Governance structure

King IV Principle

Application

Governance outcome: Ethical culture

PRINCIPLE 1: Ethical leadership
The governing body should lead ethically and effectively.

The board has approved a Code of Conduct for Newpark and ensures that its own and management’s conduct set the example for how the company’s values are conducted.
Measures are in place to ensure that all board members have sufficient working knowledge of the organisation, its industry, its operating context and all key laws, rules, codes and standards.

PRINCIPLE 2: Organisation values, ethics and culture
The governing body should govern the ethics of the organisation in a way that supports the establishment of an ethical culture.

The board ensures compliance with the Code of Conduct is integrated into the strategy and operations of Newpark. The group’s ethics are contained in its vision; strategies and operations; its decisions and conduct; and the way it treats its internal and external stakeholders.
This Code of Conduct is supported by a Code of Ethics approved during FY 2016. The code provides guidance on ethical conduct in all areas and across all activities of the business.

PRINCIPLE 3: Responsible corporate citizenship
The governing body should ensure that the organisation is and is seen to be a responsible corporate citizen.

The board takes responsibility for and oversees how Newpark promotes opportunities for under-privileged social groupings. A social and ethics committee was constituted during the F2016 in terms of South Africa’s Companies Act requirements.

Governance outcome: Performance and value creation

PRINCIPLE 4: Strategy, implementation and performance
The governing body should appreciate that the organisation’s core purpose, its risks and opportunities, strategy, business model, performance and sustainable development are all inseparable elements of the value creation process.

The board challenges and signs off on management’s proposed strategies in terms of the group’s purpose, business value drivers and the legitimate interests of our stakeholders. Management has processes in place to define and align the group’s short-, medium- and long-term macroeconomic, financial, operational and strategic objectives with its risk appetite.
The board considers sustainability to be a business opportunity and recognises that all our capital resources are interconnected – as one capital resource is increased or created, another is depleted. The board and management endeavour to balance the use of capital resources to support future sustainability.
Policies and operational plans approved by the board include financial, ethical, compliance, sustainability, performance and risk measures.

PRINCIPLE 5: Reports and disclosure
The governing body should ensure that reports issued by the organisation enable stakeholders to make informed assessments of the organisation’s performance, and its short-, medium- and long-term prospects.

Newpark’s integrated report shares the collective thinking applied to material issues impacting on the group’s ability to create long-term value. The report aims to provide a balanced and succinct view of Newpark’s financial and non-financial performance in accordance with the IIRC framework. It provides information on Newpark’s strategies for growth, efficiency, quality, sustainability, corporate governance and accountability.
Our preparation of this report was guided by the principle of materiality. A matter is considered material if it can substantively affect the group’s ability to create and sustain value over the short, medium or long term. After determining material matters, we assess these against the need to provide Newpark’s actual and potential providers of capital with a concise 360˚ view of the business.

Governance outcome: Adequate and effective control

PRINCIPLE 6: Role of the governing body
The governing body should serve as the focal point and custodian of corporate governance in the organisation.

The board’s role, responsibilities, membership requirements and procedural conduct are documented in a board charter that is reviewed from time to time.

The board has approved a protocol that allows all directors to access any company information they might require.

PRINCIPLE 7: Composition of the governing body
The governing body should comprise the appropriate balance of knowledge, skills, experience, diversity and independence for it to discharge its governance role and responsibilities objectively and effectively.

When determining the number of directors needed, the board considers factors such as the appropriate mix of business, commercial and industry experience and skills. We also decide on the optimum combination of executive, non-executive and independent non-executive members.

Prospective members of the board are independently and thoroughly assessed in line with JSE guidelines. The Newpark board considers this present mix of two executive directors, three non-executive directors and four independent non-executive directors as optimal and compliant with JSE requirements.

PRINCIPLE 8: Committees of the governing body
The governing body should ensure that its arrangements for delegation within its own structures promote independent judgement and assist with balance of power and the effective discharge of its duties.

The board has established a stable and balanced distribution of skills, experience and role allocation through all its committees in terms of paragraph 3.84(b) of the JSE listing requirement. A set policy stipulates a clear balance of power and authority at board level, to ensure that no one director has unfettered powers of decision-making.

The board of directors performs the function and responsibility of the nominations committee. A social and ethics committee was constituted during the 2016 financial year in terms of the Companies Act.

PRINCIPLE 9: Performance evaluations
The governing body should ensure that the evaluation of its own performance and that of its committees, its chair and its individual members, support continued improvement in its performance and effectiveness.

The board determines its own role, functions, duties and performance criteria as well as that for directors and board committees. An annual effectiveness self-evaluation is undertaken in respect of the board and its sub-committees and for the year under review, the board satisfied itself that it and its sub-committees operated effectively.  In addition, the Chairman also ensures the board operates effectively by regularly engaging with the non-executive directors on their performance and other matters that may need to be raised with Exco. Any pertinent matters of concern are conveyed by the Chairman to the Chief Executive Officer and filtered down to Exco.

PRINCIPLE 10: Delegation to management
The governing body should ensure that the appointment of, and delegation to, management contribute to role clarity and the effective exercise of authority and responsibilities.

The Chief Executive Officer (CEO), Mr Simon Fifield, was appointed by the board on 7 January 2016 and is responsible for executing strategy and the day-to-day business of the company. The CEO is not a member of the remuneration committee or the audit and risk committee. Newpark utilises an approved Delegation of Authority (DoA) framework to assist in maintaining proper delegation of authority. The framework indicates matters reserved for the board and those delegated to management.  The board is satisfied that its delegation to management contributes to an effective arrangement by which authority and responsibilities are exercised.

Newpark complies with the provisions of the Companies Act in relation to the appointment and removal of the Company Secretary. The role and function of the Company Secretary is formalised.

Governance outcome: Adequate and effective control continued

PRINCIPLE 11: Risk and opportunity governance
The governing body should govern risk in a way that supports the organisation in setting and achieving strategic objectives.

The board is ultimately responsible for setting the risk appetite of the group, identifying strategic risks and opportunities and managing these. This responsibility for risk governance is expressed in the board charter and risk policy and plan. The board ensures that appropriate risk management programmes are in place and monitors their implementation against key risk indicators. The board has approved and oversees policy that articulates and gives effect to its set direction on risk. Each group operation maintains a risk register listing risks identified in risk workshops and strategic workshops are conducted regularly to evaluate risks.

Each year the board evaluates the company’s risks against current realities and resets risk tolerances as necessary.
The board has delegated the management of risk to the group’s management team, which executes this responsibility through processes within an established risk management policy and governance framework.

PRINCIPLE 12: Technology and information governance
The governing body should govern technology and information in a way that supports the organisation setting and achieving its strategic objectives.

The board is responsible for IT governance. The CEO directs, controls and measures the IT activities and processes of the group. Internal IT controls are assessed by the audit committee on behalf of the board.

PRINCIPLE 13: Compliance governance
The governing body should govern compliance with applicable laws and adopted, non-binding rules, codes and standards in a way that supports the organisation being ethical and a good corporate citizen.

The board ensures compliance with all relevant South African legislation. It also ensures compliance with the JSE Listings Requirements and King IV. The group also recognises and utilises the IIRC’s framework and the Global Reporting Initiative (GRI) guidelines for establishing and reporting on non-financial capitals and sustainability.

PRINCIPLE 14: Remuneration governance
The governing body should ensure that the organisation remunerates fairly, responsibly and transparently so as to promote the achievement of strategic objectives and positive outcomes in the short-, medium- and long-term.

The group’s remuneration philosophy seeks to reward executive directors and other senior management for individual and group performance. It recognises that these individuals can significantly impact the group’s performance over the short-, medium- and long-term. The group’s remuneration policy provides a framework for remuneration to attract, retain and motivate employees to achieve the strategic objectives of the organisation, within its risk appetite and risk management framework. The remuneration committee (Remco) assists the board in approaching and administering remuneration. Remco comprises only non-executive directors, which monitors and strengthens the credibility of the group’s executive remuneration system.

PRINCIPLE 15: Assurance
The governing body should ensure that assurance services and functions enable an effective control environment, and that these support the integrity of information for internal decision-making and of the organisation’s external reports.

The board has approved a charter that mandates the audit and risk committee to oversee internal controls established not only for financial matters, but also for operational, compliance and sustainability issues.

Chapter

Principle

Principle Description

Applied / Partially Applied / Not Applied

How the principle is applied

Chapter 1

Principle 1.1

The Board provides effective leadership base on ethical foundation

Applied

Chapter 1

Principle 1.2

The Board ensures that the company is and is seen to be a responsible corporate citizen

Applied

A formally appointed social and ethics committee of the board has been constituted to assist the board with social and ethics related matters.

Chapter 1

Principle 1.3

The Board ensures that the company ethics are managed effectively

Applied

The social and ethics committee will monitor the company's ethics and endeavour to ensure that such ethics pervade the culture of the company.

Chapter 2

Principle 2.1

The board acts as the focal point for and custodian of corporate governance

Applied

Newpark's board considers sound corporate governance practises to be a critical element in delivering sustainable growth. The board recognises that it is the ultimate custodian of corporate governance.

Chapter 2

Principle 2.2

The Boards appreciates that the strategy, risk, performance and sustainability are inseparable

Applied

Chapter 2

Principle 2.3

The Board provides for effective leadership based on ethical foundation

Applied

Please refer to principle 1.1 above.

SAME AS PRINCIPLE 1.1 - CHAPTER 1

Chapter 2

Principle 2.4

The Board ensures that the company is and is seen as a responsible corporate citizen

Applied

Please refer to principle 1.2 above.

SAME AS PRINCIPLE 1.2 - CHAPTER 1

Chapter 2

Principle 2.5

The Boards Ensures that the company's ethics are managed effectively

Applied

Please refer to principle 1.3 above.

SAME AS PRINCIPLE 1.3 - CHAPTER 1

Chapter 2

Principle 2.6

The Board ensures that the company has an effective and independent audit committee

Applied

SAME AS PRINCIPLE 3.1 - CHAPTER 3

Chapter 2

Principle 2.7

The Board is responsible for the governance of risk

Applied

The board oversees the management of risk and has delegated the process to the audit and risk committee. The committee monitors the adequacy and effectiveness of the company's internal and risk management process generally.

SAME AS PRINCIPLE 4.1 - CHAPTER 4

Chapter 2

Principle 2.8

The Boards is responsible for information technology (IT) governance

Applied

The board is responsible for IT governance. The financial director oversees the information technology function, attend the executive committee meetings and reports to the CEO.

SAME AS PRINCIPLE 5.1 - CHAPTER 5

Chapter 2

Principle 2.9

The Board ensures that the company complies with applicable laws and considers adherence to non-binding rules, codes and standards.

Applied

Nothing has come to the attention of the Board that the group has not complied with applicable laws. The group strives to maintain abreast of all applicable laws via regular communication with its advisors. The board has adopted a legal compliance policy.

SAME AS PRINCIPLE 6.1 - CHAPTER 6

Chapter 2

Principle 2.10

The Board ensures that there is an effective risk-based internal audit

Not applied

SAME AS PRINCIPLE 7.1 - CHAPTER 7

Chapter 2

Principle 2.11

The Board appreciates that stakeholders' perceptions affect the company's reputation

Applied

The board of directors believes that stakeholders perceptions are of critical importance and to this end the board regularly communicates with a cross section of stakeholders in order to gauge perception.

SAME AS PRINCIPLE 8.1 - CHAPTER 8

Chapter 2

Principle 2.12

The Board ensures the integrity of the company's integrated report

Applied

SAME AS PRINCIPLE 9.1 - CHAPTER 9

Chapter 2

Principle 2.13

The Board reports on the effectiveness of the company's internal controls

Applied

The board is responsible for the effectiveness of internal controls.

SAME AS PRINCIPLES OF CHAPTER 7 & 9

Chapter 2

Principle 2.14

The Board and its directors act in the best interests of the company

Applied

Chapter 2

Principle 2.15

The Board will/has consider/ed business rescue proceedings or other turnaround mechanisms as soon as the company has been/may be financially distressed as defined in the Company's Act, 71 of 2008

Applied

The board has noted this responsibility and will deal with it in accordance with the provisions of the Companies Act 2008, as amended ("Companies Act"), King III and advice received from advisors should the need arise.

Chapter 2

Principle 2.16

The Board has elected a chairman of the board who is an independent non executive director. The CEO of the company does not also fulfil the role of chairman of the Board.

Applied

The chairman of the board is an independent non-executive director and his role is separate from that of the CEO.

Chapter 2

Principle 2.17

The Board has appointed the Chief Executive Officer and has established a framework for the delegation of authority

Applied

The board has appointed a CEO and established a framework for the delegation of authority.

Chapter 2

Principle 2.18

The Board comprises a balance of power, with a majority of non executive directors. The majority of non executive directors are independent.

Partially applied

The approvals framework ensures that there is a clear balance of power between the various board members. The board comprises 2 executive and six non-executive directors, three of whom are independent.

Chapter 2

Principle 2.19

Directors are appointed through a formal process

Applied

Chapter 2

Principle 2.20

The induction of and ongoing training, as well as the development of directors are conducted through a formal process

Applied

Training is arranged for the Board as required.

Chapter 2

Principle 2.21

The Board is assisted by a competent, suitably qualified and experienced company secretary.

Applied

Chapter 2

Principle 2.22

The evaluation of the Board, its committees and individual directors is performed every year.

Applied

The evaluation of the board, its committees and individual directors is performed annually.

Chapter 2

Principle 2.23

The Board delegates certain functions to well-structured committees without abdicating from its own responsibilities.

Applied

The board has delegated certain specific responsibilities to the remuneration committee, the audit and risk committee, the investment committee and the social and ethics committee without abdicating its own responsibilities.

Chapter 2

Principle 2.24

A governance framework has been agreed upon between the group and its subsidiary Boards

Applied

The holding company and its subsidiary operate as a single corporate group and the subsidiary is required to entrench the holding company governance framework within their day-to-day activities.

Chapter 2

Principle 2.25

The company remunerates its directors and executives fairly.

Applied

The remuneration committee approves the remuneration policy annually and ensures that the group remunerates its directors and executives fairly.

Chapter 2

Principle 2.26

The company has disclosed the remuneration of each individual director and prescribed officer.

Applied

The directors' remuneration will be disclosed for each individual director in its integrated annual report.

Chapter 2

Principle 2.27

The shareholders have approved the company's remuneration policy.

Not applied

Chapter 3

Principle 3.1

The Board has ensured that the company has an effective and independent audit committee

Applied

Chapter 3

Principle 3.2

Audit committee members are suitably skilled and experienced independent non-executive directors

Applied

The audit committee members are suitably skilled and experienced directors. The audit committee consists of 3 independent non-executive directors.

Chapter 3

Principle 3.3

The audit committee is chaired by an independent non-executive director.

Applied

The audit committee is chaired by Gary David Harlow who is an independent non-executive director.

Chapter 3

Principle 3.4

The audit committee oversees integrated reporting

Applied

The audit committee is responsible for ensuring the integrity of the integrated report and recommending it to the board for approval.

Chapter 3

Principle 3.5

The audit committee has ensured that a combined assurance model has been applied which provides a coordinated approach to all assurance activities.

Applied

The audit and risk committee obtains combined assurance from the external auditors, Grant Thornton and management and ensures that the combined assurance received is appropriate to address all significant risks facing Newpark.

Chapter 3

Principle 3.6

The audit committee is satisfied with the expertise, resources and experience of the company's finance function.

Applied

The audit committee evaluates and reports on the finance function's expertise, resources and experience annually.

Chapter 3

Principle 3.7

The audit committee should be responsible for overseeing internal audit

Not applied

The audit committee continuously monitors the appropriateness of retaining independent internal auditors to periodically review activities of the group and service providers.

Chapter 3

Principle 3.8

The audit committee is an integral component of the risk management process.

Applied

As Newpark has a combined audit and risk committee, the risk management process is an integral component of the committee's duties.

Chapter 3

Principle 3.9

The audit committee is responsible for the recommending the appointment of the external auditor and overseeing the external audit process.

Applied

The audit committee oversees the external audit process and satisfies itself as to the suitability of the external auditors for re-appointment. The audit committee recommends the re-appointment of the auditors to shareholders.

Chapter 3

Principle 3.10

The audit committee has reported to the board and the shareholders as to how it has discharged its duties.

Applied

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Chapter 4

Principle 4.1

The Board is responsible for the governance of risk.

Applied

The board retains ultimate responsibility for the governance of risk. The oversight of the risk management process has been delegated to the audit and risk committee which provides feedback to the board on matters within its mandate.

Chapter 4

Principle 4.2

The Board has determined the levels of risk tolerance

Applied

The board regularly reviews Newpark's risk profile so as to ensure that risks are being managed within a tolerable level and steps are taken when necessary to address and mitigate risks.

Chapter 4

Principle 4.3

The risk committee and/or audit committee has assisted the Board in carrying out its risk responsibilities.

Applied

The board has delegated the oversight of the risk management process, including the levels of tolerance, to the audit and risk committee. The risk committee reports to the board on matters within its mandate.

Chapter 4

Principle 4.4

The Board has delegated to management the responsibility to design, implement and monitor the risk management plan.

Applied

The board has delegated the responsibility to design, implement and monitor the risk management plan to management. Management has compiled a risk management plan and a risk matrix which has been presented to and approved by the audit and risk committee.

Chapter 4

Principle 4.5

The Board has ensured that risk assessments are performed on a continual basis.

Applied

The board has delegated the oversight of the risk management process, including monitoring of continual risk assessments, to the risk committee. The risk committee reports to the board on matters within its mandate.

Chapter 4

Principle 4.6

The Board has ensured that frameworks and methodologies are implemented to increase the probability of anticipating unpredictable risks.

Applied

The risk committee is responsible for ensuring that  frameworks and methodologies are implemented to anticipate unpredictable risks as set out in the risk committee charter.

Chapter 4

Principle 4.7

The Board has ensured that management has considered and has implemented appropriate risk responses.

Applied

Management has compiled a risk management plan and a risk matrix setting out the risks and appropriate risk responses which has been presented to and approved by the risk committee.

Chapter 4

Principle 4.8

The Board has ensured the continual risk monitoring by management.

Applied

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Chapter 4

Principle 4.9

The Board has received assurance regarding the effectiveness of the risk management process.

Applied

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Chapter 4

Principle 4.10

The Board has ensured that there are processes in place which enable complete, timely, relevant, accurate and accessible risk disclosure to stakeholders.

Applied

The integrated report contains a section disclosing the key risks and risk management.

Chapter 5

Principle 5.1

The Board is responsible of information technology (IT) governance.

Applied

The board is responsible for IT governance. The financial director oversees the information technology function, attend the executive committee meetings and reports to the CEO.

Chapter 5

Principle 5.2

IT has been aligned with the performance and sustainability objectives of the company.

Applied

The board discusses IT governance at board meetings and ensures the integration of IT into the performance and sustainability objectives of the company.

Chapter 5

Principle 5.3

The Board has delegated to management the responsibility for the implementation of an IT governance framework.

Applied

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Chapter 5

Principle 5.4

The Board monitors and evaluates significant IT investments and expenditure.

Applied

Significant IT expenditure and investments are presented to the board.

Chapter 5

Principle 5.5

IT is an integral part of the company's risk management plan.

Applied

The audit risk committee assists the board in carrying out its IT responsibilities by ensuring that IT risks are considered and dealt within the risk matrix.

Chapter 5

Principle 5.6

The Board ensured that information assets are managed effectively.

Applied

The board gives IT and its information assets the necessary importance with regards to the performance and sustainability objectives of the company and in furtherance hereof it ensures that its information assets are managed effectively.

Chapter 5

Principle 5.7

A risk committee and audit committee assists the board in carrying out its IT responsibilities.

Applied

The and it and risk committee assists the board in carrying out its IT responsibilities by ensuring that IT risks are considered and dealt with in the risk matrix.

Chapter 6

Principle 6.1

The Board ensures that the company complies with applicable laws and considers adherence to non binding rules, codes and standards.

Applied

Nothing has come to the attention of the Board that the group has not complied with applicable laws. The group strives to maintain abreast of all applicable laws via regular communication with its advisors. The board has adopted a legal compliance policy.

Chapter 6

Principle 6.2

The Board and each individual director have a working understanding of the effect of applicable laws, rules, codes and standards on the company and its business.

Applied

The company's legal advisors, designated advisor and company secretary advise the company of any changes to the laws and regulations applicable to the company. Training is arranged for the board as required.

Chapter 6

Principle 6.3

Compliance risk should form an integral part of the company's risk management process.

Applied

Management has compiled a risk management plan and a risk matrix, which includes compliance risk, which has been presented to and approved by the audit and risk committee.

Chapter 6

Principle 6.4

The Board should delegate to management the implementation of an effective compliance framework and processes.

Applied

The board has delegated to executive management the implementation of an effective compliance framework and processes.

Chapter 7

Principle 7.1

The Board should ensure that there is an effective risk based internal audit.

Not applied

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Chapter 7

Principle 7.2

Internal Audit should follow a risk based approach to its plan.

Not applied

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Chapter 7

Principle 7.3

Internal Audit should provide a written assessment of the effectiveness of the company's system of internal controls and risk management.

Not applied

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Chapter 7

Principle 7.4

The audit committee should be responsible for overseeing internal audit

Not applied

The audit committee continuously monitors the appropriateness of retaining independent internal auditors to periodically review activities of the group and service providers.

SAME AS PRINCIPLE 3.7

Chapter 7

Principle 7.5

Internal audit should be strategically positioned to achieve its objectives.

Not applied

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Chapter 8

Principle 8.1

The Board should appreciate that stakeholders' perceptions affect a company's reputation.

Applied

The board of directors believes that stakeholders perceptions are of critical importance and to this end the board regularly communicates with a cross section of stakeholders in order to gauge perception.

Chapter 8

Principle 8.2

The Board should delegate to management to proactively deal with stakeholder relationships.

Applied

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Chapter 8

Principle 8.3

The Board should strive to achieve the appropriate balance between its various stakeholder groupings, in the best interests of the company.

Applied

Newpark strives to maintain a balance between the various stakeholders while acting in the best interests of the company.

Chapter 8

Principle 8.4

Companies should ensure the equitable treatment of shareholders.

Applied

The company provides timely and equitable disclosure of information to the market and all shareholders are treated equally in this regard. Information is posted on the company's website.

Chapter 8

Principle 8.5

Transparent and effective communication with stakeholders is essential for building and maintaining their trust and confidence.

Applied

The company provides timely and equitable disclosure of information to the market and all unitholders are treated equally in this regard. Information is posted on the company's website.

Chapter 8

Principle 8.6

The Board should ensure that disputes are resolved effectively and expeditiously as possible.

Applied

The board ensures that all disputes are resolved effectively and expeditiously.

Chapter 9

Principle 9.1

The Board should ensure the integrity of the company's integrated report.

Applied

The audit and risk committee are responsible for ensuring the integrity of the integrated report and recommending it to the board for approval.

Chapter 9

Principle 9.2

Sustainability reporting and disclosure should be integrated with the company's financial reporting.

Applied

The audit and risk committee ensures that sustainability reporting and the financial reporting are consistent and integrated.

Chapter 9

Principle 9.3

Sustainability reporting and disclosure should be independently assured.

Not applied

The audit and risk committee will consider the appropriateness of obtaining independent assurance on the sustainability reporting based on the benefit to stakeholders and the costs of obtaining it.