Diversity policy

Achieving suitable board composition and appropriate balance of power between individual directors and/or groups of directors so the board will operate effectively and in the interests of the company, requires deliberate policy parameters and careful consideration.

The JSE Listings Requirements seek to strengthen regulation of primary and secondary listings, and require companies to adopt a policy on the promotion of broader board diversity, focusing on gender and race, with a 12-month transition period. The amendment is set out in paragraph 3.84(i) of the updated JSE Listings Requirements. The board of directors or nomination committee must have a policy on the promotion of broader diversity at board level, specifically focusing on promoting gender, race, culture, age, field of knowledge, skills and experience.

The committee considered several drafts of the diversity and inclusion policy during the period under review in setting clear voluntary diversity targets informed by the company’s MoI and considerations of reasonableness. These were considered by the social and ethics committee as well as the nomination committee in respect of board composition with the following agreed targets:

• Size — minimum of four and maximum of 20 members
• Race — 60% black
• Gender — 40% black women
• Age — average of 55 years
• Tenure — average tenure of seven years (two years mentoring a successor)
• Appropriate diversity mix based on prevailing strategic objectives
• Prevailing business, commercial and industry experience needed to govern the organisation includes preference for experience in finance, environment and sustainability, mining, renewable energy, technology and innovation, transformation and ethics, governance and compliance, leadership, stakeholder relations, health and safety, and legal (subject to change)

Board composition

In terms of the company’s MoI, one-third of non-executive directors are subject to retirement by rotation and re-election by shareholders at least once every three years. This means this committee has the responsibility to annually consider the names of directors to retire and be recommended for re-election to shareholders during the AGM. This is conducted with the utmost responsibility and assessment includes the individual’s performance, meeting attendance, age and diversity targets, the need to introduce members with new expertise and perspectives while retaining valuable knowledge, skills and experience and maintaining continuity. A fit and proper assessment is also conducted to consider whether a director is regarded as fit and proper to continue as director, including assessment of skills, experience, qualifications and integrity.

In accordance with the company’s MoI, a non-executive director who has reached the age of 70 years or older will retire. As the chair of the board reached the age of 70 in 2020, an evaluation was conducted in terms of the above criteria and he was recommended for re-election at the 2020 AGM.

Nomination and appointment of directors

Due to resignations and retirements of three of our directors in 2019 and 2020, and to fulfil our board mandate, this committee had to identify suitable candidates to be appointed to our board. This responsibility goes with board performance and succession planning, including consideration of the requirements of the business in skills and experience as well as the board’s voluntary diversity targets.

Although no appointments were made in 2020, the board appointed, with effect from 1 February 2021, Chanda Nxumalo and Mandlesilo Msimang with effect from 15 March 2021. On 18 March 2021, Dr Nombasa Tsengwa was appointed as CEOdesignate and a member of the board, with immediate effect One other appointment has been underway since 2020. We hope to recommend three new directors for appointment at the 2021 AGM.

Induction and ongoing development of directors

Two governance sessions are scheduled annually when directors receive focused inputs from a regulatory, strategic and economic perspective. Throughout the year, our directors also receive information and opinions on changes within the regulatory framework. As no new directors were appointed in 2020, no inductions were scheduled.

Succession planning

Succession planning for non-executive directors is typically iterative and part of an ongoing programme of planning and discussion by the nomination committee. Succession planning is based on a broader diversity policy, which is before the board for imminent approval. The policy is couched in a holistic approach to diversity with the aim of inclusion and supporting the group’s strategic focus areas. The committee considers planned retirement ages of existing members and addresses identified skills gaps following rigorous board effectiveness evaluation. In accordance with succession planning needs, the process of filling nonexecutive director vacancies is underway.

Given the changing context, the nominations committee’s contribution to the process of a wide governance enhancement programme aims to align strategic changes in the group to board and board committee composition. Therefore, the committee’s terms of reference and mandate were revised.

2020 KPIs	Evaluation
Ensure appropriate director appointments as per BEE transaction	Achieved
Review metrics for annual bonus to ensure alignment with Exxaro’s strategy	Achieved
Consider effectiveness of current remuneration advisers and the need to change	Achieved
Review incentive plans to confirm desired impact	Achieved
Review board skills set and address representation and independence	Achieved
Ensure human resource policies as well as relationships with business and stakeholders are fair, consistent and sustainable	Achieved

PERFORMANCE

The committee is not required by law to complete annual performance evaluations. While King IV recommends regular performance evaluations of board subcommittees, it is governance practice at Exxaro to biannually evaluate committee performance and effectiveness. Exxaro’s board committees embarked on a significant transformation journey in 2020, as detailed in Adequate and effective control.

CONCLUSION

The remuneration and nomination committee, in carrying out its respective duties, duly regards the principles and recommended practices of King IV. The committees are satisfied that they have considered and discharged their responsibilities in accordance with their terms of reference.

Eden district
19 April 2021