CSL’s Board and management maintain high standards of corporate governance as part of their commitment to maximise shareholder value through promoting effective strategic planning, risk management, transparency and corporate responsibility.
This statement outlines the Company’s principal corporate governance practices in place during the financial year ended 30 June 2014.
The Board believes that the Company complies with the recommendations contained in the 2nd edition of the ASX Corporate Governance Council’s ‘Corporate Governance Principles and Recommendations’, released in June 2010 (the Corporate Governance Principles and Recommendations). A checklist summarising the Company’s compliance with the 2nd edition of the Corporate Governance Principles and Recommendations is available on the Company’s website (see www.csl.com.au/about/governance.htm).
In March 2014, the ASX Corporate Governance Council released the 3rd edition of the Corporate Governance Principles and Recommendations, which applies to ASX listed companies in respect of their first full financial year commencing on or after 1 July 2014. Accordingly, the 3rd edition of the Corporate Governance Principles and Recommendations will apply to CSL for its financial year ending 30 June 2015. The Board intends to ensure that its corporate governance practices comply with the recommendations in the 3rd edition, and the Company’s Corporate Governance Statement for its financial year ending 30 June 2015 will report its compliance against those recommendations.
This statement has been approved by the Board.
1. The Board of Directors
1.1 The CSL Board Charter
The Board has a formal charter documenting its membership, operating procedures and the allocation of responsibilities between the Board and management.
The Board is responsible for oversight of the management of the Company and providing strategic direction. It monitors operational and financial performance, human resources policies and practices and approves the Company’s budgets and business plans. It is also responsible for overseeing the Company’s risk management, financial reporting and compliance framework.
The Board has delegated the day-to-day management of the Company, and the implementation of approved business plans and strategies to the Managing Director, who in turn may further delegate to senior management. In addition, a detailed authorisations policy sets out the decision making powers which may be exercised at various levels of management.
The Board has delegated specific authority to five Board committees that assist it in discharging its responsibilities by examining various issues and making recommendations to the Board. Those committees are:
Each committee is governed by a charter setting out its composition and responsibilities. A description of each committee and their responsibilities is set out below. The Board also delegates specific responsibilities to ad hoc committees from time to time.
The CSL Board Charter sets guidelines as to the desired term of service of non-executive directors. The CSL Board Charter provides that non-executive directors should be able to serve for at least 8 years before retiring from the Board, subject to re-election by shareholders. This charter also recognises that whilst board renewal is essential, a mixture of skills and differing periods of service provides for balance and optimal outcomes at a board level. Prior to the expiry of a director’s current term of office, the Board reviews that director’s performance. In the event that such performance is considered less than effective, the Board may decide that it will not support the re-election of that director.
The Company Secretary is responsible to the Board for ensuring that Board and committee procedures are complied with and advising the Board and its committees on governance matters. The Company Secretary is accountable directly to the Board, through the Chairman, on all matters to do with the proper functioning of the Board. All directors have access to the Company Secretary for advice and services. The Board approves any appointment or removal of the Company Secretary.
Directors are entitled to access independent professional advice at the Company’s expense to assist them in fulfilling their responsibilities. To do so, a director must first obtain the approval of the Chairman. The director should inform the Chairman of the reason for seeking the advice, the name of the person from whom the advice is to be sought, and the estimated cost of the advice. Professional advice obtained in this way is made available to the whole Board
Details of Board meetings held during the year and individual directors’ attendance at these meetings can be found on page 46 of the Directors’ Report attached to the financial report.
The CSL Board Charter is available on the Company’s website (see www.csl.com.au/about/governance.htm).
1.2 Composition of the Board
Throughout the year there were between eight and nine directors on the Board. On 14 August 2013, Marie McDonald was appointed to the Board as a non-executive director (and was elected by shareholders on 16 October 2013 at the Company’s annual general meeting). On 16 October 2013, Ian Renard retired from the Board. One of the current directors - Paul Perreault, Managing Director – is the only executive director.
The CSL Board Charter provides that a majority of directors should be independent. No director acts as a nominee or representative of any particular shareholder. A profile of each current director, including details of their skills, expertise, relevant experience, term of office and Board committee memberships can be found on the Directors' Profiles page.
The Chairman of the Board, John Shine, is an independent, non-executive director. He is responsible for leadership of the Board, for ensuring that the Board functions effectively, and for communicating the views of the Board to the public. The Chairman sets the agenda for Board meetings and manages their conduct and facilitates open and constructive communication between the Board, management, and the public.
The Board has determined that all of its non-executive directors are independent, and were independent for the duration of the reporting period.
All CSL directors are aware of, and adhere to, their obligation under the Corporations Act to disclose to the Board any interests or relationships that they, or any associate of theirs, may have in a matter that relates to the affairs of the Company, and any other matter that may affect their independence. As required by law, details of any related party dealings are set out in full in Note 28 of the financial report. All directors have agreed to give the Company notice of changes to their relevant interests in Company shares within five days to enable both them and the Company to comply with the ASX Listing Rules. If a potential conflict of interest exists on a matter before the Board then (unless the remaining directors determine otherwise), the director concerned does not receive the relevant briefing papers, and takes no part in the Board’s consideration of the matter nor exercises any influence over other members of the Board.
In addition to considering issues that may arise from disclosure by directors from time to time under these obligations, the Board makes an annual assessment of each nonexecutive director to determine whether it considers the director to be independent. The Board considers that an independent director is a director who is independent of management and free of any business or other relationship that could, or could reasonably be perceived to, materially interfere with the exercise of their unfettered and independent judgment.
Information about any such interests or relationships, including any related financial or other details, is assessed by the Board to determine whether the relationship could, or could reasonably be perceived to, materially interfere with the exercise of a director’s unfettered and independent judgment. As part of this process the Board takes into account a range of relevant matters including:
In determining whether an interest or relationship is considered to interfere with a director’s independence, the Board has regard to the materiality of the interest or relationship. For this purpose, the Board adopts a conservative approach to materiality consistent with Australian accounting standards.
If a director has a current or former association with a supplier, professional adviser or consultant to the CSL Group, that supplier, adviser or consultant will be considered material:
Similarly, a customer of the CSL Group would be considered material for this purpose:
In addition to assessing the relationship in a quantitative sense, the Board also considers qualitative factors, such as the nature of the goods or services supplied, the period since the director ceased to be associated and their general subjective assessment of the director.
1.4 Nomination Committee
The functions and responsibilities of the Nomination Committee are documented in a formal charter approved by the Board.
The Nomination Committee comprises all of the independent directors. The Nomination Committee is chaired by the Board Chairman.
Details of the Nomination Committee’s current members, including their qualifications and experience, are set out on the Directors' Profiles page.
The Nomination Committee is responsible for reviewing the Board’s membership and making recommendations on any new appointments. In making recommendations for new directors, the Nomination Committee seeks to ensure that any new director will complement or maintain the skills, experience, expertise and diversity of the Board necessary to enable it to oversee the delivery of the Company’s objectives and strategy. The Board is looking to maintain an appropriate mix of skills and diversity in the membership of the Board. This includes diversity of skills, experience and background in the pharmaceutical industry, international business, finance and accounting and management.
The Nomination Committee is also responsible for:
Details of Nomination Committee meetings held during the year and individual directors’ attendance at these meetings can be found on page 46 of the Directors’ Report attached to the financial report.
The Nomination Committee Charter is available on the Company’s website - www.csl.com.au/about/governance.htm.
1.5 Director Appointments
One new director was appointed to the Board during the financial year. Marie McDonald was appointed to the Board on 14 August 2013 and was elected at the 2013 Annual General Meeting. One director retired from the Board during the financial year. Ian Renard retired as a director as at the conclusion of the 2013 Annual General Meeting. John Akehurst was re-elected as a director at the 2013 Annual General Meeting.
Before a director is nominated for election or re-election, it is the Company’s policy to ask directors to acknowledge to the Board that they have sufficient time to meet the Company’s expectations of them. The Board requires that all of its members devote the time necessary to ensure that their contribution to the Company is of the highest possible quality. The CSL Board Charter sets out procedures relating to the removal of a director whose contribution is found not to be effective.
Before a person is appointed as a director, or put forward to shareholders as a candidate for election as a director, the Company also undertakes appropriate checks in respect of that person, which include checks as to the person’s character, experience and education.
The Company provides its shareholders with all material information (that is in the Company’s possession) relevant to a decision on whether or not to elect or re-elect a director (including any material adverse information revealed by the above checks).
The Company provides an induction program to assist new directors to gain an understanding of:
In addition to the briefing papers, agenda and related information regularly supplied to directors, the Board has an ongoing professional development and education program designed to give directors further insight into the operation of the Company’s business, and to provide opportunities for directors to develop and maintain the skills and knowledge needed to perform their role as a director effectively. The program includes education on key developments in respect of the Company and the industry and environment within which it operates. As part of this program, directors have the opportunity to visit Company facilities, including all major operating sites in the US, Europe and Australia, and to attend meetings and information sessions with the Company’s local management and employees.
1.6 Performance Evaluation
As mentioned above, the Nomination Committee meets annually to review the performance of the Board, individual directors and the Board committees. The Nomination Committee’s review process includes seeking relevant feedback from all directors and executive management, by way of a questionnaire that is circulated to those persons, with their responses then collated and provided to the Nomination Committee.
The effectiveness of the Board and its committees is assessed against the roles and responsibilities set out in the Board Charter and each Committee Charter. Matters considered in the evaluation include:
The Chairman also holds discussions with individual directors to facilitate peer review.
As a result of the Nomination Committee’s most recent annual review, the Nomination Committee has suggested a number of new processes and procedures that aim to improve the performance and effectiveness of the Board, including:
These new processes and procedures have been agreed by the Board and implemented by the Company.
The Nomination Committee is responsible for evaluating the performance of the Managing Director, who in turn evaluates the performance of all other senior executives and makes recommendations in respect of their remuneration. These evaluations are based on specific criteria including the Company’s business performance, whether the long term strategic objectives are being achieved and the achievement of individual performance objectives.
These performance evaluations took place in accordance with these processes during the last financial year.