Corporate Governance
The Board of Directors of HGL Limited is responsible for the corporate governance of the Company and its controlled entities (HGL) and to ensure HGL is directed and managed appropriately. The Board guides and monitors the business and affairs of the consolidated entity on behalf of shareholders, by whom they are elected and to whom they are accountable. The Board and management are committed to ensuring control systems are commensurate with the risks that HGL is exposed to.
This corporate governance statement summarises the practices and policies in place during the year ended 30 September 2009. For ease of reference this statement has been presented consistently with the eight ASX Corporate Governance Principles. On at least an annual basis, the Board reviews these practices and policies to ensure they continue to assist HGL with its corporate governance. Various policies and charters have been posted at the end of this page.
Principle 1 – Lay solid foundations for management and oversight
The primary functions and responsibilities of the Board are as follows:
• establishing the long-term goals for the Company and the review of strategic and operational plans to achieve those goals;
• appointment of the Chief Executive;
• allocating capital and funding;
• reviewing and adopting the annual budgets of the Company and all its controlled entities;
• monitoring the performance of the Company and its controlled entities against the budget and strategic plans;
• ensuring adequate systems of internal control and risk management have been designed and implemented;
• approving the half yearly and annual financial reports;
• ensuring effective external disclosure policies so that the market is fully informed on all matters that may influence the share price; and
• monitoring corporate governance.
The responsibility for the operation and administration of the consolidated entity is delegated by the Board to the Chief Executive and his executive team. The Board ensures that this team is appropriately qualified and experienced to discharge this responsibility. The Board is responsible for ensuring that management’s objectives are aligned with the expectations and the risks identified by the Board. The Company has in place a process for evaluating the performance of senior executives. The Chief Executive reviews the performance of senior executives and presents to the Nomination and Remuneration Committee on this review. A performance review of senior executives took place during the year.
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Principle 2 – Structure the Board to add value
The Board is comprised of four Directors (one Executive and three non-executive members). Mr FM Wolf is the sole independent director as defined in the ASX Corporate Governance Principles and Recommendations.
The board does not have a majority of independent directors.
As the Chairman of the Board is associated with a substantial shareholder (Sery Pty Limited and its associates) he is not deemed independent in accordance with the Corporate Governance Principles and Recommendations. The Chairman is on the board of Sery Pty Limited and a number of its associates but he does not benefit financially from their shareholdings in HGL Limited.
The Board has established a Nomination and Remuneration Committee. The Committee consists of PG Miller (Chairman) and KJ Eley.
The primary functions of the Nomination and Remuneration Committee are to review:
• the composition of the Board on a regular basis and make recommendations to the Board, when considered necessary, to ensure that the Board comprises a majority of non-executive Directors with the appropriate mix of skills and experience; and
• the remuneration packages of all Directors, the Chief Executive and senior HGL managers annually and make recommendations to the Board.
The Board has considered its composition and believes the current composition is in the interests of shareholders.
Annually the Chairman assesses the performance of the Directors and the performance of the Board committees.
All Directors have the right to seek independent legal and financial advice, at the expense of the Company, concerning any aspect of the consolidated entity’s operations or undertakings. However, prior approval of the Chairman is required, which is not unreasonably withheld.
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Principle 3 – Promote ethical and responsible decision making
The Board has a Code of Conduct and a Share Trading Policy.
Code of conduct
The overriding principle of the Code of Conduct is that all business affairs must be conducted legally and ethically.
Share trading policy
Other than from 1 April or 1 October until the day after the release of half or full year results, the Directors and employees of the Company are permitted to deal in the securities of the Company at any time, subject to the insider trading provisions of the Corporations Act. The insider trading provisions of the Corporations Act have been drawn to the attention of all Directors and employees of the Company. Prior to dealing in HGL shares Directors and employees must notify the Chairman of the number of shares involved, the proposed date of the transaction and whether it is a sale or a purchase. The Directors and employees must consider any views expressed by the Chairman. Notification to the Chairman does not constitute approval. It is the responsibility of the person dealing in the HGL shares to ensure it does not constitute insider trading and to ensure the proposed dealing preserves the reputation of each of HGL, the Directors and employees and is not only fair but seen to be fair. Dealings of the Chairman must be notified to the Chairman of the Audit Committee. The share trading policy relates not only to those HGL shares held directly but also to HGL shares where the Director or employee of HGL has in substance, rather than form, the ability or power, whether direct or indirect, to dominate the decision about the trading of HGL shares.
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Principle 4 – Safeguard integrity in financial reporting
It is the Board’s ultimate responsibility to ensure that effective internal controls exist within the consolidated entity. To this end the Board established an Audit Committee. The Committee consists of FM Wolf (Chairman), JD Constable and PG Miller all of who are non executive directors.
The Chairman of this committee is an independent director. Committee meetings are usually held at least three times a year. A copy of the charter of the Committee is posted on the HGL website.
The functions of the Committee are to:
• consider the half yearly and annual financial reports before they are approved by the Board;
• review the appointment of the external auditors, the terms of their engagement, the scope and quality of the audit and the auditor’s independence;
• establish and maintain the framework of internal control; and
• ensure compliance with statutory, Australian Security Exchange and other reporting requirements.
The Audit Committee generally invites the Chief Executive Officer, Chief Financial Officer, Company Secretary and external auditors to attend Audit Committee meetings.
The external auditors can meet privately with the committee. The partner managing the audit was appointed in 2006 and will be rotated after a maximum of five years. It is the policy of the external auditors to provide an annual declaration of their independence to the Committee.
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Principle 5 – Make timely and balanced disclosure
The Board recognises its continuous disclosure obligations. The Board is committed to ensuring all investors have equal and timely access to material information about the Company and that announcements made by the Company are accurate, balanced and presented in a clear fashion.
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Principle 6 – Respect the rights of shareholders
The Board aims to ensure that shareholders, on whose behalf they act, are informed of all information necessary to assess the performance of the Company. Information is communicated to the shareholders through:
• compliance with Australian Security Exchange reporting and disclosure requirements;
• the Company’s website;
• the annual and interim reports; and
• the Annual General Meeting and any other meetings so called to obtain approval for Board action as appropriate.
HGL creates and distributes to all shareholders an overview of the half year and full year results. These are also made available through the HGL website.
A representative from the external auditor attends the Annual General Meeting and is available to answer shareholder questions about the conduct of the audit and preparation and content of the auditor’s report.
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Principle 7 – Recognise and manage risk
The Board is responsible for ensuring the Company’s risk management systems are effective. There are a number of material business risks that could impact the performance of the Company. There are risks that are specific to the Company and also those which are general business risks, for example movements in foreign exchange rates, which are beyond the control of the Company.
Calculated risk taking is an essential part of business. The Company has policies and procedures to manage risk. Some of the controls across the business include:
• annual budgeting and monthly reporting;
• the Board has sole discretion to approve any proposed material business acquisition. Proposed new business acquisitions are analysed by management, this includes a risk assessment and extensive due diligence. Businesses that meet the Company’s return and risk parameters are presented in a formal proposal document to the Board for consideration;
• policies and procedures for the management of financial risk, including movements in foreign exchange and interest rates;
• reviews of material existing and new customer and supplier arrangements;
• debtor and inventory reviews; and
• internal control questionnaires completed by management as part of the half year and year end financial reporting process.
Risks and the management of risks are not static. Management and the Board regularly review both. A copy of the risk management policy is posted to the HGL website.
The Chief Executive Officer and Chief Financial Officer confirm in writing that, to the best of their knowledge:
• the Company’s financial report presents a true and fair view of the Company’s financial condition and operating results and is in accordance with applicable accounting standards;
• the Company’s financial records for the financial year have been properly maintained in accordance with section 286 of the Corporations Act 2001; and
• the integrity of the financial records and systems is founded on a sound system of risk management and internal compliance and control which operates efficiently and effectively in all material respects.
The Board has received the above assurances for this financial year.
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Principle 8 – Remunerate fairly and responsibly
The Board has established a Nomination and Remuneration Committee. The Committee consists of PG Miller (Chairman) and KJ Eley. The principle is to reward for performance, an overview of the executive bonus schemes is described in the remuneration report. The functions and responsibilities of the Committee have been summarised under principle 2. The attendance of committee members is detailed in the directors’ report. There are no retirement benefits, other than superannuation, for non executive directors.
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Share Trading Policy
Risk Management Policy
Nomination & Remuneration Committee Charter
Audit Committee Charter
Listing Rule 3.1 Compliance
Code of Conduct
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