Corporate governance

The Board of Directors (the Board) is responsible for the corporate governance of Ergon Energy Corporation Limited and its controlled entities (the Group) (PDF 6.4 kb).

Our approach to corporate governance

The Board and management are committed to conducting all business activities legally, ethically and with strict observance of the highest standards of integrity and propriety.

To achieve this requires sound corporate governance practices and policies that have been adopted by the Board and implemented throughout all levels of management.

Each director is expected to have regard for these practices and policies in the performance of her or his duties as a director of the Company.

Good corporate governance is a fundamental part of the culture and the business practices of the Group.

Our corporate governance practices are further described in the "Corporate Governance Statement" on page 40 of our 2016 Annual Stakeholder Report (PDF 1.9 mb).

The Australian Stock Exchange (ASX) Corporate Governance Council released the third edition of the Corporate Governance Principles and Recommendations (the Principles) in March 2014. We have reviewed its current practices and established that, where the Principles are applicable to a Government Owned Corporation (GOC), it is substantially in accordance with the Principles.

The State of Queensland (Queensland Treasury) issued Version 2 of the Corporate Governance Guidelines (the Guidelines) for Government Owned Corporations in February 2009.

These guidelines have been drafted having regard to the ASX Principles, Reports from the Queensland Auditor-General, the OECD Principles of Corporate Governance and Guidelines for Managing Conflicts of Interest in the public sector issued by the Crime and Corruption Commission.

In some instances, the recommendations in the guidelines differ from those in the Principles. Where appropriate, new policies and procedures have been developed in response to these differences.

We will continue to review our policies and practices in light of further developments in corporate governance and new guidelines that are generally accepted by the business community.

The corporate governance section on this website will be updated with any changes to the company's governance arrangements.

Board of Directors

The Directors of the parent company (Ergon Energy Corporation Limited) are appointed by the Governor-in-Council in accordance with the Government Owned Corporations Act 1993 (Qld) (GOC Act) and are accountable under the provisions of that Act to the Queensland Government shareholding ministers.

All, including the Chairman, are non-executive directors and, in light of the interests disclosed by those directors, are assessed as being independent based on the seven criteria for assessing the independence of directors under the ASX Corporate Governance Principles.

When conducting the assessment, materiality is judged on a case-by-case basis by reference to each director's individual circumstances rather than by general materiality thresholds.

The Board has set out the functions that have been delegated to it in the Constitution and at law and those delegated to management in a Board Charter (PDF 161.0 kb) and a policy document, Delegation of Powers Policy (PDF 31.2 kb).

ASX Principles Recommendation 1.1, 2.1, 2.2, 2.3, 2.4, 2.5

GOC Guidelines, Principle 1, 2

Board performance

Evaluation

The Board reviews and evaluates the performance of itself and Committees on a regular basis with the guidance of the Chairman.The framework for the conduct of the review is set out in a Board Performance Evaluation Policy which provides that the process selected may vary from year to year depending upon the circumstances and that a report of the evaluation is to be provided to the shareholding Ministers.

External consultants were engaged to facilitate the 2009 review. This involved interviews with individual directors and a Board workshop to present the findings from the interviews and to consider areas for improvement in board performance.

ASX Principles Recommendation 1.6

GOC Guidelines, Principle 2.

Induction and continuing education

Senior management, working with the Chairman, provides an orientation program for new directors in order to assist them in fulfilling their duties and responsibilities.

The program includes discussions with the Chief Executive and members of the Executive Management Team, the provision of reading material, tutorials and workshops.

These include details of the director's rights, duties and responsibilities, the Company's strategic plans, its significant financial, accounting and risk management issues, its Code of Conduct, management structure and its internal and external auditors.

A board handbook is made available to directors to facilitate the board operations. Directors are also encouraged to keep up to date on relevant topical issues.

ASX Principles Recommendation 2.6

GOC Guidelines, Principle 1

Access to information and independent professional advice

The Directors Code of Conduct (PDF 22.4 kb) provides for each director to have the right to seek independent professional advice, at the Company's expense, subject to the prior approval of the Chairman.

The Board has the authority to conduct or direct any investigation required to fulfil its responsibilities and has the ability to retain, at the Company's expense, such legal, accounting or other services, consultants or experts as it considers necessary from time to time in the performance of its duties.

To effectively discharge its responsibilities, the Board may request additional information from management.

In the normal course, requests made by a director for access to information from management, or access to an employee, should be made through the Chief Executive or Company Secretary or otherwise in accordance with protocols or arrangements approved by the Board or Chief Executive.

The Company has entered into a Deed of Access with each director, giving them right of access to all documents that were provided to them during their term in office, and for a period of ten years after ceasing to be a Director.

ASX Principles Recommendation 4.1, 7.1, 8.1

GOC Guidelines, Principle 2

Conflicts of interest

Directors and senior executives are expected to observe the highest standards of ethical behaviour, the requirements for which are defined in the Directors Code of Conduct (PDF 22.4 kb) and Employees Code of Conduct (PDF 130.0 kb) policies. These standards are further expanded in the Conflict of Interest Guidelines (PDF 36.5 kb).

Directors are expected to avoid any action, position or interest that conflicts with an interest of the Company or gives the appearance of a conflict.

In accordance with the Corporations Act (2001) any director with a material interest in a matter must not be present when the matter is being considered and may not vote on the matter.

A director who has a material personal interest in a matter that relates to the affairs of the Company must give the other directors notice of such interest.

The Board regularly reviews the register of directors' interests and all new declarations of interest by directors should be provided in writing to the Company Secretary who is to ensure that the declaration is brought to the attention of the other directors.

The Board has approved the Trading in Securities Policy (PDF 33.0 kb) which provides that directors, officers or employees who may, in the course of their duties, have access to inside information about a company's securities that is not generally available to others must not use this information in deciding whether or not to buy those securities.

ASX Principles Recommendation 3.1

GOC Guidelines, Principle 3

Reporting of unlawful/unethical behaviour

The Company actively encourages the reporting of unlawful/unethical behaviour and corrupt conduct and has established an independent service (FairCall Service (PDF 20.6 kb)) that provides a means by which a person can report suspected fraud, unethical conduct or breach of policy.  Also see our Reportable Conduct Guidelines (PDF 64.1 kb) and Fraud and Official Misconduct Policy (PDF 134.6 kb).

FairCall Service Provider: KPMG

Phone: 1800 500 965 between 8am and 6pm business days.

The service reflects the principles embodied in the various whistle blowers' protection standards and ensures fairness to all concerned.

ASX Principles Recommendation 3.1

GOC Guidelines, Principle 3, 7

Board committees

The Board has established the following committees to assist in the execution of its duties and to allow detailed consideration of complex issues.

All committees consist of non-executive directors and are chaired by a director who is not the chair of the board.

Current committees of the Board and their objectives as detailed in the relevant committee charters are:

ASX Principles Recommendation 4.1, 7.1, 8.1

GOC Guidelines, Principle 1, 4

Risk management, compliance and internal controls

The Board has adopted overarching policies for risk management (PDF 31.9 kb) and compliance (PDF 25.0 kb) which govern the overall approach of the Company to the management of risk.

These policies are designed to ensure that strategic, operational, legal, reputational, financial, and business risks are identified, assessed, monitored, and managed to produce better performance outcomes and minimise unnecessary volatility.

Risks are managed by setting appropriate levels and areas for risk retention and, where necessary, through the use of insurance or other forms of risk financing and risk transfer.

The Board requires the Company and its executives to conduct all business activities in a manner that complies with the law and Board-approved delegated limits of authority.

Considerable importance is placed on maintaining a strong control environment to safeguard the Company's and stakeholders' interests.

Detailed control procedures cover management accounting, financial reporting, project appraisal and approval, environment, health and safety, information technology, security, compliance, and other key risk areas.

As a controlled entity in terms of the Auditor General Act 2009, the shareholders must appoint the Queensland Auditor General as the external auditor for the Company.

An internal audit section has been established and operates under the terms of the Internal Audit Charter (PDF 219.3 kb).

Compliance with control procedures is subject to investigation by Internal Audit as part of an annual plan approved by the Audit and Compliance Committee (PDF 36.1 kb).

Detailed questionnaires on key aspects of operational and financial risks are completed on a quarterly basis by senior management and are reviewed by the Risk Committee (PDF 94.5 kb) and the Audit and Compliance Committee (PDF 36.1 kb).

When presenting financial statements for approval, the Chief Executive and Chief Financial Officer provide a formal statement to the Board that:

  • The Company's financial statements present a true and fair view, in all material aspects, of the Company's financial condition and operational results in accordance with relevant accounting standards
  • The Company's financial statements are founded on a sound system of risk management and internal compliance and control which implements the policies adopted by the Board
  • The risk management and internal control systems are sound and operating effectively in all material respects.

ASX Principles Recommendation 7.1, 7.2, 7.3, 7.4

GOC Guidelines, Principle 4, 7

Remuneration

Directors

Directors are remunerated separately from executive management.

Directors' emoluments are set by State Government regulation with other fees and allowances determined on the basis of meetings attended and expenditure incurred in performing their roles as directors of the Company.

Directors of the Company do not participate in any variable reward or at-risk plan.

ASX Best Practice Recommendation 8.3

Senior executives

The People and Safety Committee (PDF 34.7 kb) recommends executive remuneration to the Board as part of an annual review.

Input is sought from several industry and market surveys (as well as Shareholding Ministers) when determining the level of remuneration for these positions.

The level of remuneration is determined in accordance with the provisions of Guidelines for Executive Remuneration approved by the Shareholding Ministers ensuring that remuneration arrangements for the executives are appropriate.

Executive staff are eligible for an at-risk or variable component that is directly linked to both the overall performance of the Company and their individual efforts against a range of key indicators.

The Board reviews the performance of the Chief Executive based on the achievement of previously agreed Key Performance Indicators and this process cascades to senior executives on a semi-annual basis.

Any at-risk payment is totally contingent on the Board's assessment of the Company's overall performance.

ASX Principles Recommendation 1.2, 8.1, 8.3

GOC Guidelines, Principle 8

Stakeholders' interests

The Board has a formal Directors Code of Conduct (PDF 22.4 kb) to guide compliance with legal and other obligations to legitimate shareholders.

Shareholders

Ergon Energy is required to keep the Shareholding Ministers reasonably informed (Government Owned Corporations Act 1993 Section 122).

The Disclosure to Shareholders Policy (PDF 23.2 kb) has been adopted to ensure that these requirements are met and Ergon Energy will, in addition to any other disclosure obligations, provide the Shareholding Ministers with sufficient information to enable the Shareholding Ministers to properly fulfil their obligations. Ergon Energy will base its disclosures on a 'no-surprises' approach and will ensure that its disclosure of information is:

  • Made in a timely manner
  • Sufficiently factual and does not omit material information
  • Clear and objective (and not overly technical).

ASX Principles Recommendation 6.1, 6.2

GOC Guidelines, Principle 5, 6

Other stakeholders

The Board has also adopted formal policies relating to its obligations to non-shareholder stakeholders such as employees, customers, suppliers, contractors, developers and the community as a whole.

These include areas such as safety, probity, occupational health and safety, employment practices, privacy, and environmental protection.

ASX Principles Recommendation 3.1

GOC Guidelines, Principle 3

Subsidiary companies

The activities of every company in the Group (PDF 6.4 kb) are overseen by their own boards of directors.

The boards of the subsidiary companies have resolved, for the purpose of the power to delegate obtained in the company constitution, to approve, where appropriate, that the Board committees are committees of the subsidiary company.

The boards of the subsidiary companies have also resolved to adopt the Directors Code of Conduct (PDF 22.4 kb) and to adopt applicable Ergon Energy management and governance policies as issued and amended from time to time.

The constitutions of the subsidiary companies provide that the directors may take into account and act in the best interests of the company's holding company in the exercise of their powers as directors of the company.

ASX Corporate Governance Council, Corporate Governance Principles &  Recommendations – 3rd Edition

Principle Reference Compliance
Principle 1: Lay solid foundations for management and oversight

1.1

A listed entity should disclose:

(a) the respective roles and responsibilities of its board and management; and

(b) those matters expressly reserved to the board and those delegated to management.

2, 17

Comply

1.2

A listed entity should:

(a) undertake appropriate checks before appointing a person, or putting forward to security holders a candidate for election, as a director; and

(b) provide security holders with all material information in its possession relevant to a decision on whether or not to elect or re-elect a director.

 

Not Applicable

1.3

Have a written agreement with each director and senior executive setting out the terms of their appointment.

2, 17

Comply

1.4

The company secretary of a listed entity should be accountable directly to the board, through the chair, on all matters to do with the proper functioning of the board.

2

Comply

1.5

A listed entity should:

(a) have a diversity policy which includes requirements for the board or a relevant committee of the board to set measurable objectives for achieving gender diversity and to assess annually both the objectives and the entity's progress in achieving them;

(b) disclose that policy or a summary of it; and

(c) disclose as at the end of each reporting period the measurable objectives for achieving gender diversity set by the board or a relevant committee of the board in accordance with the entity's diversity policy and its progress towards achieving them, and either:

(1) the respective proportions of men and women on the board, in senior executive positions and across the whole organisation (including how the entity has defined "senior executive" for these purposes); or

(2) if the entity is a "relevant employer" under the Workplace Gender Equality Act, the entity's most recent "Gender Equality Indicators", as defined in and published under that Act.

 

Not Applicable

1.6

A listed entity should:

(a) have and disclose a process for periodically evaluating the performance of the board, its committees and individual directors; and

(b) disclose, in relation to each reporting period, whether a performance evaluation was undertaken in the reporting period in accordance with that process.

10

Comply

1.7

A listed entity should:

(a) have and disclose a process for periodically evaluating the performance of its senior executives; and

(b) disclose, in relation to each reporting period, whether a performance evaluation was undertaken in the reporting period in accordance with that process.

10

Comply

Principle 2: Structure the board to add value

2.1

The board of a listed entity should:

(a) have a nomination committee which:

(1) has at least three members, a majority of whom are independent directors; and

(2) is chaired by an independent director,

and disclose:

(3) the charter of the committee;

(4) the members of the committee; and

(5) as at the end of each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or

(b) if it does not have a nomination committee, disclose that fact and the processes it employs to address board succession issues and to ensure that the board has the appropriate balance of skills, knowledge, experience, independence and diversity to enable it to discharge its duties and responsibilities effectively.

 

Not applicable

Directors appointed by Governor-in-Council

2.2 A listed entity should have and disclose a board skills matrix setting out the mix of skills and diversity that the board currently has or is looking to achieve in its membership.  Comply
2.3

A listed entity should disclose:

(a) the names of the directors considered by the board to be independent directors;

(b) if a director has an interest, position, association or relationship but the board is of the opinion that it does not compromise the independence of the director, the nature of the interest, position, association or relationship in question and an explanation of why the board is of that opinion; and

(c) the length of service of each director.

 Comply
2.4

A majority of the board of a listed entity should be independent directors.

5 Comply
2.5 The chair of the board of a listed entity should be an independent director and, in particular, should not be the same person as the CEO of the entity. 5 Comply
2.6 Have a program for inducting new directors and provide appropriate professional development opportunities for directors to develop and maintain the skills and knowledge needed to perform their role as directors effectively. 6 Comply
Principle 3: Act ethically and responsibility

3.1

A listed entity should:

(a) have a code of conduct for its directors, senior executives and employees; and

(b) disclose that code or a summary of it.

4

Comply

Principle 4: Safeguard integrity in corporate reporting

4.1

The board of a listed entity should:

(a) have an audit committee which:

(1) has at least three members, all of whom are non-executive directors and a majority of whom are independent directors; and

(2) is chaired by an independent director, who is not the chair of the board,

and disclose:

(3) the charter of the committee;

(4) the relevant qualifications and experience of the members of the committee; and

(5) in relation to each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or

(b) if it does not have an audit committee, disclose that fact and the processes it employs that independently verify and safeguard the integrity of its corporate reporting, including the processes for the appointment and removal of the external auditor and the rotation of the audit engagement partner.

3

Comply

4.2

The board of a listed entity should, before it approves the entity's financial statements for a financial period, receive from its CEO and CFO a declaration that, in their opinion, the financial records of the entity have been properly maintained and that the financial statements comply with the appropriate accounting standards and give a true and fair view of the financial position and performance of the entity and that the opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively.

3

Comply

4.3

A listed entity that has an AGM should ensure that its external auditor attends its AGM and is available to answer questions from security holders relevant to the audit.

3

Comply

Principle 5: Make timely and balanced disclosures

5.1

A listed entity should:

(a) have a written policy for complying with its continuous disclosure obligations under the Listing Rules; and

(b) disclose that policy or a summary of it.

 

Not Applicable

Not subject to ASX Listing Rule
Principle 6: Respect the rights of security holders

6.1

Provide information about itself and its governance to investors via its website.

 

Not Applicable

6.2 Design and implement an investor relations program to facilitate effective two-way communication with investors.   Not Applicable
6.3 Disclose the policies and processes it has in place to facilitate and encourage participation at meetings of security holders.   Not applicable
6.4 Give security holders the option to receive communications from, and send communications to, the entity and its security registry electronically.   Not applicable
Principle 7: Recognise and manage risk

7.1

The board of a listed entity should:

(a) have a committee or committees to oversee risk, each of which:

(1) has at least three members, a majority of whom are independent directors; and

(2) is chaired by an independent director,

and disclose:

(3) the charter of the committee;

(4) the members of the committee; and

(5) as at the end of each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or

(b) if it does not have a risk committee or committees that satisfy (a) above, disclose that fact and the processes it employs for overseeing the entity's risk management framework.

11

Comply

7.2

The board or a committee of the board should:

(a) review the entity's risk management framework at least annually to satisfy itself that it continues to be sound; and

(b) disclose, in relation to each reporting period, whether such a review has taken place.

11

Comply

7.3

A listed entity should disclose:

(a) if it has an internal audit function, how the function is structured and what role it performs; or

(b) if it does not have an internal audit function, that fact and the processes it employs for evaluating and continually improving the effectiveness of its risk management and internal control processes.

1

Comply

7.4 A listed entity should disclose whether it has any material exposure to economic, environmental and social sustainability risks and, if it does, how it manages or intends to manage those risks. 11, 17 Comply
Principle 8: Remunerate fairly and responsibly
8.1

The board of a listed entity should:

(a) have a remuneration committee which:

(1) has at least three members, a majority of whom are independent directors; and

(2) is chaired by an independent director,

and disclose:

(3) the charter of the committee;

(4) the members of the committee; and

(5) as at the end of each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or

(b) if it does not have a remuneration committee, disclose that fact and the processes it employs for setting the level and composition of remuneration for directors and senior executives and ensuring that such remuneration is appropriate and not excessive.

3, 14 Complu
8.2 A listed entity should separately disclose its policies and practices regarding the remuneration of non-executive directors and the remuneration of executive directors and other senior executives. 3, 14 Comply
8.3

A listed entity which has an equity-based remuneration scheme should:

(a) have a policy on whether participants are permitted to enter into transactions (whether through the use of derivatives or otherwise) which limit the economic risk of participating in the scheme; and

(b) disclose that policy or a summary of it.

  Not Applicable

* Reference refers to the relevant sections of the Board Handbook.

Corporate Governance Guidelines for Government Owned Corporations - Version 2.0

PrincipleReferenceCompliance
Principle 1: Foundations for management and oversight  
The board should have a formal statement or board charter which clearly defines the roles and responsibilities of the board and individual directors and the matters which are delegated to management. This also applies to any committees established by the board. 2 Comply
A board handbook should be available to facilitate board operations and induction and self-evaluation processes. Introduction Comply
Appropriate induction processes should be developed for new members in relation to their board and committee functions and for senior executives to allow them to participate fully and actively in management decision-making at the earliest opportunity. 6 Comply
A register of committees and their functions should be maintained. 3 Comply

The process for performance evaluation of the chief executive officer and senior executives should be disclosed.

14 Comply
Principle 2: Structure the board to add value  
A majority of the board should be independent directors. 5 Comply
The board should develop and implement a plan for identifying, assessing and enhancing director competencies. 10 Comply
Disclose the process for performance evaluation of the board, committees and individual directors. 10 Comply
The board and committees regularly review their information needs (quality, quantity and timeliness) to ensure the information they receive is appropriate for the effective discharge of their duties. 9 Comply
Develop and implement appropriate, formal self-evaluation process for the board and committees. 10 Comply
Principle 3: Promote ethical and responsible decision-making  
Establish and disclose a code of conduct outlining the practices necessary to maintain confidence in the company's integrity and to guide compliance with legal obligations to stakeholders. 4 Comply
Establish and disclose the policy for trading in securities by directors, officers and employees. 4 Comply

Establish the code of  conduct in line with the best practice guide.

4, 17 Comply
Principle 4: Safeguard integrity in financial reporting  

The board should establish an audit committee.

3 Comply
The chief executive officer and chief financial officer (or equivalent) state in writing that the financial reports present a true and fair view and are in accordance with accounting standards. 11 Comply
Principle 5: Make timely and balanced disclosures  

Establish written policies and procedures to ensure compliance with disclosure requirements (including those in the GOC Act) and generally ensure the accountability of senior management for that compliance.

15, 17 Comply
Principle 6: Respect the rights of shareholders  
Design and disclose a communications strategy to promote effective communication with shareholding Ministers. 15 Comply
Principle 7: Recognise and manage risk  
Establish policies on risk management and oversight. 11 Comply

Require management to design and implement a risk management and internal control system to manage the GOC's material business risks.

11 Comply
Ensure the integration and alignment of the risk management system with corporate and operational objectives. 11 Comply
Ensure clear communication throughout the GOC of the board and senior management's position on risk. 11 Comply
Ensure a common risk management terminology across the GOC. 11 Comply
Ensure risk management is undertaken as part of normal business practice and not as a separate task at set times. 11 Comply
Ensure information systems for reporting on risk are integrated to enable aggregation and reporting at a corporate level. 11 Comply
Undertake a risk assessment to identify any high-risk fraud areas and develop strategies to mitigate any significant fraud risks. 11 Comply

Implement policies and procedures which include:

  • responsibilities in relation to fraud prevention and identification;
  • for fraud investigation once a fraud has been identified;
  • for reporting on fraud related matters to management;
  • and recording processes to be followed to record allegations of fraud;
  • for employee training to be conducted on fraud prevention and identification; and
  • a reference to the GOC's code of conduct for ethical behaviour.
12, 17 Comply
Implement a fraud control plan for ongoing monitoring and coordination of fraud control activities, which identifies fraud risk, incorporates control strategies, action plans and a timetable for implementation, and sets out responsibilities and accountabilities for fraud control at all levels of the GOC. 11 Comply
Management reports to the board as to the effectiveness of the GOC's management of its material business risks, allowing the board to assess the effectiveness of the implementation of the company's risk management and internal control systems annually. 11 Comply
The chief executive officer and the chief financial officer (or equivalent) state to the board that the statement given under the recommendations applying to Principle 4 is founded on a sound system of risk management and internal compliance and control which implements board policies; and the risk management and control system is operating efficiently and effectively in all material respects. 11 Comply
Principle 8: Remunerate fairly and responsibly  
GOCs should disclose their remuneration policies to show the broad structure and objectives of the policies and the link between remuneration of the chief executive officer and senior executives and corporate performance. 14 Comply
The board should establish a remuneration committee. 3 Comply

* References are to the relevant sections of the Board Handbook

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