s viability statement is detailed in the Viability Statement sub‑section of the Risk Management, Principal Risks and Uncertainties page. Please refer to the Audit and Risk Committee Report for further detail in relation to the Audit and Risk Committee’s role.

The Group’s governance structure of risk management is illustrated in Figure 7.

Ethics and compliance

Conducting business in an honest, fair and legal manner is a fundamental guiding principle in Mediclinic, which is actively endorsed by the Board and management, ensuring that the highest ethical standards are maintained in all our dealings with stakeholders. The Group’s commitment to ethical standards is set out in the Group’s values, and is supported by the Company’s Code of Business Conduct and Ethics (the “Ethics Code”), which is available on the website at www.mediclinic.com. The Ethics Code provides a framework of the standards of business conduct and ethics that are required of all business divisions, directors and employees within the Group in order to promote and enforce ethical business practices and standards throughout the Group. The Ethics Code is available to all staff and communicated to new employees as part of the on-boarding process.

Compliance with relevant laws, regulations, accepted standards or codes is integral to the Group’s risk management process and is monitored in accordance with the terms of the Group’s Regulatory Compliance Policy.

Slavery and human trafficking

The Board has considered the Company’s slavery and human trafficking statement for the year under review, as required in terms of the Modern Slavery Act 2015, reporting on the steps the Group has taken to ensure that slavery and human trafficking does not take place. A link to the Company’s slavery and human trafficking statement can be found on the home page of the Company’s website.

Fraud and corruption

The Group adopts a zero-tolerance policy to unethical business conduct, in particular fraud and corruption, which is addressed in the Group’s Ethics Code and the Anti-bribery Policy. Refer to the Audit and Risk Committee Report for an overview of the Group’s approach to fraud and corruption.

Competition laws

The Group supports and adheres to the relevant competition and anti-trust laws applicable in the various countries in which the Group operates. These laws are complex and the Group has issued guidelines to its employees on competition law compliance within their relevant jurisdiction, which are reviewed and updated at least annually.

The South African Competition Commission is undertaking a market inquiry into the private healthcare sector in South Africa. Mediclinic is participating in the inquiry, with the assistance of expert competition attorneys and advocates who guide Mediclinic through the process, as referred to in the Market Overview section of the Divisional Review of Mediclinic Southern Africa.

No legal action for anti-competitive, anti-trust or similar conduct was instituted against the Group during the year under review.

Information and communications technology governance

Mediclinic has an extensive information and communications technology (“ICT”) environment that acts as an enabler of its business strategies and operations. The core business information systems cover clinical processes, revenue cycle management and patient administration. The SAP ERP back-office systems support, inter alia, the finance, accounting, human resources management and procurement functions. An enterprise data warehouse enables advanced analytics activities as well as providing data for decision support. Lastly an extensive office automation environment exists which enables both on-premise and mobile working, as well as collaboration and communication within and across the Mediclinic business platforms. A global network enables data flows and communication between the Group’s operating platforms. Major ICT-related projects in the pipeline, which include various SAP projects, an electronic health record system and the introduction of a global HR system.

ICT governance is done in context of the Group’s overall corporate governance and specifically the Group’s risk management structures and processes. Central to ICT governance is the Group’s ICT Steering Committee, various ICT architecture management committees at the operating platforms. The ICT Steering Committee is a sub-committee of Company’s Executive Committee and membership consists of the Group’s CIOs, various Group ICT architects and key functions such as Risk Management, Finance and the Enterprise Project Management Office. This committee focuses on collaboration, standardisation and synergies across the various ICT entities in the Group by way of:

  • setting information security related policies and standards;
  • developing and reviewing ICT risk profiles; and
  • providing assurance regarding information and cybersecurity, data protection and privacy, as well as access control, change management and disaster recovery.

The ICT Steering Committee is supported by the Group’s Information Security Architecture Committee, consisting of the Information Security Officers of the Group and the operating platforms. The proceedings of this committee are informed by information security best practices sourced from Gartner, ISACA, CoBIT 5, ITIL, ISO27001 and the South African King IV™ Report on Corporate Governance.

The Group’s risk management system is used to capture and track all ICT risks, audit findings, actions and responsibilities.

Mediclinic employs a wide range of technology capabilities to safeguard its ICT installation, its ICT users and connections to other external ICT systems to ensure business continuity.

Information security policies and controls are in place throughout the Group regulating, inter alia, the processing, use and protection of own and third-party information. This is further entrenched through ongoing user training, security awareness programmes and certification courses in information security. Flows of personal data across country borders are dealt through formal arrangements in line with country-specific legislation. There were no material information security or data privacy incidents during the year under review.

REMUNERATION

The Board has established a Remuneration Committee to assist with discharging its responsibility in relation to Board and executive remuneration. A report on the activities of the Committee, including its composition and key responsibilities, is included on the Directors’ Remuneration Report.

RELATIONS WITH STAKEHOLDERS

Stakeholder engagement

Mediclinic recognises its accountability to its stakeholders. Effective communication with stakeholders is fundamental in maintaining Mediclinic’s corporate reputation as a trusted and respected provider of healthcare services and positioning itself as a leading international private healthcare group. The Group’s key stakeholders, methods of engagement, topics discussed or concerns raised are outlined in the Sustainable Development Report.

Shareholder engagement

Responsibility for shareholder relations rests with the Chairman, CEO, CFO, SID and Head of Investor Relations. Collectively, but mainly through the CEO, CFO and Head of Investor Relations, as referred to above, they ensure that there is effective, regular and clear communication with shareholders on matters such as operational performance, regulatory changes, governance and strategy. In addition, they are responsible for ensuring that the Board understands the views of shareholders on matters such as governance and strategy. The Board is supported by the Company’s corporate brokers with whom it is in constant dialogue. The Disclosure Committee also assists the Board to ensure the timely and accurate disclosure of all information that is required to be so disclosed to meet the legal and regulatory obligations and requirements arising from its listing on the LSE.

During the year, following the appointment of the Group’s Head of Investor Relations in London, a formal programme was established for engaging with the capital markets. This programme included regular investor meetings, attendance at investor conferences, roadshows, presentations and ad hoc events with investors, sell-side analysts and sales teams. Over the year under review, senior management and the Head of Investor Relations have met some 200 institutions and participated in 18 roadshows, investor conferences and ad hoc capital market events across the UK, South Africa, North America, UAE and Asia. A breakdown of the fund manager style and geographic holdings as at year end are provided in Figure 8 and Figure 9 respectively. The CEO, CFO and Head of Investor Relations provide regular feedback to the Board on investor relations matters, including, inter alia, an overview of meetings held with investors.

Shareholders can access details of the Group’s results and other news releases through the London Stock Exchange’s Regulatory News Service and the Johannesburg Stock Exchange News Service. In addition, the Group publishes the announcements in the Investor Relations section of the Group’s website. Shareholders and other interested parties can subscribe to email news updates by registering online on the website.

The Group continually looks for ways to improve its use of online channels to communicate with our stakeholders through the corporate website and webcasting.

2017 annual general meeting

The Company’s annual general meeting will take place at 15:00 (British Summer Time) on Tuesday, 25 July 2017 at the Rosewood London Hotel, 252 High Holborn, London, WC1V 7EN, United Kingdom. All ordinary shareholders have the opportunity to attend and vote, in person or by proxy. The Notice of Annual General Meeting can be found on the Investor Relations section of the Company’s website, and is being posted in a separate booklet at the same time as this Annual Report. The Notice of Annual General Meeting sets out the business of the meeting and provides explanatory notes on all resolutions. Separate resolutions are proposed in respect of each substantive issue. The annual general meeting is the Company’s principal forum for communication with private shareholders. The Chairman of the Board and the Chairmen of the Board committees, together with senior management, will be available to answer shareholders’ questions at the meeting and the Directors encourage shareholders to participate at the event.