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Corporate governance

APPLYING INTERNATIONAL
BEST PRACTICE

AngloGold Ashanti believes that adherence to best practice in corporate governance is the bedrock of a sustainable business and underpins the creation of long-term value for its shareholders. During the year under review, the company demonstrated this belief by applying best practice in corporate governance in managing the affairs of the group. A number of activities were undertaken to embed existing governance practices and to introduce new practices.

Key corporate governance activities during 2011

  • Implementation of programmes to strengthen the safety culture
  • Significant progress made in the application of the recommendations of King III
  • Full implementation of the requirements of the South African Companies Act No. 71 of 2008, which became effective on 1 May 2011, will be completed by the end of the two-year transitional period
  • Educating and promoting awareness among employees and other stakeholders on standards of ethical behaviour
  • Continued implementation of business improvement initiatives under Project ONE
  • Improvements to and embedding of risk management initiatives
  • Continuous improvement in the internal control environment – implementation of a combined assurance model
  • Progress made in information technology management – embarked on an enterprise resource planning project
  • Executive management further strengthened with three new appointments to the Executive Committee

Corporate governance structure at 31 December 2011

Corporate governance structure at 31 December 2011 [graph]

The governance of the company is guided by internal policies and external laws, rules, regulations and best practice guidelines as detailed in the corporate governance structure above. Internal policies and external legislation, regulations, codes and guidelines are detailed on the corporate website at www.anglogoldashanti.com/sustainability, under Corporate Governance and Policies.

Internal policies: Group level internal policies are listed on the corporate governance structure shown above; key among these is the Code of Business Principles and Ethics which incorporates a summary of key group policies and guidelines that have a bearing on the company’s ethics and values.

External legislation, regulations, codes and guidelines:

These include:

  • the South African Companies Act No. 71 of 2008 (the Companies Act), as amended;
  • the US Sarbanes-Oxley Act of 2002 (SOX) and the Securities Act of 1933 and the Securities Exchange Act of 1934;
  • the listings requirements of the JSE Limited and other stock exchanges on which the company’s stock is listed; and
  • applicable legislation and regulations in jurisdictions in which the company has operations.

In addition there are various corporate governance guidelines and best practice recommendations, key among which are those provided by the King Code on Corporate Governance (King III), the OECD Principles of Corporate Governance, the United Nations Global Compact and the Global Reporting Initiative guidelines.

Application of King III principles

Given that AngloGold Ashanti’s primary listing is on the JSE Limited , adherence to the JSE Limited Listings Requirements takes precedence. The JSE Limited requires, among other things, adherence to King III. Following its promulgation on 1 March 2010, AngloGold Ashanti conducted a gap analysis to determine the extent to which it needed to comply with new principles included in King III. At the end of 2010, the company provided a report on the application of King III as part of the review by the chairman of the Audit and Corporate Governance Committee. The review detailed the outstanding areas to be complied with and the board promised full compliance by the end of 2011.

Accordingly, as at 31 December 2011, AngloGold Ashanti had identified areas where further refinement was necessary in order to fully comply with requirements of King III. For further details, refer to the Chairman’s Letter – Audit and Corporate Governance Committee.

Compliance with the Companies Act No. 71 of 2008

Following its promulgation on 1 May 2011, management developed a framework to guide the company in its compliance with the new provisions of the Companies Act. Compliance with key provisions requiring substantial amendment to processes and procedures is expected to be completed before or by the end of the two-year transitional period ending on 1 May 2013.

Board and committee meeting attendance – 2011

During 2011, the board held eight meetings. In addition two sub-committee meetings were held to approve the company’s 2010 suite of annual reports and 2010 annual report on Form 20-F prepared in accordance with US GAAP.

Attendance at meetings by directors
Director Board Audcom Remcom R&II Nomcom SHSD THRC INVCOM FACOM
TT Mboweni 8/8 4/4 4/4 3/3 4/4 1/1
Dr TJ Motlatsi+ 2/2 1/1 1/1 1/1 1/1
FB Arisman §8/8 6/6 4/4 4/4 4/4 4/4 4/4 1/1
M Cutifani §8/8 4/4 4/4 4/4 4/4
R Gasant §8/8 6/6 4/4 4/4 1/1
NP January-Bardill* 2/2 1/1 1/1
WA Nairn §7/8 2/3 4/4 3/4 4/4 4/4 4/4
Prof LW Nkuhlu §8/8 6/6 4/4 4/4 4/4 4/4 1/1
F Ohene-Kena 6/8 4/4 4/4 4/4
SM Pityana 7/8 4/4 4/4 4/4 4/4 4/4 4/4 R
S Venkatakrishnan §8/8 4/4 4/4
  1. + Retired 17 February 2011
  2. *Appointed to the board on 1 October 2011 and Audcom on 2 November 2011
  3. R Recused
  4. § Attended two sub-committee meetings.
Key
Audcom: Audit and Corporate Governance Committee
Remcom: Remuneration Committee
R&II: Risk and Information Integrity Committee
Nomcom: Nominations Committee
SHSD: Safety, Health and Sustainable Development Committee
THRC: Transformation and Human Resources Development Committee
INVCOM: Investment Committee
FACOM: Financial Analysis Committee

Strategic leadership

The strategic leadership of AngloGold Ashanti is the responsibility of a unitary board, comprising two executive directors and eight independent non-executive directors as at 31 December 2011. Post year-end, another independent non-executive director, Mr RJ Ruston, was appointed. The board has delegated some of its responsibilities to its subcommittees but reserves certain areas of responsibility solely for itself.

The background and qualifications of each director are set out under Integrated Report 2011Board and executive management.

Appointment of directors

The board is authorised by the company’s Memorandum of Incorporation to appoint new directors based on recommendations by the Nominations Committee. Newly appointed directors are required to retire at the next annual general meeting following their appointment and stand for election by shareholders. Eligibility for appointment as a director is guided by the Director’s Fit and Proper Standards Policy, requirements of the Companies Act, King III and best practice.

Non-executive directors receive fees for their services as directors which are approved by shareholders at annual general meetings. Non-executive directors do not participate in the company’s share incentive scheme.

Executive directors have contracts of employment with the company. Details of directors’ remuneration are included in the Remuneration Report.

Executive Committee

Day-to-day management of the group’s affairs is vested in the Executive Committee, which is chaired by the Chief Executive Officer and comprises 12 members, four of whom head the regional operations. The committee’s work is supported by country and regional management teams. During the year under review, three new members, Mike O’Hare, Ria Sanz and Italia Boninelli, were appointed to the committee.

The committee met monthly to discuss operational matters and review the programmes and activities being implemented to advance the achievement of the set of strategic goals on safety, asset portfolio-, financial-, people- and environmental management as well as stakeholder engagement. Progress in terms of these strategic targets is detailed in the Integrated Report 2011Chief Executive Officer’s Review.

Prescribed officers

In terms of Section 66(10), read together with regulation 38 of the Companies Act, AngloGold Ashanti has determined that all members of the Executive Committee are prescribed officers.

The resumés of the prescribed officers are disclosed under Integrated Report 2011Board and executive management. The remuneration of prescribed officers is reported on an individual basis in the Remuneration report. In addition the remuneration of the three highest paid employees, other than executive directors, is also individually disclosed as is required by King III.

Board activities in 2011

Outside of meeting on a collective basis, individual board members, especially the chairman of the board, the chairman of the Audit and Corporate Governance Committee and the chairmen of the other board committees, actively and continuously engage with management and other stakeholders on important matters, thereby enabling the board to provide the required strategic leadership.

The following are some key actions and programmes undertaken and implemented by the board in 2011 in fulfilling its functions and responsibilities regarding strategic oversight:

  • discussed and approved management’s budget proposals for the 2012 financial year;
  • evaluated and approved management’s five-year strategic proposals;
  • examined ways of improving long-term value to shareholders;
  • discussed and approved, capital expenditure proposals submitted by management on a quarterly basis;
  • reviewed and approved an enterprise resource planning (ERP) project for the group;
  • approved the Group Information Technology Strategic Plan;
  • visited various mines and exploration sites to observe and acquire a better understanding of the operations;
  • assessed the skills set of the board which resulted in the appointment of two new independent non-executive directors;
  • reviewed composition of and restructured committees to enhance skills set and improve effectiveness of discussions;
  • reviewed the independence of each non-executive director in accordance with policy and best practice guidelines;
  • approved a formal role description for the chairman of the board;
  • approved an Alternative Dispute Resolution Policy in accordance with recommendations of King III; and
  • considered the necessary information to provide an assessment of internal controls.

Board evaluation

The Institute of Directors has been contracted to conduct an independent evaluation of the effectiveness of the board and the chairman. The evaluation process for 2011 has commenced and the findings will be reported to the board during 2012.

Board committees

The board has established and delegated specific roles and responsibilities to ten standing committees, including the Executive Committee, to assist it in discharging its duties and responsibilities. The terms of reference of each committee are approved by the board and reviewed annually or as necessary.

All committees, except the Executive Committee, are chaired by independent non-executive directors and the following committees comprise non-executive directors only – Audit and Corporate Governance, Nominations, Remuneration and Financial Analysis.

All committees meet quarterly in accordance with their terms of reference, except the Party Political Donations, Nominations and Financial Analysis committees which meet on a need-to basis. Members of the Executive Committee and other management attend meetings of the various committees as and when required. During 2011, all committees held at least the minimum number of meetings as required and discharged their duties as prescribed by the respective terms of reference.

The Party Political Donations Committee did not meet during 2011.

The current composition of each committee and the number and attendance at meetings are disclosed above.

Audit and Corporate Governance Committee

In accordance with best practice recommendations of King III and the Sarbanes-Oxley Act of the United States, membership of this committee comprises four independent non-executive directors. Several members of the executive team and management, including the Chief Executive Officer, the Chief Financial Officer, Chief Accounting Officer, General Counsel, Vice President Treasury, the Vice President: Group Internal Audit, Financial Controllers at the regional operations as well as the external auditors attended the committee’s quarterly meetings. Members of the committee regularly engage with key members of the financial management team for discussion on matters relevant to the committee’s role.

Pursuant to the Companies Act, King III and best practice, the committee, amongst others:

  • reviewed and approved the external auditors’ fees and the integrated audit plan for the 2011 financial year;
  • reviewed the performance of the external auditors and recommended their reappointment;
  • considered, and pre-approved, on a quarterly basis, non-audit services provided by all external auditors to the group;
  • reviewed the independence of the external audit team and audit partner and concluded that they were independent for the 2011 audit year;
  • reviewed the 2010 annual reports and 2011 quarterly reports on behalf of the board;
  • received and reviewed, on a quarterly basis, the use of the company’s whistle-blowing facility and advised on ways to enhance its use;
  • reviewed, on a quarterly basis, submissions by management on the state of the group’s financial affairs, internal control environment and auditing and reporting thereof to the board;
  • monitored implementation of recommendations on audit findings;
  • monitored the activities of the group’s internal audit function and also ensured that it was sufficiently resourced to discharge its duties;
  • reviewed and approved a combined assurance framework and an integrated audit process;
  • monitored, on behalf of the board, application of the principles of King III and compliance with the requirements of the Companies Act;
  • received a briefing from a legal firm on the requirements of the Companies Act so as to enable it to effectively advise on and monitor implementation of the Act by management;
  • monitored developments in IFRS and US GAAP accounting standards through regular updates from management and a formal training session, with the main objective of ensuring that the company’s accounting practices complied with relevant standards;
  • received quarterly briefings and updates on the roll-out of the Code of Business Principles and Ethics and matters relating to compliance;
  • received and reviewed on a quarterly basis, reports on major litigations and disputed cases so as to assess their likely outcome and their potential financial and other impact on the group; and
  • assisted and advised management to develop a legal and regulatory framework to monitor compliance with relevant laws and regulations.

Risk and Information Integrity Committee

This committee which was established in August 2010, held its first meeting in November 2010 and became fully operational during 2011. The committee was established to not only comply with the recommendations of King III but also to improve the management of risk and information technology which are important tools for the achievement of business objectives. A detailed report on risk management is provided.

Below are the salient matters deliberated on by the committee during 2011.

Risk management: The board has ultimate responsibility for the group’s risk management and exercised its oversight responsibilities through the Risk and Information Integrity (R&II) Committee. Major risk management oversight responsibilities that took place during 2011 included the following:

  • the committee guided management in the implementation of its 2011 risk management plan. At its meeting held in November 2011, achievements under the plan were assessed against set objectives and a significant improvement in risk management was noted; and
  • the Risk Management Plan for 2012, developed in line with the recommendations of King III on risk management and the terms of reference of the committee and which set out the activities of the risk management team for 2012, was reviewed and approved.

Information technology: Information technology is core to AngloGold Ashanti’s strategic business planning and execution. Information Technology matters have therefore become a strategic focus for the board as a business imperative as well as an application of best practice recommendations by King III.

A major development in Information Technology Management in 2011 was the approval of an enterprise resource planning project. The main objective of the project is to remove the unacceptable high level risk from obsolete information systems, improve the group’s decision-making capability through a uniform information system throughout the organisation and support ongoing organisational improvement initiatives. It will create a new information systems environment that is world class to support the vision of AngloGold Ashanti to be the leading mining company. Other major information technology improvement activities that took place in 2011 included the following:

  • a Chief Information Officer was employed in August 2011 to strengthen information technology management;
  • an information technology plan for the AngloGold Ashanti group was considered by the committee and, based on its recommendations, was approved by the board on 7 November 2011. The plan will guide the implementation of information technology programmes; and
  • an international best practice information technology governance framework and the control objectives for information technology (CoBIT), which contain a comprehensive set of IT processes and a measurement framework for measuring the maturity of those processes within a company, were adopted by the group.

Business insurance: Business insurance is a critical component of risk management in AngloGold Ashanti. The R&II committee assumed oversight responsibility for insurance matters during 2011. It reviewed the group’s insurance policies for the 2011/2012 insurance year to ensure that adequate cover for the company’s assets and employees, to the extent this cover was available and commercially feasible, was in place.

Safety, Health and Sustainable Development Committee

In accordance with its mandate, the Safety, Health and Sustainable Development (SHSD) committee played an active role in advising and monitoring the group’s performance on safety, health, the environment, the nature and level of interactions with the communities in which the company operates and security issues around its operations, with due emphasis on practices that conform with the company’s values on sustainable development.

Safety remains AngloGold Ashanti’s first value and continues to form a key component of management’s operational deliverables.

During 2011, the main focus of the committee’s deliberations was the implementation of safety targets under the safety improvement initiative and safety transformation. The committee also reviewed strategies to improve the health and well-being of employees and their families especially in relation to HIV/AIDs and malaria. Illegal mining continued to raise concerns across the company’s operations, especially in West Africa. The committee is addressing these concerns with a view to finding alternative and sustainable solutions to improve the socio-economic standards of the communities. The issues deliberated on at the committee’s meetings during 2011 are reported on in various sections of this report.

Transformation and Human Resources Development Committee

AngloGold Ashanti subscribes to the South African government’s initiatives on social transformation and the labour localisation policies of other operational jurisdictions.

The Transformation and Human Resources Development (THRC) Committee has been mandated by the board to oversee compliance with these laws and to guide the development and implementation of policies to develop the skills and talents of employees groupwide, and to support the achievement of social transformation and localisation targets.

Remuneration Committee

In accordance with its mandate, the Remuneration Committee oversees matters relating to the remuneration of executive directors and the executive management and considered issues relating to competitive and equitable remuneration. Details of the company’s remuneration policy and other relevant matters are disclosed in the Remuneration Report.

Nominations Committee

During the year under review, the Nominations Committee assessed the skills mix of the board as well as the outcomes of the 2010 annual self-performance evaluation of the board. It recommended a review of the structures of some of the board sub-committees and the appointment of two new independent non-executive directors. The Nominations Committee also reviewed succession planning for the group.

Investment Committee

This committee deliberated on matters pertaining to the company’s strategic plans as they relate to the management of its asset portfolio. It debated several investment proposals, made appropriate recommendations to the board and monitored the management of approved projects to ensure these complied with project specifications.

Financial Analysis Committee

In line with AngloGold Ashanti’s policy of maintaining healthy stakeholder relationships at all times, the company responded to a request by the unions in South Africa to restructure the black economic empowerment (BEE) transaction that was implemented in 2006 but which failed to deliver the expected value to employees. In April 2011, the Financial Analysis Committee examined the proposed restructured BEE transaction and, based on its recommendations, the board approved the transaction which was presented to, and approved by shareholders on 11 May 2011.

Chief financial officer

Mr Srinivasan Venkatakrishnan, an executive director, is the Chief Financial Officer. At its meeting held on 9 February 2012, the Audit and Corporate Governance Committee considered and expressed its satisfaction at the level of expertise and experience of the Chief Financial Officer. The committee concluded that, he, together with other members of the financial management team, had effectively and efficiently managed the group’s financial affairs during the period under review.

Company secretary

The Company Secretary, Ms Lynda Eatwell, provides the necessary support to the board as a whole and to individual directors to ensure that the necessary structures and processes are in place for the board to fulfil its mandate.

Stakeholder engagement

AngloGold Ashanti’s vision to become a leading mining company cannot be realised without the contribution of all stakeholders. The company has therefore adopted an inclusive approach to stakeholder engagement. Its key stakeholders include investors, employees, host communities, civil society groups and governments. Numerous stakeholder engagement activities took place during 2011 and are detailed under Sustainability Report 2011Community relations.

Legal and regulatory compliance

The group’s geographical spread makes its regulatory environment diverse and complex. Given the critical role played by regulatory compliance in building a sustainable business, a Group Compliance Department is essential to coordinate compliance with laws and regulations and to assist and advise the board and management on designing and implementing appropriate compliance management policies and procedures.

During 2011, the Group Compliance Department undertook activities that contributed to the enhancement of the company’s governance environment. Key among these was the roll-out of the Code of Business Principles and Ethics.

South African Employment Equity Act of 1998

In compliance with Section 21 of the Employment Equity Act 55 of 1998, the company is obliged to file with the Department of Labour, the employment equity statistics for its South African workforce. A report was filed with the Department of Labour on 29 November 2011, covering the period 1 August 2010 to 31 July 2011. A copy of the report is available on the AngloGold Ashanti website, www.anglogoldashanti.com/sustainability, in the section entitled, Other public reports.

Values and ethics

The Code of Business Principles and Ethics (our Code) is the most important document on AngloGold Ashanti’s values and ethics systems. The board and management recognise the enduring importance of ethical behaviour by all employees, directors and related parties at all times as the company strives to generate competitive shareholder returns and create value for the benefit of all stakeholders. Our Code provides a framework and sets requirements for the implementation of key corporate policies and guidelines covering fraud and corruption, conflict of interests, gifts, hospitality and sponsorship, delegation of IR authority and insider trading. The company also recognises that instilling ethical behaviour in employees requires continuous and deliberate effort and nurturing.

Roll-out of our Code, which commenced soon after its launch in November 2010, continued during 2011. A top-down approach to training was adopted – beginning with management and progressing to other levels throughout the organisation. The board and executive management supported activities targeted at embedding ethical values in employee behaviour.

To mark the first anniversary of the launch of our Code, a roundtable panel discussion, facilitated by an independent ethics practitioner, was held on the topic "Turning integrity into outcomes: the role of the manager". The panelists emphasised the value of ethical discipline as a necessary contributor to and driver of business performance and expressed the continuous need for leaders and managers not only to set the tone but to shape and influence an ethical work environment.

Anti-corruption initiatives

The board recognises the importance of preventing corruption not only as a compliance imperative but as part of its corporate governance agenda. In line with this, the Group Compliance Department has embarked on an initiative to develop a group-wide anti-corruption policy and procedures.

Internal control

The board recognises the importance of effective internal controls to the company’s overall risk management system, which ultimately contributes to a high standard of corporate governance. The group’s Internal Audit Department plays a key role in establishing a credible internal control system by monitoring and reporting to the board on a quarterly basis, through the Audit and Corporate Governance Committee, on significant developments in the company’s internal control environment.

In line with the recommendations of King III and in pursuit of a more effective internal control environment, a combined assurance framework was developed and implemented in 2011.

Based on assurance received by the board from all assurance providers, including the Group Internal Audit Department as well as consideration of significant operational and financial matters, the board concluded that the group’s internal control environment during the year under review and up to the date of the approval of the annual report was effective.

Whistle blowing

The board and management continued to improve the operation of the whistle-blowing initiative which provides a platform for employees and other stakeholders to report anonymously and in good faith acts, practices or activities that are in conflict with AngloGold Ashanti’s business principles, which are unlawful, or constitute financial malpractice or endanger the public or the environment. The number and type of reports received groupwide through this whistle-blowing facility as well as action taken against persons found to have engaged in wrongful acts were reported to the board through the Audit and Corporate Governance Committee on a quarterly basis. Since its inception in February 2004, 453 cases have been reported, of which 415 were investigated and closed by 31 December 2011.