FirstRand : corporate governance report 2022

corporate governance report

FOR THE YEAR ENDED 30 JUNE 2022

contents

Corporate governance

Introduction	1
Governance outcome: Ethical culture	2
Governance outcome: Sustainable value creation and good performance	3
Governance outcome: Effective control	4
Legislation and best practice guidelines	4
Integrated governance framework	5
Governance structure	8
Board of directors	9
Company secretary	15
Chief executive officer	16
Board committees	16
> Large exposures committee	17
> Directors' affairs and governance committee	19
> Risk, capital management and compliance committee	22
> IT risk and governance committee	25
> Audit committee	28
> Social, ethics and transformation committee	32
> Remuneration committee	36
Governance outcome: Trust and legitimacy through stakeholder engagement	42
Non-financial reporting policies	43
Independent assurance report on selected non-financial information to the
directors of FirstRand Limited	44

FirstRand's ESG resource hub seeks to provide stakeholders with a single source of relevant disclosures on environmental, social and governance (ESG) topics relating to FirstRand and its operating businesses. It contains relevant group ESG policies, including several corporate governance policies.

https://www.firstrand.co.za/investors/esg-resource-hub/policies-and-practices/

CORPORATE GOVERNANCE REPORT		1

corporate governance

Introduction

The board of FirstRand Limited (FirstRand or the group) is committed to the highest standards of corporate governance, integrity and ethics, which it views as essential to the group's success and to deliver on promises to stakeholders in a credible and transparent manner.

FirstRand's overarching governance objective is to ensure that an adequate and effective process of corporate governance is established and maintained, consistent with the nature, size, complexity and risk inherent in the group's activities and which is responsive to changes in the group's operating environment.

The board endorses a holistic approach to corporate governance, mindful of the legislative backdrop of the jurisdictions in which it operates, and supports the corporate governance outcomes of King IV outlined below.

Ethical			Good		Effective			Legitimacy
culture			performance		control

This report details the practices implemented and progress made towards achieving the above governance outcomes. The board is the custodian of corporate governance. It is satisfied that FirstRand complies with the material recommendations of King IV to ensure sound corporate governance and appropriate governance structures across the group.

2		CORPORATE GOVERNANCE REPORT		Corporate governance continued

Board responsibilities include:

• steering and setting the group's strategic direction;
• enabling delivery of strategy through the approval of required policies, frameworks, budgets, plans, structures and procedures;
• providing oversight on strategy implementation; and
• demonstrating accountability and transparency through appropriate disclosure.

The board retains full and effective control of the group. It is supported by senior management and the strategic executive committee (which is the custodian of the group's strategy) in discharging its fiduciary duties and governance role and responsibilities objectively and effectively, in a manner that balances the interests of all stakeholders.

The board believes that its current composition and mix of knowledge, skills, experience, diversity and independence is suitable to enable the group to meet its strategic objectives.

Governance outcome ethical culture

The board has endorsed the FirstRand code of ethics (the code), which represents a very important framework for the business.

The code provides guidance on ethical decision-making and behaviour. It creates a common understanding of how the group expects its people to behave.

As a financial services group, looking after the financial interests, personal and other information of customers is a responsibility that requires the highest standards of integrity and confidentiality.

The board promotes ethical conduct and directors hold each other accountable for decision-making and acting in a way that is consistent with the code. The group ethics office is the custodian of the code and has representatives in businesses across the group.

Employees are required to adhere to the code and to regularly complete ethics training. Ethical standards are reinforced throughout the employee life cycle and ethical conduct is considered in performance management.

Ethics monitoring

Ethics and risk culture are continually assessed through surveys, audits and ongoing employee engagement. During the year, the perception of the group's ethical conduct was assessed by employees, customers and suppliers. The ethics office continually tracks employee engagement with ethics content (including the code of ethics, related policies and video content).

Current year focus

• Promoting awareness and continued implementation of the new code of ethics, which includes an ethics check to assist decision-making.
• Proactive communication on the ethics line process, protection of whistle-blowers and the management of conflicts of interest.
• Equipping management with practical ethics toolkits.
• Conflict of interest management policy and process were enhanced with a risk-based approach and verification elements.
• Implementation of the framework for ethical use of data.

CORPORATE GOVERNANCE REPORT		3

Governance outcome sustainable value creation and good performance

FirstRand's purpose is to build a future of shared prosperity through enriching the lives of its customers, employees and the societies it serves. This is the foundation to a sustainable future and will preserve the group's enduring promise to create long-term value and superior returns for its shareholders.

This purpose underpins the group's strategic framework, which is approved by the board.

The group believes that to have the greatest impact it must intentionally use its core business activities, including its role in allocating capital to the economy, to add value to society - profitably and at scale. This principle was adopted by the group as a strategic imperative in 2019 and is considered a transformative and sustainable business strategy, albeit a long-term journey.

FirstRand's annual integrated report covers the group's financial and operational performance, and the report to society provides deeper insight into the group's societal impact. These reports are available at https://www.firstrand.co.za/investors/annual-reporting/.

During the year ended 30 June 2022, the board oversaw the creation of R150 billion in economic value for stakeholders.

	2022		2021
Statement of value added (IFRS)	R million		%	R million		%
Value added
Net interest income after impairment	101 887		67.8	92 275		67.0
Non-operating revenue	49 604		33.0	47 186		34.2
Non-operating expenses	(1 215)		(0.8)	(1 636)		(1.2)
Value added by operations	150 276		100.0	137 825		100.0
To employees
Salaries, wages and other benefits	36 621		24.4	34 358		24.9
To providers of funding	60 820		40.5	49 592		36.0
Dividends to shareholders	18 228			6 947
Interest paid	42 592			42 645
To suppliers	18 790		12.5	17 427		12.6
To government	14 647		9.7	11 777		8.6
Normal tax	12 950			10 232
Value-added tax	1 420			1 505
Capital gains tax	-			-
Other	277			40
To communities
Corporate social investment spend	221		0.1	152		0.1
To expansion and growth	19 177		12.8	24 519		17.8
Retained income	15 371			20 573
Depreciation and amortisation	4 827			5 226
Deferred income tax	(1 021)			(1 280)
Total value added	150 276		100.0	137 825		100.0