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Corporate Governance

The AGL Board considers best practice corporate governance standards support sustainable performance by AGL over time. The Board is committed to best practice standards of governance underpinning how AGL conducts its business.

Principles of Corporate Governance

In determining what is best practice governance for AGL, the Board's philosophy is to adopt principles, practices and recommendations that are in the best interests of AGL's stakeholders.

Consistent with the ASX Best Practice Recommendations, AGL's corporate governance practices are regularly reviewed and are available below.

Corporate Governance Statement – 2016

This statement has been approved by the Board. It is current as at 26 August 2016.

Print Version: Full 2016 Corporate Governance Statement

AGL’s approach to Corporate Governance

This Statement explains how AGL addresses the ASX Corporate Governance Council’s, ‘Corporate Governance Principles and Recommendations – 3rd Edition' (referred to as either ASX Principles or Recommendations).

Principle 1: Lay solid foundations for management and oversight

Recommendation 1.1 – Companies should establish the functions reserved to the Board and those delegated to the Executive Team

Role of the AGL Board (‘the Board”)

The Board is responsible for the governance of AGL. The role of the Board is to review and approve AGL’s strategic direction and provide effective oversight of management. The Board derives its authority to act from AGL’s Constitution.

The Board's responsibilities are set out in a formal Charter which the Board reviews every two years. The Charter was most recently reviewed and updated in April 2016.

The major powers the Board has reserved to itself are:

  • reviewing and approving AGL’s strategic direction, its business plan and budget and significant strategic initiatives and plans;
  • selecting, appointing and monitoring the performance of the Chief Executive Officer (CEO) and, if appropriate, terminating the appointment of the CEO;
  • monitoring the performance of, and approving the remuneration policies and procedures applying to, the Executive Team and other key management roles;
  • monitoring the timeliness and effectiveness of reporting to shareholders;
  • approving and monitoring policies governing AGL’s relationship with other stakeholders and the broader community, including policies in relation to environmental management and occupational health and safety;
  • considering the social, ethical and environmental impact of AGL’s activities and overseeing the system for managing compliance with AGL’s sustainability policies and practices;
  • monitoring compliance with legislative and regulatory requirements (including continuous disclosure) and ethical standards, including reviewing and approving AGL’s Code of Conduct;
  • monitoring financial outcomes and the integrity of financial reporting;
  • authorising any actions affecting AGL’s capital, including determining AGL’s dividend policy, the amount, nature and timing of dividends to be paid to shareholders and declaring dividends payable to shareholders;
  • reviewing and recommending to shareholders the appointment or, if appropriate, the termination of the appointment of the external auditor; and
  • monitoring the effectiveness of AGL's systems of internal compliance, risk management and control, and systems of legal compliance that govern AGL’s operations.

AGL’s Constitution and the Board Charter enable the Board to delegate certain activities to Committees and management. The roles and responsibilities delegated to the Board Committees are enshrined in the Charters of each of the four established Committees. They are:

  • Nominations Committee (see Principle 2);
  • Audit and Risk Management Committee (see Principle 4);
  • Safety, Sustainability and Corporate Responsibility Committee (see Principle 7.4); and
  • People and Performance Committee (see Principle 8).

Timetables for Board and Committee meetings are agreed annually in advance.

Non-executive Directors also participate in due diligence committees established from time to time in relation to the funding of transactions which require the preparation and distribution of documents inviting shareholders and other recipients to invest in AGL securities.

Delegation to the CEO and the Executive Team

The Board has delegated to the CEO responsibility for implementing AGL’s strategic direction and for managing AGL’s day-to-day operations. The CEO has authority to sub-delegate to the Executive Team. Specific limits on the authority delegated to the CEO and the Executive Team are set out in the Delegated Authorities approved by the Board.

The Executive Team comprises the CEO and senior managers who report directly to the CEO.

Recommendation 1.2 – Companies should carry out appropriate checks of board candidates and provide information to shareholders that is material to their candidacy

The Board has established a Nominations Committee (refer 2.1) whose responsibilities include overseeing arrangements for the effective appointment of new Directors. When considering the appointment of a new Director, the Committee may engage the services of an executive recruitment firm to assist in identifying suitable candidates to be shortlisted for consideration for appointment to the Board and to carry out appropriate reference checks before the Board makes an offer to a preferred candidate.

Newly appointed directors must stand for reappointment at the next subsequent Annual General Meeting (AGM). The Notice of Meeting for the AGM provides shareholders with information about each Director standing for election or re-election including details of their relevant skills and experience.

Recommendation 1.3 – Companies should have a written agreement with each director and Executive setting out the terms of their appointment

New Directors consent to act as a director and receive a formal letter of appointment which sets out their duties, responsibilities, rights and remuneration entitlements.

Each member of AGL’s Executive Team (including the CEO) is employed under a Service Agreement which sets out the terms on which the Executive is employed including details of the Executive’s duties, responsibilities, rights and remuneration entitlements. The Service Agreement also sets out the circumstances in which the employment of the Executive may be terminated by either AGL or the Executive, including details of notice periods and the amounts payable to the Executive as a consequence of the termination by AGL of the Executive’s employment.

Recommendation 1.4 – The company secretary of a listed entity should be accountable directly to the Chair of the Board for matters relevant to the Board

AGL’s Company Secretary fulfils other management responsibilities in addition to company secretarial duties. The formal reporting line of the Company Secretary is to the CEO. For any matter relevant to the company secretarial duties or conduct of the Board, the Company Secretary has an indirect reporting line, and is accountable, to the Chairperson of the Board.

Recommendation 1.5 – Companies should have a policy concerning diversity and disclose that policy, together with measurable objectives for achieving gender diversity and its progress towards achieving those objectives

AGL’s Diversity and Inclusion Policy describes AGL’s approach to diversity and inclusion and how these attributes are to be embedded in AGL workplaces. In this context, diversity covers demographic characteristics such as age, gender, sexual orientation, religion or national or social origin and personal characteristics such as disability, medical condition, pregnancy and other individual characteristics.

The Policy includes specific provisions regarding gender diversity and the positive correlation between increased representation of women on company boards and in senior management positions and the achievement of better financial performance, higher employee retention rates and enhanced corporate image and reputation. The Policy is published on AGL’s website

AGL has established a Diversity & Inclusion Council to support the achievement of a diverse workforce and an inclusive workplace culture. The Council is chaired by Andy Vesey, AGL’s CEO, and is comprised of eight other senior leaders across AGL’s business.

Set out below is a summary of AGL’s gender diversity objective for FY16 and progress made in achieving that objective.

AGL has supported a number of priority activities to increase the proportion of women in senior leadership roles. Progress against these actions is summarised below:

 

FY16 Diversity Objective

Progress made

 1

 AGL will increase the percentage of female appointments to its senior leadership pipeline to 50% by 30 June 2016.

 The rate of external appointments of females to the senior leadership pipeline was 41%. This compares to 33% of external appointments in FY15.
AGL’s ‘Diversity Objective’ has focused on targeting female talent for inclusion on leadership shortlists.
Business units recruiting for traditional (male) gendered occupations have expanded talent sources and broadened the scope of background and experience typically sought for these roles.


AGL has supported a number of priority activities to increase the proportion of women in senior leadership roles. Progress against these actions is summarised below:

1. Increase female representation on shortlists for senior roles

A stronger partnership with internal and external recruitment providers has led to more focussed search processes for qualified female candidates. As a result ten senior women were appointed into male dominated leadership teams in FY16:

  • General Manager Customer, Capability and Insights
  • Manager, Group Financial Services & Systems
  • Manager, Strategy and Business Development, Wholesale Gas
  • Finance Planning and Analysis Manager - Business Customers
  • Finance Planning and Analysis Manager - Energy Markets 
  • Finance Planning and Analysis Manager – Wholesale Markets
  • Head of Finance - Group Operations
  • Head of Digital, Brand & Customer Communications
  • Head of Marketing Services
  • Head of IT New Energy & Corporate

2. Increase men’s and women’s access to flexible working arrangements

In FY16, AGL launched a strategy to create a workplace where working flexibly is the norm, and not the exception. This has meant that flexibility, in some form, can be considered for all new and existing roles.

Before launching the strategy company-wide, the proposed approach to flexible working was piloted in the Marketing & Retail Customers team, which included roles in sales, contact centres and office based environments. The results of the three-month pilot were compelling, and reported an uplift in engagement and productivity across the team.

3. Increase support and advocacy for women in the recruitment process for senior roles

In FY15, AGL developed initiatives to enhance advocacy for women participating in job selection processes. These initiatives have been maintained in FY16. For example, selection processes for senior roles required at least one woman on the short list, and a commitment to maintain any agreed flexible working arrangements for key talent who may transition into new roles. Where practicable, we try to ensure interviews are conducted by a mix of men and women.

4. Increase women’s access to key leadership development programs

AGL’s Leadership Development Program for emerging female leaders, Illuminate, was piloted in late 2014. The program demonstrated positive outcomes in supporting women’s career progression and leadership capability. Based on its success, a further program was offered in FY16 and 18 high potential female leaders participated. The program combines group work, one-on-one coaching and workshops with each participant’s leader. A further six high-potential senior leaders participated in Illuminate Plus, which also provides the opportunity for those leaders to ‘shadow’ Executive Team members.

5. Increase advocacy of men in supporting gender equality

AGL’s Network of Women hosted a forum for male employees to increase their awareness of identified barriers to gender equality and to encourage more male employees to become ‘champions of change’.

AGL’s Network of Women was established in 2012 and is a volunteer employee group with membership open to women and men of AGL who support gender equality, which the CEO supports

6. Increase support and advocacy for women and men pre/during and on return from extended parental leave

In FY15, AGL developed processes to provide support to pregnant women and employees on parental leave who were impacted by organisational change and the restructuring processes undertaken during the financial year. These processes were maintained in FY16, the aim of which are to provide equal opportunity for affected employees to participate in selection processes for available roles. This included a commitment to maintain approved parental leave for employees who either:

  • secured positions following an organisational restructure; or
  • were displaced as a result of an organisational restructure. In this case, employees were able to commence their redeployment at the end of their parental leave period.

AGL’s Working Parents Program for women and men continued during FY16 which includes an informal alumni network to support working parents in keeping in touch.

AGL reports under the Workplace Gender Equality Act 2012 (Cth). Publication of AGL’s Gender Equality Indicators can be found on AGL’s external website.

As at 30 June 2016, the proportion of women employed by the AGL Group (as compared to 30 June 2015) is as follows:

 

 FY15

FY16

Female directors on the Board

25%

33%

Female employees in Executive Positions

12%

14%

Female employees in Senior Leadership Pipeline

33%

34%

Female employees in the company

31%

30%


In relation to:

  • the proportion of female directors on the Board for FY16, AGL has included Ms Sandra McPhee, who retired from the Board with effect from 5pm on 30 June 2016 and Ms Jacqueline Hey, who was appointed to the Board on 21 March 2016; and
  • the proportion of female employees in Executive Positions, Ms Jeni Coutts held the position of Executive General Manager, Stakeholder Relations until 24 June 2016. A search is currently underway for her replacement.

The Board has approved a new three year diversity objective which is based on the participation of women in senior leadership roles. For the financial year commencing 1 July 2016, the new metric is as follows:

  • AGL will increase the representation of women in the senior leadership pipeline to 40% by 30 June 2019.

AGL will continue to track and report on initiatives helping to progress the supporting objectives established in FY16 (as detailed above).

The Board has also committed to achieving a target that, by 2018, 30% of the non-executive Directors will be female. As at the date of this document, it is 28.5%. However, on 10 August 2016, AGL announced to the ASX its intention to appoint Diane Smith-Gander as a non-executive Director to the Board, and that Bruce Phillips will be retiring from the Board following AGL’s Annual General Meeting (AGM) on 28 September 2016. Ms Smith-Gander will stand for election at the AGM and, subject to approval by AGL’s shareholders, her appointment will take effect immediately thereafter. If appointed, then with effect from the close of the AGM, approximately 43% of the non-executive Directors on the Board will be female.

Recommendation 1.6 – Companies should disclose the process for evaluating the performance of the Board, its committees and individual Directors

Evaluation of Board and individual Directors

The Board regularly reviews its own performance and the performance of individual Directors. The most recent review, which was conducted during the year, involved the completion of a survey by all of the Directors. The results of the review were discussed at a subsequent Board meeting.

An independent review of the performance of the Board is conducted every two years. The next independent review is scheduled for 2017.

Evaluation of Board Committees

The Charters for each of the Board Committees require that each Committee annually review its own performance. During FY16, each Board Committee set aside time at one of its meetings to review and discuss the Committee’s performance over the past 12 months. Each Committee was satisfied that it had been effective in performing its responsibilities under its Charter (whilst also identifying areas for continuous improvement).

Recommendation 1.7 – Companies should disclose the process for evaluating the performance of the Executive Team

Executive Team performance evaluations have been conducted for the financial year ended 30 June 2016. Details of the evaluation process and the linkages between the result of performance evaluations and remuneration are disclosed in the Remuneration Report which forms part of the 2016 Annual Report.

Principle 2: Structure the Board to add value

AGL’s Constitution provides for a minimum of three and a maximum of ten directors.

The Directors of AGL at any time during the financial year are listed with a brief description of their qualifications, appointment date, experience and special responsibilities in the Annual Report.

The Board met 15 times during the financial year. Director’s attendances are set out in the Directors’ Report which forms part of the 2016 Annual Report.

Recommendation 2.1 – The Board should establish an appropriately structured nomination committee

The Board has established a Nominations Committee. The Committee comprises all of AGL’s non-executive Directors.

The Committee has adopted a formal Charter that is required to be reviewed at least every two years. The Charter was most recently reviewed and updated in June 2016. A copy of the Charter is available on AGL’s website.

The Committee is responsible for:

  • reviewing the skills, knowledge and experience a Director should have having regard to AGL’s operational, financial and strategic objectives;
  • reviewing the structure, size and composition of the Board and Board Committees;
  • developing and implementing a process for evaluating Board, Committee and individual Director performance;
  • developing selection criteria for the appointment of new Directors and overseeing arrangements for the effective appointment and induction of new Directors; and
  • developing succession plans for non-executive Directors to maintain an appropriate mix of skills, experience, expertise and diversity on the Board.

The Committee met four times during the financial year.

Details of Directors’ attendances are set out in the Directors’ Report which forms part of the 2016 Annual Report.

Recommendation 2.2 – The Board should establish and disclose a board skills matrix on the mix of skills and diversity for Board membership

AGL seeks to maintain a Board of Directors with a broad range of financial and other skills, experience and knowledge relevant to overseeing the business of a vertically integrated energy company. As well as general skills expected of a Director, AGL seeks to maintain a board which at a minimum collectively has:

  • relevant experience within energy or related industries with direct relevance to AGL’s strategy;
  • an understanding of risk management;
  • a background in, or understanding of, customer insights and customer strategy;
  • knowledge of governance and compliance matters in listed entities;
  • experience in people matters including employee engagement,
  • management development, succession and remuneration;
  • experience on the boards of listed companies; and
  • an ability to contribute to gender diversity.

Recommendation 2.3 – The Company should disclose whether its Directors are independent

AGL considers a Director to be independent if the Director is independent of management and free of any business or other relationship that could materially interfere, or be perceived as interfering, with the exercise of an unfettered and independent judgement in relation to matters concerning AGL.

In determining whether a Director is independent, the Board has considered whether the Director (or any of the Director’s associates):

  • within the last three years, has been employed in an executive capacity by AGL or any of its related bodies corporate;
  • within the last three years, has been a principal of a material professional adviser or a material consultant to AGL or any of AGL’s related bodies corporate;
  • is a material supplier to, or customer of, AGL or any of AGL’s related bodies corporate, or an officer of, or otherwise associated directly or indirectly with, a material supplier or customer;
  • is a substantial shareholder of AGL or an officer of, or otherwise associated directly with, a substantial shareholder of AGL;
  • has a material contractual relationship with AGL or any of AGL’s related bodies corporate other than as a Director or shareholder of AGL;
  • has close family ties with any person that falls into the categories outlined above;
  • has been a Director for more than 9 years; or
  • has any interest or any business or other relationship which could, or could reasonably be perceived to, materially interfere with the Director’s ability to act in AGL’s best interests.

The Board has determined that each non-executive Director is, and was throughout the entirety of the financial year, independent.

No Director has received, or has become entitled to receive, a benefit under or in relation to a contract between AGL or any of its related bodies corporate and the Director, or a firm in which the Director is a substantial member, or an entity in which the Director has a substantial financial interest, other than:

  • in the case of non-executive Directors, remuneration as disclosed in the Annual Report which includes participation in the shareholder approved AGL Share Purchase Plan; and
  • in the case of the CEO, a contract of employment and entitlements under AGL’s Long-Term Incentive Plan.

Directors have unfettered access to AGL records and information reasonably necessary to fulfil their responsibilities. Directors also have access to the Company Secretary on any matter relevant to their role as a Director. In addition, the Board has access to other relevant senior management to seek additional information concerning AGL’s business.

Under AGL’s Board Charter, the Board collectively, and each Director individually, has the right to seek independent professional advice at AGL’s expense to help them carry out their responsibilities.

It is usual for the non-executive Directors to confer, without management being present, at the start of each scheduled Board meeting.

Recommendation 2.4 – The majority of the Board should be comprised of independent Directors

As at 30 June 2016, the Board comprised eight non-executive Directors and one executive Director. This includes Sandra McPhee, who retired from the Board with effect from 5pm on 30 June 2016. The executive Director is AGL’s CEO, Andy Vesey.

Recommendation 2.5 – The Chair should be an independent Director

Under AGL’s Constitution, the Board elects a Chairperson from amongst the non-executive Directors. This means that the roles of Chairperson and Chief Executive Officer are not exercised by the same individual. It is a requirement of AGL’s Board Charter that the Chairperson be independent.

The Board is satisfied that AGL’s Chairperson, Jerry Maycock is, and has been throughout the year, an independent Director.

The Chairperson presides over AGL’s Board meetings and shareholder meetings. Under AGL’s Board Charter, the Chairperson is also responsible for, among other things:

  • leading the Board in reviewing and discussing Board matters;
  • managing the efficient organisation and conduct of the Board’s function;
  • promoting constructive relations between Board members and between the Board and management;
  • briefing all Directors in relation to issues arising at Board meetings;
  • facilitating effective contribution by all Directors and monitoring Board performance;
  • promoting constructive relations between Board members and between the Board and management;
  • overseeing the implementation of policies and procedures to renew the composition of the Board; and
  • reviewing corporate governance matters with the Company Secretary and reporting on those matters to the Board.

Recommendation 2.6 – The Board should establish a program for inducting new directors and provide appropriate professional development opportunities for Directors

The formal letter of appointment and an induction pack provided to Directors contains detailed information to allow the new Director to gain an understanding of:

  • AGL, its operations and governance systems;
  • the rights, duties and responsibilities of Directors;
  • the role of each Board Committee;
  • the roles and responsibilities of the Executive Team; and
  • AGL’s financial, strategic, and operational risk management position.

New Directors undertake an induction program which comprises:

  • review of an information pack which includes a copy of AGL’s Constitution, Board and Committee Charters, most recent Annual Report, most recent Sustainability Report, most recent Appendix 4D or 4E and market results presentation, most recent monthly Group Performance Report, AGL’s strategic plan, organisational chart, Deed of Access, Insurance and Indemnity and details of AGL’s Directors and Officers insurance policy and a copy of the register of AGL’s most significant risks;
  • a program of meetings with members of AGL’s Executive Team; and
  • visits to AGL’s main operational sites.

As part of a program of ongoing Director education, the Board regularly receives presentations on a range of topics generally relevant to AGL’s business activities.

Principle 3: Act ethically and responsibly

Recommendation 3.1 – Companies should establish a Code of Conduct

AGL has a Code of Conduct that applies to AGL and its Directors, employees and contractors (all of which are referred to as “employees” in the Code).

The Code of Conduct sets out a number of overarching principles of ethical behaviour which are set out under the following headings:

Acting honestly and with integrity

Observing the law, voluntary commitments and internal standards

Valuing and maintaining professionalism

Respecting confidentiality

Managing conflicts of interest

Looking after our employees

Looking after the community

Training on the Code of Conduct is part of the induction process for new AGL employees. It is also a requirement that AGL employees complete on-line refresher training about the Code of Conduct.

The Code of Conduct provides a mechanism to enable employees to report actual or suspected breaches, including an independently monitored telephone service to allow for anonymous reporting. An Ethics Panel oversees the application of the Code of Conduct in AGL, including investigating alleged breaches of the Code, monitoring compliance and recommending amendments to the Board. The Ethics Panel comprises the General Counsel & Company Secretary, the Executive General Manager of People and Culture, the Head of Group Audit and an independent person who has expertise in managing employee grievances. The Ethics Panel met twice during the year.

AGL’s Code of Conduct is available on AGL’s website.

Compliance Management Policy

AGL’s Compliance Management Policy sets out AGL’s compliance management objectives, its commitment to maintaining a culture of compliance (including compliance with the AGL Code of Conduct) and to clearly articulate responsibilities of all AGL personnel in relation to compliance. The Policy is available on AGL’s website.

Principle 4: Safeguard integrity in corporate reporting

Recommendation 4.1 – The Board should establish an appropriately structured audit committee

The Board has established an Audit and Risk Management Committee. Its primary function is to assist the Board to fulfil its responsibilities to provide shareholders with timely and reliable financial reports and to protect the interests of shareholders, customers, employees and the broader community through the effective identification, assessment, monitoring and management of risks.

Structure of the Audit and Risk Management Committee

Under its Charter, the Audit and Risk Management Committee must have at least three members, all of whom must be independent non-executive Directors. The Charter also requires that all members have a working familiarity with basic accounting and finance practices and that at least one member have financial expertise. The Committee must also include members with an understanding of the industry in which AGL operates.

The Committee currently comprises five members as detailed in AGL’s 2016 Annual Report. Other non-executive Directors may attend meetings.

The Chair, John Stanhope, has financial expertise as a qualified accountant. Further details of the qualifications and experience of all Committee members are set out in the Directors’ Report which forms part of the 2016 Annual Report.

The CEO, CFO, Company Secretary, Assistant Company Secretary, Head of Group Audit and the external auditor attend Committee meetings at the discretion of the Committee. The Committee meets privately with the external auditor on general matters concerning the external audit and other related matters, including the half-year and full-year financial reports. The Committee also meets privately with the Head of Group Audit.

The Company Secretary is the secretary to the Committee. Copies of the minutes of a meeting of the Committee are distributed to the Board for discussion at the next full Board meeting. The Chairperson of the Committee reports to the Board on the Committee’s conclusions and recommendations.

The Committee collectively, and its members individually, have access to internal and external resources, including access to advice from external consultants or specialists.

The Committee met six times during the financial year. Directors’ attendances are set out in the Directors’ Report which forms part of the 2016 Annual Report.

Charter of the Audit and Risk Management Committee

The Committee operates under a formal Charter published on AGL's website. The Charter is required to be reviewed by the Committee and updated at least every two years. The Charter was most recently reviewed and updated in June 2016 and is available on AGL’s website.

The Charter sets out the roles and responsibilities, composition, structure and membership requirements of the Committee.

The Committee’s primary responsibilities include overseeing and reviewing the following matters:

in relation to audit:

  • the integrity of the financial statements and financial reporting systems of AGL and its related bodies corporate;
  • external audit engagement, including the external auditor’s qualifications, performance, independence and fees;
  • performance of AGL’s internal audit function; and
  • the integrity of the AGL Group’s corporate reporting (including oversight of the AGL Group’s regulatory and statutory reporting requirements); and

in relation to risk management:

  • reviewing and recommending AGL’s Risk Appetite Statement and main ‘Tier 1’ risks’ to the Board for approval; and
  • reviewing and monitoring the implementation of policies and procedures for identifying, assessing, monitoring and managing risk.

Monitoring performance of the external auditor

AGL’s Auditor Independence Policy contains details of the procedures for the selection, appointment, independence and performance of the external auditor.

Under the Auditor Independence Policy, the external auditor is precluded from providing any services that might threaten their independence, or conflict with their assurance and compliance role.

Reports on the provision of auditing and related services are provided to the Committee. The Committee has concluded that non-audit services provided during the year did not compromise the external auditor's independence requirements under the Corporations Act 2001 (Cth).

The performance of the external auditor is discussed by the Committee following completion of the full year financial statements. The Chairperson of the Committee subsequently meets with the external auditor to discuss recommendations for improvements to the conduct of the audit.

AGL’s Auditor Independence Policy is published on AGL’s website.

Recommendation 4.2 – CEO and CFO certification of financial statements

The CEO and the CFO have provided the Board with written assurances that the declaration provided in accordance with section 295A of the Corporations Act 2001 (Cth) is founded on a sound system of risk management and internal compliance and control and that the system is operating effectively in all material respects in relation to financial reporting risks.

Recommendation 4.3 – External auditor availability at AGM

The external auditor attends AGL's AGM. Shareholders may submit written questions to the auditor to be considered at the meeting in relation to the conduct of the audit and the preparation and content of the Independent Audit Report by providing the questions to AGL at least five business days before the day of the meeting. Shareholders are also given a reasonable opportunity at the meeting to ask the auditor questions relevant to the conduct of the audit, the Independent Audit Report, the accounting policies adopted by AGL and the independence of the auditor.

Principle 5: Make timely and balanced disclosure

Recommendation 5.1 – Companies should establish continuous disclosure policies and ensure compliance with those policies

Market Disclosure

AGL’s Market Disclosure Policy describes AGL's continuous disclosure obligations and how they are managed by AGL. The Policy is reviewed biennially and is published on AGL’s website. It was most recently reviewed in June 2015.

The Market Disclosure Committee comprises the CEO, the Company Secretary, the CFO and the Head of Capital Markets. It is responsible for monitoring compliance with the Market Disclosure Policy.

The Committee is also responsible for recommending changes to the Market Disclosure Policy.

Accountability

The Company Secretary reports to the Board quarterly on matters that were either notified or not notified to the ASX. Directors receive copies of all announcements immediately after notification to the ASX. All ASX announcements are available in the Media centre on the AGL website.

Each member of AGL’s Executive Team must confirm in writing to the Board, on a quarterly basis, that matters which might need to be disclosed have been brought to the attention of the Continuous Disclosure Officer (currently the General Counsel & Company Secretary) for review.

Financial market communications

Communication with the financial market is the responsibility of the Board Chairperson, CEO, CFO and Head of Capital Markets. The Market Disclosure Policy covers briefings to institutional investors and stockbroking analysts, general briefings, one-on-one briefings, blackout periods, compliance and review as well as media briefings.

The substantive content of all market presentations regarding the half year and full year financial results and all statements relating to AGL’s future earnings performance must first be approved by the Board before they are disclosed to the market.

Principle 6: Respect the rights of security holders

Recommendation 6.1 – Companies should provide information about itself and its governance to shareholders on its website

AGL’s website at www.agl.com.au provides detailed information about its business and operations. Details of AGL’s Board Members can be found here and the Executive Team here.

The Investor Centre link on AGL’s website contains a wide range of information relevant to shareholders. It allows shareholders to view all ASX and media releases since at least December 2007; various investor presentations; a copy of the most recent Annual Report and Annual Reports for at least the two previous financial years; the notice of meeting and accompanying explanatory material for the most recent AGM and the AGMs for at least the two previous financial years; an Investor Calendar and links to Share Registry Services provided by Link Market Services.

AGL also publishes an annual sustainability report setting out details of its sustainable business practices and strategy. AGL’s current sustainability report can be also accessed from the website here.

Shareholders can find information about AGL’s corporate governance on its website at www.agl.com.au/CorporateGovernance. This includes AGL’s Constitution, Board and Board Committee Charters, and extensive list of AGL’s other Policies that support corporate governance.

The following documents are published on the AGL website under About AGL/Who We Are:

  • Constitution
  • Corporate Governance Statement
  • Board Charter
  • People and Performance Committee Charter
  • Audit and Risk Management Committee Charter
  • Safety, Sustainability and Corporate Responsibility Charter
  • Nominations Committee Charter
  • Code of Conduct
  • Securities Dealing Policy
  • Compliance Management Policy
  • Auditor Independence Policy
  • Market Disclosure Policy
  • Risk Management Policy
  • Health and Safety Policy
  • Environment Policy
  • Privacy Policy
  • Greenhouse Gas Policy
  • Diversity and Inclusion Policy
  • Political Donations Policy
  • AGL Supplier Code of Conduct
  • AGL Dispute Resolution Policy
  • Dividend Reinvestment Plan

Recommendation 6.2 – Companies should design and implement an investor relations program to facilitate two-way communication with shareholders

Although AGL has not established a formal shareholder communications policy, it does take appropriate measures to keep shareholders informed about its activities and to listen to issues or concerns raised by shareholders.

AGL has an investor relations program which focuses on both retail and institutional shareholders. The program is tailored each year to target domestic and international investors as well focusing on specific industry issues. As well as attending broker-sponsored conferences, AGL participates at several industry conferences throughout each year. Key presentations are lodged with the ASX.

Fundamental to AGL’s investor relations program is the management of its continuous disclosure obligations which facilitates all shareholders having access to important company information. In addition to lodging this information with the ASX, AGL uses its website to make available to shareholders information about the company and its activities.

The Board papers regularly include an investor relations report the content of which includes feedback from shareholders and issues raised by the investment community. AGL also regularly engages with corporate governance advisory firms and shareholder representative bodies to understand market expectations on topics including governance, ESG and remuneration. The Chairperson of the Board and the Chairperson of the People and Performance Committee both participate in meetings with such organisations so the Board can be in a better position to receive direct feedback about the effectiveness of AGL’s corporate governance arrangements.

Recommendation 6.3 – Companies should disclose the policies and processes it has in place to facilitate and encourage participation at meetings of shareholders

Notices of meeting sent to AGL’s shareholders comply with the “Guidelines for notices of meeting” issued by the ASX in August 2007. In relation to AGMs, shareholders are invited to submit questions before the meeting.

The Chairperson also encourages shareholders at the AGM to ask questions and make comments about AGL’s operations and the performance of the Board and senior management. The Chairperson may respond directly to questions or, at his discretion, may refer a question to another Director, the CEO or a member of the Executive Team.

New Directors or Directors seeking re-election are given the opportunity to address the AGM and to answer questions from shareholders.

AGL has adopted the practice of conducting a poll on each motion being considered at the meeting. Shareholders in attendance at the AGM are also given the opportunity to vote by a show of hands before the poll is conducted.

Recommendation 6.4 – Companies should provide the option to send and receive communications from the company and its share registry in electronic form

Shareholders have the option of electing to receive all shareholder communications, including dividend statements, by e-mail. AGL provides a printed copy of the Annual Report to those shareholders who have specifically elected to receive a printed copy. Other shareholders are advised that the Annual Report is available on the AGL website.

All announcements made to the ASX are available to shareholders by email notification when a shareholder provides the AGL Share Registry with an email address and elects to be notified of all AGL ASX announcements.

Shareholder meetings are webcast and analyst/media briefings in relation to half-year and full year financial results and other significant events can be heard by teleconference.

The AGL Share Register is managed and maintained by Link Market Services Limited. Shareholders can access their shareholding details or make enquiries about their current shareholding electronically by quoting their Shareholder Reference Number (SRN) or Holder Identification Number (HIN), via the Link Market Services investor centre or by emailing aglenergy@linkmarketservices.com.au

Principle 7: Recognise and manage risk

Recommendation 7.1 – Companies should establish an appropriately structured risk management committee for the oversight of material business risks

The Board has established an Audit and Risk Management Committee. Its responsibilities include reviewing and recommending AGL’s Risk Appetite Statement and main risks’ to the Board for approval and reviewing and monitoring the implementation of policies and procedures for identifying, assessing, monitoring and managing risk.

The Committee receives regular presentations on AGL’s material business risks and the controls in place to mitigate the consequences of those risks. AGL’s main risks are reviewed annually by the Committee and the Board. The Committee also receives regular presentations from management throughout the year on specific risk topics. The Committee has responsibility for approving the audit plan submitted annually by Group Audit. The audit plan is based on an assessment of AGL’s main risk exposures.

Details of the structure and Charter of the Audit and Risk Management Committee are set out in Recommendation 4.1

Recommendation 7.2 – The Board or a Committee of the Board should review the company’s risk framework at least annually to satisfy itself that it continues to be sound

Risk Management Policies

AGL faces a wide variety of risks due to the nature of its operations and the regions in which it operates. Details of AGL’s main risks are set out in the 2016 Annual Report.

AGL systematically examines all operational and financial activities to identify major risk exposures using an enterprise-wide risk program based on ISO31000, the international standard on risk management. This program is supported by:

  • AGL's Risk Management Policy which sets out AGL’s objectives for risk management and articulates the responsibilities of all AGL personnel in relation to the management of risk; and
  • AGL’s Risk Management & Assessment Framework the objectives of which are to provide guidance to AGL employees on how to conduct risk assessments, ensure consistency and simplicity in approach to risk identification, evaluation and management and establish a common ‘risk’ language across the business.

The annual review of AGL’s main Risks was completed by the Audit & Risk Management Committee on 6 June 2016 and was approved by the Board on 28 June 2016.

AGL has a number of other policies that directly or indirectly serve to reduce and manage risk. These include, but are not limited to the following:

  • Compliance Management Policy;
  • Market Disclosure Policy;
  • Securities Dealing Policy;
  • Code of Conduct;
  • Delegations of Authority Policy;
  • Health and Safety Policy;
  • Environment Policy;
  • Greenhouse Gas Policy;
  • Wholesale Markets Risk Management Policy;
  • Treasury Policy; and
  • Privacy Policy.

AGL also has in place a number of business unit and/or site based policies and procedures to allow for the safe and reliable operation of power generation plants and other operating assets.

Roles and responsibilities

The Risk Management Policy and the other policies listed above, describe the roles and responsibilities for managing risk. A copy of the Risk Management Policy is available on AGL’s website. This includes, as appropriate, details of the responsibilities allocated to the Board or to the Audit and Risk Management Committee (Committee), the Executive Team, AGL’s business units (including employees) and AGL’s Group Audit function.

Recommendation 7.3 - Companies should disclose the structure and role of its internal audit function

Group Audit is AGL’s internal audit function which provides the Board and senior management with an independent and objective evaluation of the adequacy and effectiveness of management’s control over risk.

Group Audit is governed by a Charter approved by the Audit & Risk Management Committee that sets out the purpose, role, scope and high level standards for the function. Group Audit covers the governance, risk management and internal control frameworks of AGL and its wholly owned subsidiaries.

The Head of Group Audit has a direct reporting line to the Chairperson of the Audit and Risk Management Committee and an administrative reporting line to the General Counsel & Company Secretary. Group Audit delivers its objectives through accessing the professional skills and capabilities of:

  • trained audit professionals who are part of the Group Audit function;
  • other professionals within AGL’s business with specific skills and experience; and
  • services provided by external consultants in respect of specialist technical or operational areas.

Group Audit’s responsibilities include providing regular reports to the Audit and Risk Management Committee and raising any significant issues with that Committee.

Recommendation 7.4 – Companies should disclose their economic, environmental and social sustainability risks and how those risks are managed

The Safety, Sustainability and Corporate Responsibility Committee assists the Board in enabling AGL to operate its businesses ethically, responsibly and sustainably. The Committee has a formal Charter that is available on AGL’s website.

The Committee currently comprises three non-executive and independent Directors.

The primary function of the Committee is to:

  • review and oversee, on behalf of the Board, the development and implementation of policies and procedures which enable AGL to operate its business safely, ethically, responsibly and sustainably; and
  • assist the Board in monitoring the decisions and actions of management in achieving AGL’s objective to be a safe, ethical, responsible and sustainable organisation.

The Committee met four times during the financial year. All of the meetings were held at AGL’s operational sites.

An overview of AGL’s sustainable business strategy, together with a detailed report about AGL’s economic, environmental and social sustainability risks is included in AGL’s Sustainability Report which can be found here.

Principle 8: Remunerate fairly and responsibly

Recommendation 8.1 – The Board should establish an appropriately structured remuneration committee

The Board has established a People and Performance Committee (which has responsibilities within the scope of those of a remuneration committee). The Committee currently comprises four non-executive and independent Directors.

The Committee has a formal Charter that is required to be reviewed at least every two years. The Charter was most recently reviewed and updated in June 2016. A copy of the Charter is available on AGL’s website.

The Committee is responsible for:

  • reviewing the performance and remuneration of senior management; and
  • reviewing and ratifying AGL’s remuneration and employment policies, procedures and programs.

These responsibilities include making recommendations to the Board in relation to the following matters:

  • the remuneration of Directors;
  • the remuneration, recruitment, retention and termination policies applicable to AGL’s senior management;
  • talent management and succession planning for key management roles;
  • guidelines for incentive plans, particularly as they relate to the Executives;
  • the superannuation arrangements in place for AGL employees; and
  • AGL employment policy matters.

In making recommendations to the Board in relation to remuneration and remuneration policies, the Committee also reviews the remuneration of female employees relative to the remuneration of male employees at all levels across AGL.

The Committee has appointed an independent advisor to provide advice on remuneration related matters.

The CEO attends meetings of the Committee by invitation when required to report on and discuss senior management performance, remuneration and related matters, but is not present at meetings when his own performance or remuneration is discussed.

Recommendation 8.2 – The Company should distinguish between non-executive Directors’ remuneration and that of executive Directors and Executives

AGL’s remuneration structure distinguishes between non-executive Directors and that of the CEO and the Executive Team. A Remuneration Report required under Section 300A(1) of the Corporations Act 2001 (Cth) is provided in the Directors’ Report which forms part of the 2016 Annual Report.

Recommendation 8.3 – The Company should establish a policy on whether participants in equity based remuneration schemes are able to enter into transactions which limit the economic risk of participating in those schemes

AGL’s Securities Dealings Policy specifically prohibits AGL Directors, Executives and employees from using derivatives in relation to any unvested AGL securities which have been granted under any of AGL’s equity based remuneration schemes. For this purpose, a derivative includes any option, forward contract, swap, futures contract or warrant, or any other arrangement, which itself or in combination with one or more other derivatives would have the effect of providing a greater benefit than would otherwise have been realised in respect of unvested AGL securities.

Derivatives may be used in relation to AGL securities which have vested, provided any dealing in those derivatives complies with the other requirements of AGL’s Securities Dealings Policy, a copy of which is available here.

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