Corporate Governance Framework

Corporate Governance Framework

Corporate Governance Framework The SMEC Holdings Limited ( SMEC or the Company ) Board of Directors (Board) is committed to building and maintaining a corporate governance framework for the Group that creates an efficient and disciplined operating environment for its Directors and employees, generates shareholder value and aims to ensure the long-term success of SMEC and its controlled subsidiary companies (Group). The Board has adopted specific corporate governance policies and practices to achieve these objectives. The details of each of the policies and practices are summarised below along with the charters for the Board and each of its committees. The Board of Directors The Board meets formally at least eight times a year with additional meetings held as required. Details of Board and committee meetings held and attendance at these meetings are set out in the Annual Report. The Board has adopted a written charter (Charter) to provide a framework for its effective operation and to govern the Group in the best interests of shareholders. The Charter sets out the roles and responsibilities reserved for the Board and those reserved for management. Consistent with the Company s Constitution and the Charter, the composition of the Board is determined in accordance with the following principles: a. the Board shall comprise a minimum of four and a maximum of eight members b. the Chair shall be elected by a majority of Board members c. the positions of Chair and MD/CEO must be held by different persons d. Directors are permitted to act in the best interests of a parent company or ultimate holding company e. collectively, the Board shall possess an appropriate range of skills, experience and expertise f. all Directors shall be able to effectively review and challenge the performance of management and exercise independent judgment Directors are expected to: exercise independent judgement; comply with all legal responsibilities; meet as often as necessary to properly discharge their responsibilities; and attend and participate in Board meetings and meetings of committees on which they serve. Directors are encouraged to ask questions, request information, and raise issues of concern with Senior Executives. Directors are also encouraged, where possible, to ask any questions and raise issues of concern before a meeting so that management is prepared to address them. The Board acts in the best interests of the Company as a whole and is accountable to shareholders for the overall direction, management and corporate governance of the Group. The Board's responsibilities (as outlined in the Charter) include: a. reviewing, approving and monitoring the quality of the Company s financial reporting and reporting to shareholders b. reviewing, approving and monitoring the implementation of the Company's strategic goals and objectives c. reviewing, approving and monitoring the implementation of the Company's annual business plans and budgets d. approving and monitoring major capital expenditure, capital management (including dividend payments), acquisitions and divestitures e. appointing and reviewing the performance of the MD/CEO f. approving senior management remuneration policies Page 1 Corporate Governance Framework www.smec.com

g. ensuring appropriate succession plans are in place for senior management h. reviewing, approving and monitoring systems for the management of material business risk, internal compliance and control (including the internal audit program) and legal and regulatory compliance i. reviewing and overseeing implementation of the Group's Code of Conduct, Business Integrity and Code of Conduct for Directors and Senior Executives j. monitoring and ensuring compliance with the Company s corporate governance programs, ethical standards and policies Responsibility for the day-to-day management of the Group is delegated to the MD/CEO and the Executive Committee. This delegation includes the responsibility to deliver strategic goals and objectives, annual budgets and business plans approved by the Board. It also includes the responsibility to provide effective leadership for the Group and to act within the authority delegated by the Board. Independence of Non-Executive Directors The Board s policy is that the Chair of the Board is an independent Non-Executive Director. The Board considers an independent Director to be independent of management, 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; and otherwise meets the criteria for independence set out in the Principles of Good Corporate Governance and Best Practice Recommendations published by the ASX Corporate Governance Council. The Board will consider the materiality of any relationship on a case-by-case basis. The Board is currently composed of nine Directors, four of whom are Non-executive Directors. Three of the four Non-Executive Directors are considered to be independent. The Chairman of the Board, Mr M J Findlay, was appointed as Non-Executive Director on 7 April 2010 and Chairman of the Board on 6 April 2016. Mr Findlay has never served as an employee of SMEC and has no material personal interest in the business of the Company. Mr Findlay is considered to be an independent Non-Executive Director. Mr A McKendrick, is a Non-Executive Director but is not considered to be independent due to his recent retirement as Global Finance Director of the SMEC Group. Mr McKendrick s skills and experience in finance and accounting, his leadership qualities, business acumen and his intimate knowledge of SMEC are considered assets to the Company and the Board. Mr R J Bayliss was appointed as a Non-Executive Director in December 2002. Mr Bayliss has never served as an employee and has no material personal interest in the business of the Company. Mr Bayliss is considered to be an independent Non-Executive Director. Ms K D Spargo was appointed as Non-Executive Directors on 7 April 2010. Ms Spargo have never served as employees of SMEC and has no material personal interest in the business of the Company. Ms Spargo isconsidered to be independent Non- Executive Director. Independent Professional Advice As a matter of principle, Directors and Board committee members have the right, in connection with their duties and responsibilities, to seek independent professional advice at the Company s expense in accordance with the Company s policy. Board Committees The Board has established the following committees to assist it in carrying out its responsibilities, to share detailed work and to consider certain issues and functions in detail: Page 2 Corporate Governance Framework www.smec.com

a. Audit and Risk Committee b. Remuneration and Nominations Committee Each Board committee has terms of reference that are approved by the Board and sets out matters relevant to each committee s composition, responsibilities and administration. Audit and Risk Committee The Audit and Risk Committee is composed of the following Non-Executive Directors, two of whom are considered to be independent: K D Spargo (Chair) M J Findlay A McKendrick Daniel Teo Thiam Guan The Audit and Risk Committee meets every quarter with additional meetings held as required. The Committee members and the Chair are appointed by the Board. The Committee shall: a. Be chaired by an independent chair who is not the Chair of the Board; b. Have at least three members; and c. At least one member of the Committee shall be a qualified accountant or other finance professional with experience of financial and accounting matters. In accordance with its terms of reference, the role of the Committee is to assist the Board in: e. overseeing and guiding the internal audit program f. making timely, accurate and balanced financial disclosures to investors The Audit and Risk Committee receives regular reports from management and external auditors. It also meets with the external auditors at least twice a year. The Audit and Risk Committee nominates the external auditor to the Board, advises the Board on the remuneration, appointment and removal of the external auditor and approves the terms of contract with the external auditor. In recognising the strict definition of independence applicable to auditors, the Board has determined that its auditors will not provide any service to the Group which might conflict with their ability to act independently in their role as auditors. The Audit and Risk Committee has the authority within the scope of its terms of reference to seek any information it requires from any employee or external party in the absence of management. The Committee may also consult other independent experts, where considered necessary, on any matter pertaining to the powers or duties of the Committee in the absence of management. Committee members have unlimited access to Company documentation as is appropriate to discharge their duties and responsibilities. The Group Finance Director, MD/CEO and other members of management attend Audit and Risk Committee meetings at the invitation of the Chair of the Committee. a. safeguarding the integrity of the Company's financial reporting b. respecting the independence of, and managing the Group s relationship with, the external auditor c. identifying, assessing, monitoring and managing the Group s material business risk d. overseeing and managing the Group's internal control policies and practices Page 3 Corporate Governance Framework www.smec.com

Remuneration and Nominations Committee The Remuneration and Nominations Committee is composed of the following Non-Executive Directors, two of whom are considered to be independent: Wong Heang Fine (Chair) R J Bayliss K D Spargo The Remuneration and Nominations Committee meets at least twice a year with additional meetings held as required. The composition of the Remuneration and Nominations Committee is determined in accordance with the following principles: a. the members and the Chair are appointed by the Board b. there must be at least three members c. majority of members must be independent Non Executive Directors. In accordance with its terms of reference, the role of the Committee is to assist the Board in: a. establishing a Board with an effective composition, diversity, size and commitment to adequately discharge its duties and responsibilities to the Company, shareholders and other stakeholders (Nominations Role) b. securing, motivating and retaining a highly skilled and diverse group of Directors and Senior Executives to ensure the long-term success of the Company and create value for shareholders (Remuneration Role) c. remunerating its Directors and Senior Executives fairly and responsibly, having regard to the performance of the Company, the performance of the Directors and Senior Executives and the general remuneration environment (Remuneration Role) d. implementing policies and practices that secure, motivate and retain a highly skilled and diverse group of employees at all levels of the Company (Remuneration Role) In achieving its Nominations Role, the Committee seeks to ensure that: a. individual Directors, the Board and Board Committees possess an appropriate level of skill, expertise and independence b. the performance of individual Directors, the Board and its sub-committees is monitored and assessed on a regular basis c. the Board has implemented appropriate succession plans for itself and the Company s Senior Executive team d. the Board has appropriate Director induction, access to information and education policies and practices in place e. the Board implements strategies on diversity In achieving its Remuneration Role, the Committee: a. reviews and makes recommendations to the Board in relation to the performance and remuneration of the Company s Non- Executive Directors and Executive Directors b. approves the annual performance measures and remuneration packages of Executive Committee members c. reviews and makes recommendations to the Board concerning the appropriateness of the Company s remuneration policies and practices The Committee has the authority to seek advice or consult with external auditors, expert advisors or solicitors in the absence of management. Committee members also have unlimited access to Group documentation as is appropriate to discharge their duties and responsibilities. Page 4 Corporate Governance Framework www.smec.com

Executive Committee The Executive Committee (EC) is a Committee appointed by the MD/CEO to assist him in fulfilling the duties delegated to him by the Board. The duties and responsibilities are broadly outlined as follows: a. Overseeing, implementing and reviewing the Boards approved Strategic Plan; b. Overseeing, implementing and reviewing the annual business planning cycle and budget preparation process; c. Safeguarding the integrity of financial reporting systems and ensuring accurate and timely advice to the Board or the Audit Committee on all of the Company s financial matters; d. Assessing the operational performance of the business; e. Assessing the company structure and corporate vehicles used (i.e. joint ventures) to deliver services; f. Ensuring the provision of adequate management development and succession planning and recommending and implementing appropriate remuneration structures within business divisions; g. Ensuring the control, co-ordination and monitoring of risk and internal controls and making timely recommendations to the Board in respect of any material matters; and h. Implementing and monitoring corporate policy and procedures and developing and making recommendations to the Board in respect of corporate policy generally. The EC meets at least 8 times a year and on any other occasion as often as is deemed necessary by the Chair. All minutes of EC meetings are provided to the Board at the subsequent Board meeting and the MD reports to the Board any key decisions or policy matters considered or made by the Committee. Remuneration of Directors Non-Executive Directors are paid annual fees. The remuneration of Non-Executive Directors is approved by the Executive Directors of the Board. Payments are made to each Non-Executive Director in recognition of his or her responsibilities at Board level and on committees. Non-Executive Directors do not participate in bonus or incentive schemes and no allowance is made for retirement benefits other than that provided by statutory superannuation. Code of Conduct The Group has developed a Code of Conduct ( the Code ) which has been fully endorsed by the Board and applies to all Directors and employees. The Code is regularly reviewed and updated as necessary to ensure it reflects the highest standards of behaviour, professionalism and the practices necessary to maintain confidence in the Group s integrity. The Code is designed to achieve the various standards of behaviour required by the legislation applicable in the numerous jurisdictions in which the Group operates. The Code covers the following topics: Statement of core values Responsibilities of those working across the SMEC Group Occupational Health and Safety (OHS) Policy Equal Employment Opportunity and Diversity Prevention of Bribery and Corruption Confidentiality and Privacy Child Protection Drugs and Alcohol Policy Appropriate use of SMEC assets including electronic communication Media comment and social networking sites Identifying and managing conflicts of interest Page 5 Corporate Governance Framework www.smec.com

Complying with the Code of Conduct Reporting a contravention or suspected contravention of this Code of Conduct Safeguarding against retaliation Disciplinary action for breaches of the Code of Conduct Encouragement of Associated Companies to adopt this Code of Conduct A copy of the Code is presented to and discussed with each new employee as part of their induction training. The Code encourages employees to report unethical practices or breaches of the Code. This can be done anonymously. The Code also sets out disciplinary action that may be taken by the Company if the Code is breached. Due to their leadership responsibilities and duty to represent the Group publicly, the Group also has a Code of Conduct for Directors and Senior Executives. This separate Code of Conduct applies an extra layer of desired behaviours on Directors and Senior Executives to act honestly, with integrity, ethically and in a law-abiding manner to protect and promote the interests of shareholders and other stakeholders. Business integrity The Board maintains a business integrity procedure which supports the Code of Conduct and establishes a common understanding of the standards of behaviour expected of all SMEC Group employees in the performance of their duties. The procedure outlines a range of requirements which are designed to reinforce the standards of behaviour required by the Code of Conduct and to combat the risks that fraud, bribery and corruption could pose to SMEC s business. The procedure covers the following topics: Prohibition of bribery and corruption Prohibition of fraudulent and/or collusive practices Treatment of conflicts of interest Treatment of political and charitable donations Treatment of gifts, hospitality, entertainment, travel, accommodation Evaluation of business partners Recording any transactions related to the above issues Business ethics training Reporting of actual or suspected contraventions of the procedure Director and Executive Education The Group has a formal process to educate new Directors about the nature of the business, current issues, the corporate strategy, the culture and values of the Group and the expectations of the Group concerning performance of Directors. In addition, Directors are also educated regarding meeting arrangements and Director Interaction with each other, Senior Executives and other stakeholders. Directors also have the opportunity to visit Group facilities and meet with management to gain a better understanding of business operations. Directors are given access to continuing education opportunities to update and enhance their skills and knowledge. The Group has a formal process to educate new Senior Executives upon taking such positions. The induction program includes reviewing the Group s structure, strategy, operations, financial position and risk management policies. It also familiarises the individual with the respective rights, duties, responsibilities and roles of the individual and the Board. Risk Assessment and Management The Board, through the Audit and Risk Committee, is responsible for ensuring that: there are adequate policies in relation to risk management, compliance and internal control systems; management s risk mitigation assumptions and assertions are sufficiently challenged and verified; Page 6 Corporate Governance Framework www.smec.com

and inherent business risks are regularly assessed and monitored. The Board s policies are available on the Company s intranet. These policies are designed to ensure strategic, operational, legal, reputation and financial risks are identified, assessed and effectively managed and monitored to enable the achievement of the Group s business objectives. Considerable importance is placed on maintaining a strong internal control environment. The organisational structure clearly shows the Group's lines of accountability and delegation of authority. The Group s risk assessment and management policy is overseen by the Group General Manager Commercial and Legal who regularly reports to the Executive Committee and the Audit and Risk Committee. Quality, Environment and Safety Management The Group recognises the importance of quality, environment and safety management issues and is committed to compliance with all legislative requirements. To help meet this objective, an integrated quality, environment and safety management system has been established to facilitate the systematic identification of pertinent issues and to ensure that they are managed in a structured manner. The Manager, Quality and Environment conducts periodic audits and submits monthly reports to the Executive Committee and the Board. The system allows the Group to: e. work with trade associations representing the Group s businesses to raise standards f. use energy and other resources efficiently g. ensure the provision of consistent, highquality and cost-effective services to clients h. ensure the provision of environmentally responsible options and solutions to clients i. encourage the adoption of similar standards by the Group s principal suppliers and contractors Gender Diversity The Board believes that the Group will derive substantial social and economic benefits from having a genuinely diverse workplace. Accordingly, the Board is committed to promoting gender diversity throughout the Group. The Board has incorporated gender diversity in the terms of reference of the Remuneration and Nominations Committee and continues to actively address the issue at all levels of the Group. a. monitor its compliance with all relevant legislation b. continually assess and improve the impact of its operations on the environment c. ensure the provision of a safe and healthy working environment d. encourage employees to participate actively in the management of environmental and occupational health and safety issues Page 7 Corporate Governance Framework www.smec.com