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Governance and Remuneration:

Nomination
Committee Report

Dr Edwin Hertzog

Chairperson of the Nomination Committee

As Chairperson of the Nomination Committee, it is my pleasure to report on the Nomination Committee’s activities for the financial year ended 31 March 2019.

The report provides an overview of the key focus areas considered during the year, together with the priorities for the 2020 financial year. The Nomination Committee is governed by formal terms of reference, which it reviews annually. The terms of reference are available in the governance section of the Company’s website and summarised in the Corporate Governance Statement.

COMMITTEE COMPOSITION AND MEETING ATTENDANCE

The current composition of the Nomination Committee meets the requirements of the 2016 UK Corporate Governance Code, with the majority of members being independent non-executive Directors. The Chairman of the Board is the Chairperson of the Nomination Committee, but does not chair the meeting when it is dealing with the matter of succession to the chairmanship. Biographies of members are included in Board of Directors. Composition and meeting attendance during the period under review are set out in Table 1 below.

Attendees of the Nomination Committee meetings may, from time to time and upon invitation, include the CEO, the Group Chief Human Resources Officer and the Group General Manager: Talent Management.

TABLE 1: COMMITTEE COMPOSITION AND MEETING ATTENDANCE

Notes
1 The composition of the Nomination Committee is shown as at 31 March 2019. The Committee Chairperson, Dr Hertzog, is the Chairman of the Board.
2 The attendance reflects the number of scheduled meetings held during the financial year. One additional ad hoc meeting was held during the financial year to deal with urgent matters and was attended by all members. One ad hoc meeting was held between the Company’s financial year-end and the Last Practicable Date and was attended by all members.
3 Drs Harvey and Oswald were appointed to the Nomination Committee with effect from 25 July 2018.

KEY AREAS OF ACTIVITY

Succession planning

The Nomination Committee conducted a detailed review of the succession plans for the Board, the Group Executive Committee and members of the divisional executive committees, taking into account the Board Diversity Policy mentioned below, the outcome of the annual Board evaluation and a detailed skills matrix.

Board and committee composition

Following the announcement made by the Company on 20 February 2018 regarding Prof Robert Leu’s planned retirement, the Nomination Committee identified potential candidates through a rigorous selection process against an agreed set of criteria. During the financial year, the Board approved the Nomination Committee’s recommendations and appointed Dr Oswald as an independent non-executive Director.

The Board also approved the Nomination Committee’s recommendation to appoint Mr Danie Meintjes as a non-executive Director following his retirement as an executive Director of the Company. The Nomination Committee considered that Mr Meintjes’ continued involvement in the Group was in the best interests of the Company, its shareholders and other stakeholders in view of the wealth of knowledge and experience he has gained during his tenure of more than 30 years at Mediclinic.

As announced on 15 November 2018, Mr Desmond Smith will retire as a Director of the Company at the conclusion of the Company’s AGM scheduled for 24 July 2019 and will not seek re-election. Mr Smith will also step down from all Board committees at that time. Mr Alan Grieve, who has been a member of the Audit and Risk Committee since February 2016, will succeed Mr Smith both as SID and Chairperson of the Audit and Risk Committee, effective from the date of Mr Smith’s resignation. A search has also commenced for an independent non-executive Director with a strong financial background and recent and relevant financial experience to be appointed to the Board. MWM Consulting has been appointed to commence with an extensive selection process to shortlist suitably qualified candidates.

During the reporting period, the Nomination Committee conducted its annual review of the structure, size, diversity and composition of the Board and its committees. As part of this process, it considered a detailed skills matrix for the Board and the outcome of the Board evaluation. The areas reviewed included the Board members’ experience, independence, tenure, geographical knowledge, and knowledge of the Company as whole.

Diversity

During the year, the Nomination Committee reviewed the Board Diversity Policy, which applies to the Board and the Group Executive Committee (the direct reports to the executive Directors). It also received feedback from the divisions regarding progress against their diversity and inclusion goals and plans for continued improvement during the 2020 financial year.

Diversity Policy

The Board believes that diversity is not limited to gender and that a diverse Board membership will include and benefit from different skills; geographical, educational and professional backgrounds; industry experience; age; race; gender; social and ethnic backgrounds; cognitive and personal strengths; and other characteristics. These factors will be considered in determining the optimum composition of the Board and, when possible, be balanced appropriately. When recruiting new Directors, consideration will also be given to ensuring that the size of the Board does not grow unnecessarily and that all appointments are made on justifiable merit. In fulfilling its role in terms of diversity, the Nomination Committee will continue to consider relevant prescribed guidelines and the performance of peer companies.

The Board supports the principles of boardroom diversity in general and takes boardroom skills diversity seriously. It actively considers these matters regularly at Board and committee meetings. The Board believes that maintaining an appropriate balance of skills, knowledge, experience and backgrounds is imperative for the long-term success of the Group and allows the Board to perform its role effectively.

The Board Diversity Policy has four objectives to support the Board’s commitment to diversity. These objectives and progress against these are set out below in Table 2.

TABLE 2: PROGRESS AGAINST OBJECTIVES

Assessment of independence of non-executive directors

The Board annually reviews any potential conflicts of interest and identified conflicts are, if appropriate, authorised. The Nomination Committee and the Board are satisfied that the commitments of the Chairman and other non-executive Directors, as shown in their biographies, do not conflict with their duties and commitments as Directors of the Company. As noted earlier, the Nomination Committee reviewed the composition of the Board and its committees, including specifically the independence of the non-executive directors. While the Chairman, Mr Durand and Mr Meintjes are considered to be non-independent, the Board is satisfied that the seven independent non-executive Directors are free from any relationship that could affect their judgment and continue to demonstrate their independence by how they conduct themselves in Board meetings, including how they exercise judgment and independent thinking.

CORPORATE GOVERNANCE CODE DEVELOPMENTS

The Nomination Committee reviewed and considered the amendments contained in the 2018 Corporate Governance Code in preparation for its implementation in the 2020 financial year, insofar as these related to:

  • establishing the preferred method for gathering the views of the workforce;
  • considering length of service of Directors when reviewing the composition of the Board;
  • accompanying papers to the resolutions to elect or re-elect each Director at the annual general meeting, outlining specific reasons why their contribution is and continues to be important for the Company’s long-term success;
  • reporting on how the Company has engaged with its workforce, suppliers and other stakeholders and how the interests of stakeholders have influenced the Board’s decision-making pursuant to Section 172 of the UK Companies Act 2006;
  • the proposed changes to the independence criteria and tenure for Directors and for the Chairman of the Company;
  • using merit and objective criteria when considering appointments and succession plans;
  • the recommendation for the Chairman not to remain in the post beyond nine years from the date of the first appointment to the Board;
  • the continued emphasis on the promotion of diversity expanding beyond gender to include social and ethnic backgrounds and cognitive and personal strengths, through the design of appointment and succession planning practices; and
  • the expansion of the Nomination Committee’s remit to include the oversight of development of a diverse pipeline for succession planning for the Board and executive management and the resultant reporting obligations for the Nomination Committee.

In line with the provisions of the 2018 Corporate Governance Code, the Company has appointed Mr Meintjes, with effect from 1 April 2019, as the designated non-executive Director responsible for engaging with the Company’s workforce. The Board believes that Mr Meintjes is suitable for the role due to the wealth of knowledge and experience he has gained during his tenure of more than 30 years at Mediclinic.

Committee evaluation

The performance of the Nomination Committee was internally evaluated by its members by way of a self-evaluation questionnaire, the results of which were considered by the Nomination Committee and the Board. No significant issues requiring improvement were identified and the Nomination Committee and the Board concluded that it operated effectively during the year.

Evaluation of the composition, structure and functioning of the board

The composition, structure and functioning of the Board was evaluated internally during the year by way of a self-evaluation questionnaire. The questionnaire focused on Board composition and expertise; the Board’s role in setting strategy; its understanding of risks facing the Group; succession planning; and the effectiveness of Board committees.

The Board regards the evaluation process as an important way to monitor progress. Further details on the Board effectiveness evaluation is included in the Corporate Governance Statement.

When considering the election or re-election of Directors, the Nomination Committee considers the outcome of the Board evaluation process, as well as other factors such as the individual Director’s knowledge, skills and experience; the independent judgment they add to Board deliberations; and other commitments. In view of Mr Desmond Smith’s intention to retire after the AGM, the Nomination Committee launched a search for an independent non-executive director with a strong financial background and recent and relevant financial experience, to ensure the Board’s current level of expertise in that area is maintained.

In accordance with the 2016 Corporate Governance Code, all Directors of FTSE 350 companies should stand for re-election annually. Accordingly, Dr Oswald (who was appointed on 25 July 2018) will stand for election at the AGM and all other Directors (other than Mr Smith) will stand for re-election. Biographies of the Directors can be found in Board of Directors.

The terms and conditions of appointment of the non-executive Directors, which include their expected time commitment, are available for inspection at the Company’s registered office and at the AGM.

Priorities for the committee for the 2020 financial year

For the coming financial year, the Nomination Committee will, among other matters, focus on:

  • the continued development of succession plans and the talent pipeline;
  • the continuous review of the composition of the Board and its committees in respect of skills, diversity, tenure and commitments;
  • the development of the Company’s diversity strategy; and
  • monitoring and implementing, where appropriate, the 2018 Corporate Governance Code requirements.

Signed on behalf of the Nomination Committee.

Dr Edwin Hertzog

Chairperson of the Nomination Committee

22 May 2019

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