The Directors of PieNetworks Limited (“pie” and the “Company”) have established a framework of corporate governance, which they review on a regular basis.
On 31 March 2003, the ASX Corporate Governance Council (“CGC”) released its Principles of Good Corporate Governance and Best Practice Recommendations.
The CGC Principles, in conjunction with the ASX Listing Rules, require companies to disclose whether their corporate governance practices follow the CGC Principles on an “if not, why not” basis. This statement outlines the main corporate governance practices in place throughout the year, which comply with the CGC Principles and Best Practice Recommendations, unless otherwise stated.
Board of Directors
The roles of the Board and Management
The role of the Board is to oversee and guide the management of the Company and its business with the aim of protecting and enhancing the interests of its shareholders and taking into account the interests of all stakeholders.
Details of the background, experience and professional skills of each director are available here.
In summary the Board is responsible for:
- setting the strategic direction of the Company;
- appointing and removing the Managing Director;
- ratifying the appointment and/or removal of the chief financial officer and the company secretary;
- reviewing and ratifying the systems of risk management, internal control and compliance;
- approving operating budgets;
- approving and monitoring the progress of major capital expenditure, capital management, acquisitions and divestments;
- approving the form of and monitoring financial and other reporting; and
- establishing goals for management and monitoring the achievement of those goals.
The Board has established a framework for the delegation of certain responsibilities to management through a formal Delegations Manual. The manual also specifically identifies those responsibilities that have been reserved by the Board.
The managing director is responsible to the Board for the day-to-day management of the Company. The role of management is to support the managing director in the implementation of the agreed strategy in accordance with the delegated authority of the Board. The Chairman meets regularly with the managing director, at least monthly, to discuss the general performance of the Company and any issues arising.
Board Structure and Independence
The Company recognises the importance of having a Board comprising of directors with an appropriate range of backgrounds, skills and experience to suit the Company’s current and future strategies and requirements. The composition of the board is determined by the application of the following principles:
- persons nominated as non-executive directors shall be expected to have qualifications, experience and expertise of benefit to the Company and to bring an independent view to the Board’s deliberations. Persons nominated as executive directors must be of sufficient stature and security of employment to express independent views on any matter;
- the Chairman should ideally be independent, but in any case be non-executive and be elected by the Board based on his suitability for the position;
- all non-executive directors are expected voluntarily to review their membership of the Board from time-to-time taking into account length of service, age, qualifications and expertise relevant to the Company’s then current policy and programme, together with the other criteria considered desirable for composition of a balanced Board and the overall interests of the Company; and
- executive directors shall be expected to retire from the Board on the relinquishment of their executive responsibilities.
The Company considers that the Board should have at least four directors and will aim to have a majority of independent directors (as required) but acknowledges that this may not be possible at all times due to the size of the Company.
Directors are expected to bring independent views and judgement to the Board’s deliberations. In determining each director’s independence the Board will use the guiding principle that an independent director is independent of management and free of any business or other relationship that could materially interfere with – or could reasonably be perceived to materially interfere with – the exercise of their unfettered and independent judgement. In applying the guiding principle, the Board will take into consideration the definition in the CGC Principles and Recommendations and appropriate materiality.
Meetings of the Board
Under the Company's Constitution, the minimum number of Directors is three. At each Annual General Meeting, one third of the Directors (excluding the managing director) must resign, with Directors resigning by rotation based on the date of their appointment. Directors resigning by rotation may offer themselves for re-election.
The Company has not met the CGC Recommendations 2.1 (majority of independent directors) and 2.2 (independent chairman).
The Board meets formally at least eight times a year and on other occasions, as required. The agenda for meetings is prepared by the company secretary in consultation with the managing director. Standard items include the managing director’s report, financial reports, strategic matters and governance and compliance matters. Executives are available to participate in Board discussions as required.
Board Access to Information and Independent Advice
All directors have unrestricted access to all employees of the group and, subject to the law and the terms of Deeds of Access, Insurance and Indemnity, access to all Company records.
Consistent with CGC Principle 2, each director may, with the prior written approval of the Chairman, obtain independent professional advice to assist the director in the proper exercise of powers and discharge of duties as a director or as a member of a Board Committee. The company will reimburse the director for the reasonable expense of obtaining that advice.
Company Code of Conduct
The Board has adopted a Company Code of Conduct to promote ethical and responsible decision-making by all employees (including directors). The Code embraces the values of honesty, integrity, accountability and equality and to strive to enhance the reputation and performance of the Company. In summary the overriding principles are:
- All employees must conduct their duties honestly and in the best interests of the Company as a whole;
- Treat other stakeholders fairly and without discrimination;
- Respect confidentiality and do not misuse Company information or assets;
- Conduct themselves in accordance with both the letter and spirit of the law;
- Maintain a safe working environment.
Securities Trading Policy
The Board has adopted a policy and procedure on dealing in the Company’s securities by directors, officers and employees. The policy prohibits trading by all employees and directors of the Company and its related entities at all times where the transaction is intended for short term or speculative gain or where the person is in possession of price sensitive information. Subject to this condition and in light of the ASX’s continuous disclosure requirements, trading can occur at any time and is not limited to specified windows following the publication of financial results. In any event, a Restricted Person proposing to trade in the Company’s securities is required to seek the Chairman’s (or nominated officers) prior approval. The policy also requires the company secretary to be notified when trading of securities in the Company occurs by specified persons.
The Company’s Securities Trading Policy is incorporated into the Employee handbook.
The Board requires the Managing Director and Chief Financial Officer to state in writing to the Board that the Company’s financial reports represent a true and fair view, in all material respects, of the Company’s financial condition and operational results in accordance with the relevant accounting standards.
The Board has established an Audit & Compliance Committee (“A&CC”). The role of the A&CC is set out in a charter and its responsibilities include reviewing all published accounts of the group; reviewing the scope and independence of external audits; monitoring and assessing the systems for internal compliance and control, legal compliance and risk management; and advising on the appointment, performance and remuneration of the external auditors.
The Company’s auditor is KPMG. They were appointed in 1999 and the lead audit partner is due for rotation after 2007.
Consistent with CGC Principle 6, KPMG attend, and are available to answer questions at, the Company’s annual general meeting.
The Company understands and respects that timely disclosure of price sensitive information is central to the efficient operation of the Australian Stock Exchange’s securities market and has adopted a comprehensive policy covering announcements to the Australian Stock Exchange, prevention of selective or inadvertent disclosure, conduct of investor and analysts briefings and media communications. The Company Secretary has responsibility for coordinating disclosure of information to the Australian Stock Exchange.
The Company’s continuous disclosure policy is reviewed periodically and updated as required and is consistent with ASX Principle 5.
Communication with Shareholders
The Company places considerable importance on effective communication with shareholders to ensure their access to timely and relevant information.
The Company communicates information on its activities and financial performance through the issue of the annual and half-year financial reports, quarterly reports on activities and cash flows and through other announcements released to the Australian Stock Exchange.
The Company posts all reports, ASX announcements, media releases and copies of newspaper reports on the Company’s website at www.pienetworks.com. The website contains an archive of ASX announcements and annual reports for at least the last 3 years. The Company will, wherever practicable, take advantage of new technologies that provide greater opportunities for more effective communications with shareholders.
The Company will ensure that the annual general meeting is held in a manner that enables as many shareholders as possible to attend and encourages effective participation by shareholders. The Company requires the attendance of the external auditor at the Company’s annual general meeting and to be available to answer shareholder questions about the conduct of the audit and the preparation and content of the auditor’s report.
Management is ultimately responsible to the Board for the group’s system of internal control and risk management. The Audit & Compliance Committee assists the Board in monitoring this role.
The Company is committed to the identification, monitoring and management of risks associated with its business activities and has established various financial and operational reporting procedures and other internal control and compliance systems in this regard. These include:
- delegated authority limits in respect of financial expenditure and other business activities;
- a comprehensive annual insurance programme;
- internal controls to safeguard the Company’s assets and ensure the integrity of business processes and reporting systems;
- annual budgeting and monthly reporting systems for all businesses which enable the monitoring of progress against performance targets and the evaluation of trends;
- appropriate due diligence procedures for acquisitions and divestments; and
- disaster recovery procedures and crisis management systems.
Audit and compliance committee
The Audit & Compliance Committee assists the Board by:
- reviewing with management the adequacy and effectiveness of internal control systems, expenditure controls and reporting systems;
- reviewing and evaluating risk management policies in the light of the Company’s business strategy, capital strength, and overall risk tolerance.
- reviewing the adequacy of its insurance policies; and
- periodically reviewing the adequacy of accounting, financial, legal and other personnel resources.
Consistent with the requirements of CGC Principles 4 and 7, the Managing Director and Chief Financial Officer must state in writing to the Board that the Company’s and consolidated entity’s financial reports present a true and fair view, in all material respects, of the Company’s financial condition and operational results and are in accordance with relevant accounting standards. Additionally, the Managing Director and Chief Financial Officer are required to state in writing that this is based on a sound system for risk management and internal compliance and control which implements the policies adopted by the Board and is operating efficiently and effectively in all material respects.
In view of the size of the board, the Audit & Compliance Committee comprises all directors. Mr Craig Ferrier is chairman of the committee.
The external auditors and the financial controller are invited to audit committee meetings at the discretion of the committee.
Remuneration & Nomination Committee
The Board has established a Remuneration & Nomination Committee that, since June 2007 is comprised of the three non-executive directors. The committee reviews its composition as required to ensure that the Board has the appropriate mix of expertise and experience. When a vacancy exists, for whatever reason, or where it is considered that the Board would benefit from the services of a new director with particular skills, candidates with the appropriate expertise and experience are considered. The Board then appoints the most suitable candidate who must stand for election at the next general meeting of shareholders.
The Chairman reviews the performance of all Directors each year. Directors whose performance is unsatisfactory are counselled and encouraged to improve their performance. If the Chairman believes their performance has not adequately improved, they are asked to retire.
At the date of this report, the Remuneration and Nomination Committee comprises Messrs Gunzburg, Ferrier and Abery. The role of the Remuneration & Nomination Committee is to ensure that appropriate remuneration policies are in place that are designed to meet the needs of the Company and to enhance corporate and individual performance. No formal meetings of the committee were held during the year.
The Remuneration & Nomination Committee is responsible for reviewing:
- executive remuneration and incentive policies;
- the remuneration packages of senior management;
- the Company’s recruitment, retention and termination policies and procedures for senior management;
- superannuation arrangements;
- the performance management system operating within the organisation and its effectiveness; and
- the remuneration framework for directors.
Remuneration levels are competitively set to attract suitably qualified and experienced directors and senior executives, having regard for Company performance. Shareholders in general meeting have approved a directors’ fee pool limit of $300,000 from which non-executive directors’ fees may be paid.
The performance of the Managing Director and other executive directors is reviewed by the Remuneration & Nomination Committee. The performances of the other executives and staff are reviewed on an annual basis by the Managing Director.