Deriving principally from the provisions of the Australian Postal Corporation Act 1989 (APC Act), the Commonwealth Authorities and Companies Act 1997 (CAC Act) and the Governance Arrangements for Commonwealth Government Business Enterprises (1997), these practices are also guided by the ASX Corporate Governance Council’s principles of good corporate governance and associated recommendations. A dedicated corporate governance section on the Australia Post website provides a detailed description of the corporation’s governance framework and associated practices, with hyperlinks to key documents.
Non-executive directors are appointed by the Governor-General on the nomination of the portfolio minister. Appointments can be for up to five years and re-appointment is permissible. Current practice is for terms of appointment to be generally of three years’ duration. Before nominating a person for appointment, the minister is required to consider the balance of expertise on the board and also to consult with the chairman. The managing director is appointed by the board. Board membership during 2006/07 was:
Click here for profiles of each director and details of their skills, experience and expertise.
Directors set the corporation’s key objectives and strategies through a rolling three-year corporate plan, which is submitted annually to shareholder ministers. Progress against the plan is reported quarterly. Ministers and their departments are also kept informed on an ongoing basis about developments of significance.
The committee charter is reviewed annually by the board. The committee meets five times a year, focusing in particular on the areas of financial reporting, risk management and internal controls. Among other things, it is responsible for reviewing:
Audit & Risk Committee meetings are attended by the external and internal auditors as well as by the managing director, chief finance officer and group financial controller. Before each meeting the committee holds separate private session discussions with the external auditors, the internal auditor and the chief finance officer. Similar discussions are also held annually with both the internal legal counsel and group manager security. All directors receive copies of committee meeting papers and minutes, and non-committee members have the right to attend meetings as observers. Click here for meeting attendance details for 2006/07.
Members of the committee during 2006/07 were:
Click here to view the committee charter. Click here for meeting attendance details for 2006/07.
Where an issue to be considered by the board or a board committee is thought to present a director with a potential conflict of interest, that director will not be provided with the related material in the first instance.
Any action or omission that contravenes the code of ethics constitutes misconduct and is subject to counselling or disciplinary action appropriate to the circumstances and seriousness of the behaviour. Disciplinary action may include dismissal. Australia Post’s whistleblower policy encourages the confidential disclosure of serious breaches of the code of ethics, particularly where criminal activity may be involved. An independently operated contact service is in place for the lodgement of any such whistleblower complaints. A senior management Ethics Committee oversees the application of the code of ethics across the organisation.
Details of individual amounts received in 2006/07 by each non-executive director are provided in Note 27 to the financial statements. Remuneration levels for holders of part-time public offices (including Australia Post non-executive directors) were increased by the Remuneration Tribunal by 4.2 per cent, with effect from 1 July 2007.
In undertaking this role, the committee has adopted a set of principles approved by the Remuneration Tribunal that are designed to link the level of remuneration with the financial and operational performance of the corporation. Remuneration arrangements for other senior executives are reviewed and determined by the managing director. Advice is sought annually from independent specialised remuneration consultants on:
On the basis of this advice, the managing director ensures that payments to senior executives are in line with market practice and are competitively placed to attract and retain the necessary talent for the work required by these roles. Incentive rewards for the managing director and other senior executives for meeting or exceeding specific key annual business objectives are linked to the annual business planning process at corporate and individual levels. Measures and targeted achievement levels are reviewed each year to reflect changes in business priorities for the forthcoming year. The measures include financial targets, customer satisfaction, employee engagement and other individual measures that support the key business objectives. Before reward is payable, a threshold must be reached, according to pre-defined measures. The managing director and other senior executives are employed under individual contracts of employment that are not limited to a specific duration. Continuation of employment is subject to ongoing satisfactory performance. Where Australia Post terminates the managing director’s or other senior executive’s employment for reasons other than performance or misconduct, they are entitled to:
All of the above payments are based on annual base salary. Remuneration details for the managing director and other key executives are provided in Note 27 to the financial statements.
The board has in place a comprehensive set of audit independence principles in relation to the external auditors. Among other things, these principles exclude the engagement of the external auditors for the provision of certain non-statutory audit-related services such as internal auditing, taxation planning, treasury policy and operations, and business and strategic planning. In addition, the senior audit partner on the corporation’s account is to be rotated at least every five years.
The internal audit work program is subject to annual endorsement by the Audit & Risk Committee, with the results, progress and performance regularly reviewed by both the committee and the external auditors. The internal auditor also meets privately with the committee before each meeting, without other management present.
As part of the risk management framework, all business units provide a presentation annually to an internal Risk Management Unit on their existing and emerging risks, associated mitigation strategies and progress against their implementation. The status of higher-rated risks is reported to the board Audit & Risk Committee each quarter. Risk identification, measurement and mitigation strategies are included in all business-related proposals considered by the board. There are also a number of programs in place to manage risk in specific areas – such as fraud, the environment, injury prevention and management, legislative compliance, fire-safety and emergency procedures, and business continuity planning. The potentially adverse financial impacts associated with catastrophic risk exposures are limited by the purchase of appropriate insurance cover. The ongoing effectiveness of the corporation’s risk management framework is reviewed annually by the board. To ensure the maintenance of best practice, independent external reviews of risk management across the corporation are commissioned every four years.
Before adopting the annual financial statements, the board receives written confirmation from the managing director and the chief finance officer that the integrity of the statements is founded on a sound system of risk management and internal compliance and control.
Established treasury procedures incorporate risk control principles of segregation of duties, dual control access and independent reconciliations. A Treasury Risk Management Committee determines appropriate hedging strategies within policy parameters. Treasury activities are reported quarterly to the board and are subject to annual review by auditors.
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Australia Post maintains a comprehensive system of corporate governance practices designed to achieve appropriate levels of disclosure and accountability.
The Minister for Communications, Information Technology and the Arts, Senator the Hon. Helen Coonan, has portfolio responsibility for Australia Post. Under a dual shareholder model, overall responsibility for the enterprise is exercised jointly with Senator the Hon. Nick Minchin, Minister for Finance and Administration.
The board of Australia Post comprises up to nine directors. With the exception of the managing director, all serve in a non-executive capacity.
Under section 28 of the APC Act, the role of the board is:
Separate Audit & Risk and Human Resources committees assist the board in the discharge of its responsibilities.
The Audit & Risk Committee provides a forum for regular communication between the board and the corporation’s auditors, both external and internal. The committee consists entirely of non-executive directors. Its membership during 2006/07 was:
Incorporating the functions of both a nomination and remuneration committee, the Human Resources Committee addresses major policy, structural and remuneration issues, including:
An externally facilitated board performance appraisal was undertaken during the year, focusing on board, board committee and individual director effectiveness.
A comprehensive induction program provides newly appointed directors with an understanding of their role and responsibilities, and exposes them to key features of the business, including its operations, policies and strategies. Additional supplements are tailored to meet particular needs or interests. Ongoing director education is provided by way of visits to facilities and presentations on matters of current interest.
Directors have the right, with the prior agreement of the chairman, to obtain at the corporation’s expense relevant independent professional advice in connection with the discharge of their responsibilities.
Directors who may have a material personal interest in a matter to be considered by the board or a board committee are required to make the nature of that interest known and must not be present while the matter is being considered. Details of such disclosures are recorded in the minutes of the meeting.
Australia Post seeks to conduct its business with integrity, honesty and fairness and in compliance with all relevant laws, regulations, codes and corporate standards. A board-approved code of ethics clearly sets out the ethical standards that are expected of directors, employees, licensees and contractors in their dealings with customers, suppliers, the corporation and each other.
Remuneration levels for Australia Post’s non-executive directors are determined by the Commonwealth Remuneration Tribunal. For 2006/07 these were as follows:
The Board Human Resources Committee is responsible for reviewing and recommending to the board the remuneration arrangements for the managing director.
Under section 8 of the CAC Act, the Auditor-General inspects and audits the accounts and records of the corporation’s financial transactions and assets, reporting to the board, the minister and parliament. The Auditor-General also audits and reports on compliance with the performance standards prescribed for Australia Post under section 28C of the APC Act. Ernst & Young has been retained by the Australian National Audit Office to assist in both of these assignments.
Australia Post’s internal audit service brings a systematic and disciplined approach to risk management, control and governance processes. Empowered by the board to direct a wide-ranging program of internal auditing, it has full and unrestricted access to all functions, property, personnel records, accounts, files
and other documentation.
The board oversees a comprehensive risk management policy framework covering all significant business risks and strategic considerations. The underpinning processes – which seek to identify, analyse, assess and treat these risks – are consistent with the principles of the relevant Standard (AS/NZS 4360).
Australia Post’s internal control framework is consistent with the model defined by the Committee of Sponsoring Organisations (COSO) of the Treadway Commission, with strategic, financial, operational and compliance elements established across multiple internal control layers. Controls include financial planning and reporting, capital expenditure appraisal procedures, authority delegation, due diligence, procurement contract tendering, expenditure gating, external performance reporting and corporation-wide risk management practices. Financial reporting and business system integrity are assured through the maintenance of extensive operating procedure policies and practices.
A comprehensive and prudent treasury policy is in place to manage liquidity, interest rate, foreign exchange and fuel price risk. Reviewed by the board at least annually, the policy provides for the use of hedging instruments to protect the corporation against adverse movements in interest rates and minimise the impact of volatility in foreign exchange rate and oil price movements. The aim is to ensure reasonable certainty against budget estimates and in the cost of imported capital equipment and other supplies.
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To facilitate compliance with the relevant legislation, Australia Post has a dedicated trade practices compliance officer responsible for a national trade practices compliance program. In addition to undertaking comprehensive biennial trade practices training, the corporation has in place a detailed formal clearance process for all promotional and advertising material.
The corporation also has a full-time chief privacy officer responsible for the maintenance of a national privacy compliance program. Detailed policies, processes and procedures are in place to safeguard customers’ personal information and to foster a corporate culture that values privacy.