Corporate governance
General
Australia Post maintains a comprehensive system of corporate governance practices designed to provide appropriate levels of disclosure and accountability.
These practices derive principally from the provisions of the Australian Postal Corporation (APC) Act 1989, the Commonwealth Authorities and Companies (CAC) Act 1997 and the Governance Arrangements for Commonwealth Government Business Enterprises (1997). They are also guided by the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations.
A dedicated corporate governance section on the Australia Post website (auspost.com.au) provides a detailed description of the corporation’s governance framework and associated practices, with links to key documents.
Shareholder ministers
As Minister for Broadband, Communications and the Digital Economy, Senator the Hon. Stephen Conroy has portfolio responsibility for Australia Post. Under a dual shareholder model, overall responsibility for the enterprise is exercised jointly with the Minister for Finance and Deregulation, the Hon. Lindsay Tanner MP.
The board
The board of Australia Post comprises up to nine directors. With the exception of the managing director, all serve in a non-executive capacity.
Non-executive directors are appointed by the Governor-General on the nomination of the portfolio minister. Appointments can be for up to five years, with reappointment permissible. In practice, terms of appointment are generally for three years.
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 2008–09 was:
David Mortimer (Chairman)
Mark Birrell (Deputy Chairman)
Graeme John (Managing Director)
Mark Darras (appointed 31 October 2008)
Margaret Gibson
William Mansfield (appointed 31 October 2008)
Sandra McPhee (retired 12 April 2009)
Tom Phillips (retired 22 November 2008)
Ian Warner.
Profiles of each director and details of their relevant skills, experience and expertise are provided on the Board of directors and executive committee page.
Role of the board
Under s23 of the APC Act, the role of the board is:
- to decide the objectives, strategies and policies to be followed by Australia Post
- to ensure that Australia Post performs its functions in a manner that is proper, efficient and, as far as practicable, consistent with sound commercial practice.
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 a regular basis about developments of significance.
Board committees
Two committees assist the board in the discharge of its responsibilities: the Audit & Risk Committee and the Human Resources Committee.
Audit & Risk Committee
Consisting entirely of non-executive directors, the Audit & Risk Committee provides a forum for regular communication between the board and the corporation’s external and internal auditors. Membership during 2008–09 was:
Margaret Gibson (Chairman)
Sandra McPhee (retired 12 April 2009)
David Mortimer
Ian Warner.
The committee charter, which is reviewed annually by the board, can be accessed in the corporate governance section of the Australia Post website (auspost.com.au).
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 reviews:
- the annual financial statements before their consideration and adoption by the board
- the clarity and quality of the corporation’s financial policies, practices and disclosures
- internal and external auditor plans, reports and performance
- significant existing and emerging risks and mitigation activities
- the adequacy and effectiveness of internal controls
- compliance with laws and regulations.
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 held annually with both internal legal counsel and group manager security.
All directors receive copies of committee papers and minutes, and non-committee members have the right to attend meetings as observers.
Meeting attendance details for 2008–09 are provided in the table below.
Human Resources Committee
Incorporating the functions of both a nomination and remuneration committee, the Human Resources Committee addresses major policy, structural and remuneration issues, including:
- recruitment, selection and succession planning
- executive remuneration
- culture and ethics
- learning and development
- terms and conditions of employment
- organisational structure.
Membership during 2008–09 was:
Mark Birrell (Chairman)
Graeme John
William Mansfield (appointed 17 December 2008)
Tom Phillips (retired 22 November 2008).
The committee charter can be accessed in the corporate governance section of the Australia Post website (auspost.com.au).
All directors receive copies of committee papers and minutes, and non-committee members have the right to attend meetings as observers.
Meeting attendance details for 2008–09 are provided in the table below.
Directors’ attendance at meetings – 2008–09
| Board | Audit & Risk Committee |
Human Resources Committee |
||||||
|---|---|---|---|---|---|---|---|---|
| (a) | (b) | (a) | (b) | (a) | (b) | |||
| David Mortimer | 10 | 10 | 5 | 5 | ||||
| Mark Birrell | 10 | 10 | 4 | 4 | ||||
| Graeme John | 10 | 9 | 4 | 4 | ||||
| Mark Darras | 7 | 7 | ||||||
| Margaret Gibson | 10 | 9 | 5 | 4 | ||||
| William Mansfield | 7 | 7 | 3 | 3 | ||||
| Sandra McPhee | 6 | 6 | 4 | 4 | ||||
| Tom Phillips | 3 | 3 | 1 | 1 | ||||
| Ian Warner | 10 | 10 | 5 | 5 | ||||
(a) Number of meetings held while a director/committee member.
(b) Number of meetings attended.
Board performance
An externally facilitated board performance appraisal is undertaken biennially, focusing on board, board committee and individual director effectiveness. The next such review will be in May/June 2010.
Director induction and education
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 facility visits and presentations on matters of current interest.
Independent professional advice
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.
Conflict of interest
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.
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, the director in question will not be provided with the associated background material.
Ethical standards
Australia Post seeks to conduct its business with integrity, honesty and fairness, and in compliance with all relevant laws, regulations, codes, and corporate policies and procedures.
A new Our Ethics guide was launched in 2009 and is being promulgated through every level of the business.
Our Ethics makes it clear that directors, employees, licensees and contractors of Australia Post are responsible for leading by example, upholding the corporation’s values and always acting consistently with the ethical standards in their dealings with customers, suppliers, the corporation and each other.
Managers and supervisors have a special responsibility to encourage and foster a culture in which ethical conduct is valued, recognised, demonstrated and expected.
Under Australia Post’s whistleblower policy, an independently operated contact service is in place to facilitate the confidential disclosure of serious breaches of ethical standards.
Director remuneration
The Commonwealth Remuneration Tribunal determines remuneration for Australia Post’s non-executive directors. For 2008–09 this was:
| Chairman | $153,600 |
| Deputy Chairman | $85,685 |
| Directors | $76,810 |
| Audit Committee Chairman | $17,750 |
| Audit Committee Member | $8,875 |
Details of individual amounts received in 2008–09 by each non-executive director are provided in Note 27 to the financial statements of the Financial and statutory reports.
Executive remuneration
The board is responsible for setting the remuneration arrangements for the managing director. In doing so it follows a set of principles approved by the Remuneration Tribunal 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, within parameters set by the Human Resources Committee.
Advice is sought annually from independent specialised remuneration consultants on:
- the structure of remuneration packages applying in the external market
- the quantum of increases that have occurred in comparable Australian corporations over the previous 12 months.
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 payable to 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 a corporate and individual level. Measures and targeted achievement levels are reviewed annually to reflect changes in the business priorities for the forthcoming year. The measures include financial, customer satisfaction, employee engagement and other individual measures that support the key business objectives. Before a reward is payable, a threshold must be reached according to predefined 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 executives’ employment for reasons other than performance or misconduct, they are entitled in the case of the managing director to:
- 60 days’ payment in lieu of notice and a termination payment of 1.5 times annual base salary
and for other senior executives to:
- 90 days’ payment in lieu of notice and a termination payment calculated on four weeks for each of the first five years of employment and three weeks for every year thereafter to a maximum of 84 weeks, including the payment in lieu of notice.
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 of the Financial and statutory reports.
External audit
Under Section 8 of the CAC Act, the Auditor-General is responsible for auditing the financial statements of Australia Post and its subsidiaries. The Auditor-General is also responsible for auditing 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.
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 must be rotated at least every five years.
Internal audit
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 internal audit work program is endorsed annually by the Audit & Risk Committee, with 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.
Risk management
The board has established a comprehensive risk management policy framework covering significant business risks and strategic considerations. The underpinning processes are consistent with the principles of the relevant Standard (AS/NZS 4360).
As part of the risk management framework, all business units provide an annual presentation to an internal Risk Management Committee 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, trade practices, privacy, 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 effectiveness of the corporation’s risk management framework is reviewed annually by the board. To ensure the maintenance of better practice, independent external reviews of risk management processes across the corporation are undertaken every four years. The most recent such review – which also covered compliance practice – was undertaken by Deloittes in late 2008.
Internal control framework
Australia Post’s internal control includes strategic, financial, operational and compliance elements established across multiple internal control layers. Controls include financial planning and reporting, commitment and expenditure delegations, due diligence, procurement contract tendering, expenditure gating, external performance reporting, and corporation-wide risk management and internal audit practices. Financial reporting and business system integrity are assured through the maintenance of extensive operating procedure policies and practices.
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, and that all material risks have been managed effectively.
Treasury
A comprehensive and prudent treasury policy exists 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.
Established treasury procedures incorporate risk control principles of segregation of duties, dual control access and independent reconciliations. An internal Treasury Risk Management Committee meets monthly and determines appropriate hedging strategies within policy parameters. Treasury activities are reported quarterly to the board and are subject to annual review by auditors.
Corporate security
The Corporate Security Group has responsibility for ensuring the integrity of the mail and the safety of Australia Post’s personnel and other assets. This specialist group maintains close internal working relationships with the legal, risk and audit areas, as well as externally with international, national, state and territory law enforcement services and agencies.
Trade practices
To facilitate compliance with 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.
Privacy
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.
