PRINCIPLE 2 STRUCTURE THE BOARD TO ADD VALUE

Board Meetings

The Board meets at least 10 times each year for scheduled meetings and may, on other occasions, meet to deal with specific matters that require attention between scheduled meetings. Together with the Board Committees, the directors use the Board meetings to challenge and fully understand the business and its operational issues.  To assist with the Board’s understanding of the business, the Board regularly conducts Board meetings at the various business locations followed by management presentations and site tours. 

The Divisional General Managers are required to regularly attend and present at the Board meetings on operational issues and performance.  An annual group strategy meeting is held as part of the budget approval process which enables the Board to review corporate strategies and performance with the Divisional General Managers.  This ensures that the Board is effectively carrying out its duties of providing input and approving corporate strategies and performance objectives.

The Chief Financial Officer is required to attend Board meetings and present the finance department monthly report, and to answer questions from the directors on financial performance, accounting, risk management and treasury matters.

The Executive Director is responsible for the completion and dispatch of the agenda and Board papers for each meeting.  The Executive Director prepares the draft minutes for each meeting, which are tabled at the next Board meeting for review and approval.  The Executive Director is accountable to the Board, through the Chairman, on all corporate governance matters.

Composition of the Board

The Board presently comprises 8 directors, 6 of whom, including the Chairman and Deputy Chairman, are non-executive directors and 2, the Managing Director and Executive Director, are executive directors. 

Profiles of the directors are set out on in the Annual Report.  The profiles outline the skills, experience and expertise of each Board member, including the period of office held by each director.

The composition of the Board is determined by the Nomination Committee and, where appropriate, external advice is sought.  The following principles and guidelines are adhered to: 

• The Board should maintain a majority of non-executive directors
• The Board should consist of a majority of independent directors
• The Chairperson should be a non-executive director
• The role of Chairperson and Managing Director should not be exercised by the same individual
• Non-executive directors should not be involved in management of the day to day operations of the Company
• All Board members should be financially literate and have relevant experience in the industries in which the Company operates

Re-Election of Directors

In accordance with the Company’s constitution, at each Annual General Meeting, a number of directors will face re-election.  One third of the Board (excluding the Managing Director and any director not specifically required to stand for re-election) must stand for re-election.  In addition, no director (other than the Managing Director) may hold office for more than three years without standing for re-election and any director appointed by the Board since the last Annual General Meeting must stand for re-election at the next Annual General Meeting.  All retiring directors are eligible for re-election.

Independence of Directors

The Board considers that the non-executive directors must be independent from management and free of any business or other relationship that could interfere, or reasonably be perceived to interfere, with the exercise of their unfettered and independent judgment. 

In considering the relationships which may affect independent status as outlined in the recommendations of the ASX Corporate Governance Council, it has been determined that the Company’s non-executive directors are independent.  Therefore, the Board comprises 75% independent directors and 25% non-independent directors (being the Managing Director and Executive Director) which meets the recommendations of the ASX Corporate Governance Council.

The following non-executive directors are considered by the Board to be independent: 

• Mr Geoff McGrath, Chairman and Non-Executive Director
• Mr Darryl McDonough, Deputy Chairman and Non-Executive Director
• Mr Robert Anderson, Non- Executive Director
• Mr Bill Bartlett, Non-Executive Director
• Mr John Mulcahy, Non-Executive Director
• Mr Peter Birtles, Non-Executive Director

The Board is responsible for ensuring that the action of individual directors in the Boardroom is that of independent persons.  The Board distinguishes between the concept of independence and issues of conflict of interest or material personal interest which may arise from time to time – refer Conflicts of Interest below.

In recognising the importance of the independence of directors and the immediate disclosure of conflicts of interest, the Board has included both matters as permanent items on the agenda at Board meetings.  Any independence or conflict of interest issues arising during the relevant period must be disclosed to the Chairman prior to each Board meeting.  The disclosure is recorded in the Register of Directors’ Interests and in the Board minutes. 

Board Succession Planning

The Board has established succession plans for the retirement of individual Board members to ensure an appropriate balance of skills, experience and expertise on the Board.  The Board views director renewal as an essential process to ensure optimal Board performance.  In accordance with the succession plans, the following director retirements and appointments have occurred in recent years: 

• Appointment of Mr Bill Bartlett in 2007
• Retirement of Mr Martin Kriewaldt in 2008
• Retirement of Mr Jim Kennedy in 2009
• Appointment of Mr Darryl McDonough in 2009
• Appointment of Mr Richard Thornton in 2009
• Retirement of Mr Barry Thornton in 2010
• Retirement of Mr David Barry in 2010
• Appointment of Mr John Mulcahy in 2010
• Appointment of Mr Peter Birtles in 2010

Further director retirements and appointments are expected in future years to continue the Board succession planning process, whilst ensuring an efficient and effective Board is maintained.

Conflicts of Interest

The directors are required to disclose to the Board any relationships from which a conflict of interest might arise.   A director who has an actual or potential conflict of interest or a material personal interest in a matter is required to absent himself from any meeting of the Board or Board Committee, whenever the matter is considered.  In addition, the director does not receive any Board papers or other documents in which there is a reference to the matter.

This process is applied to business and trading relationships, dealings with the directors, dealings with companies with common directors and dealings with any significant shareholders of the Company.

The materiality thresholds used for the determination of independence and issues of conflict of interest has been considered from the point of view of the Company and directors.  For the Company, a relationship which accounts for 5% or more of its revenue is considered material.  For a director, a relationship which accounts for 5% or more of the total income of a director is considered material.  Directors’ fees are not subject to this test. 

Access to Independent Advice

Directors and the Board Committees have the right in connection with their duties and responsibilities to seek independent advice at the Company’s expense.  Prior written approval of the Chairman is required, but this will not be unreasonably withheld.  Where appropriate, directors share such advice with the other directors.

Nomination Committee

The Nomination Committee meets as required and on several occasions throughout the year.  For membership and attendance details of the Nomination Committee, refer to the Directors’ Report.

The composition of the Nomination Committee is based on the following principles: 

• The Nomination Committee should consist of non-executive directors only
• The Nomination Committee should consist of a majority of independent directors
• The Nomination Committee should consist of a minimum of three members
• The Chairperson should be the Chairperson of the Board or another non-executive director

The Nomination Committee operates under a charter that details the Committee’s role and responsibilities, composition, structure and membership requirements.  The charter is reviewed annually to ensure it remains consistent with the Board’s objectives and responsibilities.  Refer to the Company’s website for a copy of the charter.

The main responsibilities of the Committee include: 

• Assessment of the necessary and desirable competencies of Board members
• Review of the Board succession plans
• Evaluation of the performance and contributions of Board members
• Recommendations for the appointment and removal of directors
• Review of the remuneration framework for the non-executive directors
• Reporting to the Board on the Committee’s role and responsibilities covering all the functions in its charter

In performing its responsibilities, the Nomination Committee receives appropriate advice from external consultants and other advisers as required.

The Executive Director prepares the draft minutes for each Nomination Committee meeting, which are tabled at the next Nomination Committee meeting for review and approval.  The draft minutes are also included in the Board papers of the next Board meeting following the Nomination Committee meeting.

Selection and Appointment of Directors

The Nomination Committee is responsible for the selection and appointment of directors.  In the circumstances where there is a need to appoint a director, whether due to the retirement of a director, growth of the Company, or changed circumstances of the Company, certain procedures will be followed including the following: 

• Determination of the skills and experience appropriate for an appointee, having regard to those of the existing directors and other likely changes to the Board;
• Upon identifying a potential appointee, consider the competency and qualifications, independence, other directorships, time availability, and the effect that their appointment would have on the overall balance of the composition of the Board; and
• The Board members consent to the proposed appointee.

Induction Program

The Nomination Committee is responsible for ensuring that an effective induction program for new directors is in place and regularly reviewed to ensure its effectiveness.  The Board has developed a comprehensive induction program for new directors to allow the new appointees to participate fully and actively in Board decision making.  The Board views the induction program as critical in enabling the new directors to gain an understanding of the Company and the markets in which it operates. 

Performance Evaluation

On an annual basis, the Nomination Committee conducts a formal evaluation of the performance of the Board, the Board Committees and the individual Board members to determine whether functioning effectively by reference to current good practice.  The performance evaluation is conducted by the Chairman of the Board through open discussions with the Board members and detailed questionnaires as required.  Any issues or improvement opportunities identified from the performance evaluation are actioned.