Corporate Governance Statement

The AWI Board is committed to adopting corporate governance principles and best practice recommendations in broad terms consistent with the rest of the corporate business community.

Australian Wool Innovation Limited (AWI) is an unlisted, not-for-profit, public company and has no obligation to report on the ‘Principles of Good Corporate Governance and Best Practice Recommendations’, the 10 core principles developed by the Australian Stock Exchange Corporate Governance Council.

However, the AWI Board is committed to adopting the abovementioned corporate governance principles and best practice recommendations in broad terms consistent with the rest of the corporate business community.

As at 30 June 2005 the position of AWI in relation to these 10 core principles is:

Principle 1: Lay solid foundations for management of oversight

The AWI Board is committed to reporting to its shareholders on the Company’s overall corporate governance. This commitment includes determining and reviewing the Company’s strategic direction and operational policies, establishing goals for management and monitoring the achievement of those goals, reviewing and approving the Company’s annual strategic plan and operating plan, as well as appointing and monitoring the Chief Executive Officer (CEO) and those AWI employees who report directly to the CEO.

The AWI Board also recommends the appointment of the external auditor to shareholders, the appointment and remuneration of all senior executive staff and approves all significant research development and innovation (RDI) transactions together with all acquisitions, divestments, capital expenditure, the monitoring of business risk exposures and risk management systems, approving and monitoring financial and other reporting obligations such as AWI’s annual report to the Department of Agriculture, Fisheries and Forestry and reporting annually to the shareholders of AWI in the form required by the Commonwealth Corporations Act (the Act). The AWI Board also oversees that the balance is maintained between responsibilities of the Board, and the CEO and general management team.

The CEO is accountable to the Board for the management of the Company within the policy and authority levels prescribed by the Board. Those authority levels are reviewed and approved by the Board not less than annually. The CEO’s specific responsibilities include ensuring research, development and innovation (RDI) activities are in accordance with the Company’s legal obligations such as its Constitution, its contract with its shareholders, and the Statutory Funding Agreement, the contract AWI has with the Commonwealth Government. The AWI Board also monitors that the Company is conducting its affairs within the law and abides within the Company’s various charters and codes of conduct. The CEO is also obliged to keep the AWI Board informed in relation to the progress of all significant RDI proposals and any other major developments in relation thereto and to approve remuneration levels of AWI personnel generally. The Board also appoints internal auditors to review the practices and procedures of management and to report to the Board thereon.

The AWI Board is responsible for overall Company reporting, statutory accounting, legal compliance, auditing, insurance and the like, including the monitoring of financial performance and planning by management against the financial control guidelines determined by the Board.

The AWI Board is responsible for the allocation and management of financial resources ensuring that appropriate reporting is provided to the Board by management on a monthly and annual basis.

Principle 2: Structure – The Board to add value

The Company presently has seven (7) independent, non-executive directors, the names of the directors of the Company in office at the date of this statement are set out in the 2004/05 AWI annual report available on the AWI website. There are no executive directors on the Board of AWI. The Board ensures that independent judgement is achieved and maintained by the members of the AWI Board, noting directors are entitled to seek independent professional advice at the Company’s expense, subject to the prior approval of the Chairman of the Board and in compliance with Company policy.  (Board Charter, Rule 5).

The AWI Board envisages directors who have a conflict of interest in relation to a particular item of business being considered by the Board, to absent themselves from Board meetings before commencement of discussion on the topic.

The AWI Board meets from time-to-time without management in attendance. The Board has diversity in its composition with each current director bringing a range of complementary skills and experience to the Company as indicated in the 2004/05 AWI annual report. The composition of the committees of the AWI Board can be found in the 2004/05 AWI annual report.

To assist the Board in discharging its responsibilities the AWI Board has established a number of committees including a Finance and Audit Committee, a Remuneration and Appointments Committee, an Intellectual Property and Commercialisation Committee, a Falkiner Memorial Field Station Committee and an AWI/AWS integration/alliance Committee. 

The Charter of the Committees of the AWI Board (PDF 183Kb) can be found on the AWI website.

The Company’s Chairman is considered by the Board to be independent in terms of the ASX Corporate Governance Council definition of “independent” director. 

The Company’s Chairman and CEO have separate roles. The Chairman is responsible for leading the Board in the discharge of its duties whilst the CEO is responsible for leading the management team in the discharge of its duties.

Principle 3: Promote ethical and responsible decision making

It is the policy of the AWI Board to conduct its RDI activities and all other activities undertaken in the name of the Company according to the highest standards of ethics, honesty, integrity, and fairness when dealing with all its stakeholders, including employees. All AWI employees and contractors are also required to meet these high standards. The Board approved Code of Conduct – Obligations to Stakeholders (PDF 115 Kb) on 17 June 2004. This is available on the AWI website.

The Board takes seriously the Company’s obligations to comply with all Federal, State and local government laws, as well as common law obligations. The Company requires all employees to do the same and in compliance with AWI policies, in particular the AWI Constitution, Statutory Funding Agreement, Corporate Governance Policy and Codes of Conduct. The Company is a non-listed, not-for-profit company limited by shares under the Act and pursuant to the AWI Constitution there is no trading in the Company’s shares; the single share in AWI held by each woolgrower shareholder is of no commercial resale value.

Principle 4: Safeguard integrity in financial reporting

The AWI CEO and General Manager Finance (GMF) report in writing monthly to the AWI Directors and the Finance and Audit Committee of the Board of Directors. They also report to the internal and external auditors appointed by the AWI Board of Directors. The AWI Board believes the financial statements of AWI provided in the 2004/05 AWI annual report present a true and fair view, in all material respects, of the Company’s financial condition and operational results and are in accordance with applicable Australian accounting standards. (see Directors’ Declaration in the 2004/05 AWI annual report)

The Board re-established after the last AGM in November 2004, a Finance and Audit Committee, the membership of which consists of three independent non-executive directors. Details of their attendance at committee meetings are set out in the 2004/05 AWI annual report. 

The principal functions of the Finance and Audit Committee are governed by the Charter of the Committees of the Board which include:

  1. risk oversight and management policies;
  2. risk management and risk profile;
  3. internal audit function;
  4. legal matters;
  5. external auditors; 
  6. review of financial reports;
  7. review of corporate governance.

The Finance and Audit Committee also has an obligation to report after each meeting to the Board of Directors. The principal objective of the Finance and Audit Committee is to assist the Board in the discharge of its responsibilities in respect of the preparation of the Company’s financial statements and the Company’s internal financial controls, recommend to the Board nominees for appointment as external auditors, review the scope of the audit, the level of audit fees, and the performance of internal and external auditors, provide a line of communication between the Board and auditors and examine the external auditors’ and internal auditors’ evaluation of internal controls and management’s response.

Principle 5: Make timely and balanced disclosure

The Company is not a listed company, that is, its shares are not traded on the stock exchange and the Company is therefore not subject to ASX Listing Rule disclosure requirements. The Company does however report to its shareholders in the form required by the Act and discloses significant information on a continuous basis as detailed in Principle 6 below.

Principle 6: Respect the rights of shareholders

The Company has an unusual share structure in that every shareholder has only one share in AWI but with variable voting rights attached to that share. Those voting rights are based on the amount of wool levy paid in the twelve months preceding each shareholder’s voting at a general meeting of the shareholders of AWI.

The Company has an informal policy in relation to the manner in which it will regularly communicate with its shareholders. The Board is in the process of formalising a shareholder communications policy; this process should be completed before the 2005 AGM.

The Board of Directors of AWI is committed to communication with shareholders and other stakeholders in an open, regular and timely manner so that shareholders have sufficient information to make informed decisions on the operations and results of the Company. The Company’s mechanisms for communicating with stakeholders include:

  1. letters sent to shareholders by the AWI Chaiman;
  2. hosting of forums attended by shareholders and industry representatives;  
  3. AWI’s bi-monthly magazine Beyond the Bale sent to shareholders and stakeholders; and 
  4. uploading and maintenance of information on the AWI website.

The Board encourages full and frank participation of all shareholders at the Company’s Annual General Meeting to ensure a high level of accountability and understanding of the Company’s strategy and goals. Shareholders are encouraged to appoint proxies to express their views at the AGM.

The Company’s external auditor attends the AGM and is available to answer shareholders’ questions.

Principle 7: Recognise and manage risk

The Board is responsible for the overseeing of the Company’s risk management and control framework. The Finance and Audit Committee assists the Board in fulfilling its responsibilities in this regard by reviewing the financial and reporting aspects of the Company’s risk management and control framework.

The Company has implemented a policy designed to ensure that the Company’s risks are identified and that controls are adequate, in place and functioning effectively. This policy incorporates the maintenance of comprehensive procedures and guidelines; it covers areas such as occupational health and safety, environmental management (at Falkiner Memorial Field Station), trade practices, interest rate and investment policies and exposures, ethical conduct, crisis management and business continuity planning. The Board has delegated responsibility for control of risk management to the appropriate level of management within the Company with the CEO having ultimate responsibility to the Board for the risk management and control framework.

Arrangements by management and internal auditors, put in place by the Board to monitor risk management include regular reporting to the Board in respect of operations and the financial position of the Company.

The chairman of each committee of the Board of Directors circulates to the Board the minutes of each meeting of the respective committees and, after each committee meeting, reports personally, verbally to the Board on the matters managed by that committee at its last meeting.

Principle 8: Encourage enhanced performance

The Board has adopted a self-evaluation process to consider its own performance and the performance of its committees during each financial year; the composition and skills mix of the directors of AWI are noted in the 2004/05 AWI annual report.

The Board believes that its corporate governance practices should be indicative of best practice for an organisation of its type and, as far as possible, for corporations generally. The Board, therefore, keeps all areas of AWI’s governance under ongoing review in order to provide leadership by example in this crucial area of corporate responsibility and management. In particular, the Board monitors any areas of business risk that is identified (for example mulesing, wool harvesting, People for the Ethical Treatment of Animals, competition from other fibres, and the like), and ensures appropriate strategies are in place and properly managed.

Providing leadership to management is a priority of the Board as well as the monitoring of the performance of the Company’s key executives. The Board reviews the Company’s financial performance and revised forecast results on a monthly and annual basis. Detailed presentations are made to the Board by the CEO and his direct reports during business planning and strategy review meetings, which are convened annually and each month there is a detailed analysis of one of the business units of AWI with management detailing by way of presentation to the Board all material aspects of that business unit’s recent past activities and future plans.

Performance management reviews of the CEO and direct reports to the CEO and all other staff against job description are undertaken by the Board on an annual basis.

Principle 9: Remunerate fairly and responsibly

The Board has a program of regular performance appraisal and objective setting for the CEO and the executive senior management team. The Board established the Remuneration and Appointments Committee of the Board; 3 members of the Board are members of this Committee and its principal functions include reviewing and approving the remuneration of senior executives of the Company and reviewing and making recommendations to the Board regarding the remuneration policies and practices for the Company generally.

Directors receive remuneration and reimbursement of travel and other expenses properly incurred by the director in connection with the affairs of the Company including attending general meetings, meetings of the directors, meetings of committees of directors and the like.

The Company may advance money to a director for any such purpose which must be appropriately accounted for and any balance refunded.

No director of AWI during or since the end of the financial year received, or has become entitled to receive a benefit other than that reported in the Annual Report by reason of a contract made by AWI or of a related body corporate with one of the directors or with a firm of which a director is a member or with a Company in which a director has a substantial financial interest.

Of the seven directors of AWI, McLachlan, Nivision, Sykes, Merriman & Abell (5 out of 7), directly or indirectly, are shareholders of AWI.

AWI pays insurance premiums for its directors, the CEO and the Company Secretaries for costs and expenses incurred by them in defending any legal proceedings arising out of their conduct while acting in the capacity of director, CEO or Company Secretary respectively. This insurance does not cover conduct involving a wilful breach of duty and does not provide any assistance in relation to any criminal charges whatsoever. The AWI Constitution allows for the inclusion of indemnities in favour of directors and officers and, to the extent permitted by law, AWI indemnifies every person who is or has been a director or officer of AWI against any liability to any person incurred while acting in that capacity in good faith, and against costs and expenses incurred by that person in that capacity in successfully defending legal proceedings to the extent that the loss or liability is not covered by a valid, current in insurance policy.

Principle 10: Recognise the legitimate interests of stakeholders

AWI conducts its business within the law and in compliance with the corporate governance policies of the Company. Those corporate governance policies for the Company include the following (listed with their dates approved by the Board):

  1. AWI Constitution (PDF 116Kb) - 21 November 2003
  2. Statutory Funding Agreement (PDF 261Kb) – 28 June 2007
  3. Corporate Governance Policy (PDF 68Kb) - 24 April 2008
  4. Code of Conduct – Obligations to Stakeholders (PDF 109Kb) - 24 April 2008
  5. Board Charter (PDF 100Kb) - 24 April 2008
  6. Code of Conduct – Directors and Officers (PDF 34Kb) - 24 April 2008
  7. Charter of the Committees of the Board (PDF 207Kb) - 24 April 2008
  8. Communications Strategy - (PDF 33Kb) - 24 April 2008
  9. Rules and Procedures governing election of Directors (PDF 29Kb) - 17 February 2005
 

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