Corporate Governance
CORPORATE GOVERNANCE STATEMENT
HOW WE DO BUSINESS
Australian Central’s Board and Management are committed to acting responsibly, ethically and with the highest standards of integrity to ensure that Australian Central’s activities are continually structured and delivered in a manner that allows us to meet the needs of our members.
To achieve this sound corporate governance, business practices and policies have been adopted by the Board and cascaded throughout all levels of the organisation. We strive to ensure that our governance "in action" is of the highest standard, consistent with our mutual underpinnings, while at the same time practical and transparent to our members.
We are continually working to improve our governance policies and practices both at the Board level and throughout Australian Central. While our mutual values remain constant, we know we must adapt our business practices to ensure we meet our obligations in a changing world.
As such the Board has committed to following the Australian Stock Exchange Corporate Governance Council's "Principles of Good Corporate Governance and Best Practice Recommendations". Further, the Board has carefully considered and implemented a "fit and proper" framework in accordance with relevant legislation that endeavours to ensure that Directors and Senior Management of Australian Central are appropriate persons to lead the organisation. The "fit and proper" framework deals with matters such as minimum competencies, Director development, independence, Director refreshment and renewal and performance.
Minimum Competencies
Board policy sets out the minimum competencies regarding personal attributes, skills and knowledge that each Director should bring to Australian Central. The Board undertakes an annual strategic skills gap analysis to ensure the Board has the right mix of skills. The Nominations Committee assesses all election candidates with regard to these minimum competencies.
Director Development
Relevant Board policy outlines the knowledge requirements for Directors and provides the high level guidelines for new Director induction, new committee member induction as well as the standards for ongoing Director development. Each Director is expected to attend one industry related conference annually.
Independence
As a behavioural principle, Board policy requires Directors to be independent in both judgement and action. Each Director is required to be independent in his/her thinking which must be maintained over time such that the Director makes his/her own judgement based on the present situation. It is the Director’s accountability to maintain and demonstrate his/her independence. Board policy also addresses issues relating to benefits and conflict of interest. Directors generally do not offer, seek or accept benefits in the performance of their duties and any unsolicited benefits received are to be disclosed to the following Board meeting. Where a Director has a material personal interest in a matter, that Director is not present during the consideration of, or voting on, that matter.
Refreshment and Renewal
Individual Directors are required on a regular basis to refresh and renew their knowledge generally and specific to Australian Central and the environment in which it operates. Board policy requires that each Director must be able to demonstrate his/her own refreshment and renewal process to the Board and relevant third parties as needed. Refreshment and renewal are also included as part of an individual Director's performance assessment. Also, under Board policy the Corporate Governance Committee will undertake a review of the Board’s refreshment and renewal where effective change in the composition of the Board has not occurred over a period of three years.
Performance
Established Board policy requires the annual review of performance of the Board, its committees and individual Directors including the Chairman. This is undertaken via a survey of relevant questions completed by Directors and where appropriate Executive Managers.
STRUCTURE OF THE BOARD
The size and composition of the Board is determined by the Board subject to the limits set out in Australian Central’s Constitution, which requires a minimum of seven Directors who may be member elected Non-Executive Directors, Board and merger appointed Non-Executive Directors, or a Managing Director. At all times, member elected Directors must constitute a majority of Directors, a requirement which protects our mutuality.
The Board currently comprises six Non-Executive Directors, five of whom are member elected and one Board appointed Director, and one Managing Director, ensuring independence and objectivity. All Directors are shareholding members of Australian Central. Board members are elected by the members or appointed in accordance with the constitution. All elected Directors hold a term of three years upon election. The Chairman of the Board is a member elected Non-Executive Director. If a Board or merger appointed Non-Executive Director is appointed as Chairman, they must stand for election at the election which immediately follows their appointment as Chairman.
It is important that the above framework is maintained to ensure that the Board is able to operate independently of Executive Management. Each of the Non-Executive Directors is independent of Management. This means that they are free from any relationship (for example, a business interest in a supplier or competitor of Australian Central) which could materially interfere with the exercise of their independent judgement and their ability to act in the best interests of Australian Central. In the event that a potential conflict of interest arises, involved Directors must withdraw from all debate and decisions concerning the matter unless the Board resolves that the interest should not disqualify the Director from being present and/or voting.
ROLE OF THE BOARD
The Board comprises a majority of Non-Executive Directors, who together with the Managing Director have extensive business acumen and bring accountability and judgement to the Board's deliberations to ensure optimum benefit to members, employees and the wider community.
In particular, the Board:
• provides strategic direction to Australian Central;
• provides leadership in terms of corporate governance;
• appoints the Managing Director;
• monitors the performance and approves the remuneration level of the Managing Director;
• reports to members and monitors that all regulatory requirements are met;
• oversees Australian Central’s financial performance and position and monitors its business and affairs on behalf of all members;
• oversees internal controls and processes for identifying areas of significant business risk;
• makes decisions in relation to major expenditures, acquisitions or merger opportunities;
• ensures that Australian Central’s business is conducted ethically and transparently.
Responsibility for day-to-day activities is delegated to the Managing Director by the Board.
COMMITTEES OF THE BOARD
The Board has established three standing committees as described below to consider detailed matters. Generally committees consider the various matters and make recommendations to the Board. However some decisions, within the parameters of Board policy, have been delegated to committees. Each committee's authority and responsibilities are set out in their individual terms of reference, as approved by the Board. Other committees may be established from time to time to consider matters of particular importance. Committee members are chosen for the skills, experience and other pertinent qualities they bring to the committee.
The Audit Committee meets at least quarterly, whilst the other two committees meet at least bi-monthly to consider and make recommendations or decisions on matters within their terms of reference. Committee Chairmen give verbal reports to the Board at the next Board meeting, and minutes of all committee meetings are reviewed by the Board. All information prepared for the consideration of committees is also available to the Board.
Standing Committees in operation are:
Audit Committee - assists the Board in fulfilling its responsibilities relating to the audit, accounting, and reporting obligations, monitoring internal and external auditors (including the independence of the internal and external auditors). This committee has a number of particular guidelines which include the Chairman of the committee cannot be the Chairman of the Board and the committee can and did meet with the internal and/or External Auditors without the presence of the Managing Director or Management.
Corporate Governance Committee - assists the Board in adopting and implementing good corporate governance in the areas of the Managing Director's appointment, Non-Executive Director and Executive remuneration, Director elections, Board performance reviews, oversight of the "fit and proper" framework, monitoring the size and composition of the Board and reviews Executive succession plans. A Nominations Committee is established on an annual basis in association with Director elections, and operates under the guidelines of the Corporate Governance Committee.
Risk Committee - ensures that Australian Central adopts an integrated approach to risk management including:
• treasury risk management and capital management dealing with all risks of the portfolio including those to do with the balance sheet and interest rates.
• credit risk that arises in the credit portfolio.
• operational risk management including regulatory risk management as part of the day to day conduct of the business.
• alignment with prudential standards.
STANDARDS
The Board acknowledges the need for, and continued maintenance of the highest standards of corporate governance and therefore adopts practices including:
• a Code of Conduct that applies to all staff, Management and Directors;
• an annual review of Board performance;
• active participation by all Directors at all meetings and open access to information;
• regular Executive Management presentations;
• the Managing Director and General Manager Corporate Services provide assurance on the accuracy and completeness of financial information and risk management processes;
• the Executive Managers provide assurance to the Board that the business of Australian Central has been conducted ethically and all dealings have been conducted transparently with the Board;
• the transparency of information to members through publication of (regulatory) notices on Australian Central’s website www.australiancentral.com.au
•the gearing of Board Policies towards risk management to safeguard the assets and interests of Australian Central;
• Non-Executive Director remuneration approved by members at the Annual General Meeting. The Board undertakes benchmarking and/or seeks independent advice to determine recommended Non-Executive Director remuneration levels.
AUDIT SERVICES
Australian Central’s Internal Audit Services department via the Audit Committee assists the Board in ensuring compliance with established internal controls. The Board is responsible for approving the program and scope of Audit Services activities each financial year.
INTERNAL AND EXTERNAL AUDIT INDEPENDENCE
The Board approves the appointment or dismissal of the head of the Audit Services department and oversees the appointment of Australian Central’s External Auditors.
The External Auditors were appointed in 1997. The lead External Audit engagement partner was last rotated in the year 2005 following completion of the 30 June 2005 annual audit.
The Audit Committee closely monitors the independence of the External Auditors and regularly reviews the independence safeguards put in place by the External Auditors
The Audit Committee has the ability to meet with Management without the internal and/or External Auditors being present and with the internal and/or External Auditors without Management being present.
REMUNERATION OF THE BOARD
The Corporate Governance Committee reviews and recommends the level of Executive Directors' remuneration for approval by the Board. The remuneration of Non-Executive Directors is determined by the Corporate Governance Committee following benchmarking and/or independent advice and recommended by the Board for approval by members at the Annual General Meeting.
