Corporate governance statement 2011
MLA's corporate governance framework reflects our efforts to ensure that our values underpin the way in which we operate and behave. This framework has been established to ensure that we remain accountable to our stakeholders and that stakeholder interests are protected.
In developing and implementing our corporate governance practices we have taken into account the ASX Corporate Governance Council's Corporate Governance Principles and Recommendations. This statement and documents and policies relevant to our corporate governance framework are available on our website at www.mla.com.au/corporategovernance
The company
MLA is incorporated under the Corporations Act 2001 as a public company limited by guarantee. It is the declared marketing and research and development body under the Australian Meat & Live-Stock Industry Act 1997 and is operated on a not-for-profit basis. MLA has approximately 47,500 cattle, sheep and goat producer members.
The Board
Composition
The Board comprises 10 directors, with the Managing Director the only executive director. The Board is a skills-based board with directors appointed for a maximum three-year term under the terms of MLA's constitution, after which time a director may reapply for a position on the Board in the same way as other candidates. The Board has the appropriate range of skills, knowledge and experience necessary to govern the company, and it provides input into the skills requirements for the Board through the Selection Committee. Further information about the Selection Committee is on page 40 of the Annual report 2010-11.
The Chairman of the Board was appointed in 2005 and is an independent director. The current composition of the Board and details about each director are set out in the Directors' report on page 44 of the Annual report.
Roles and responsibilities
The roles and responsibilities of the Board are formalised in the Board charter. The Board strives to build sustainable value for MLA's members and the red meat industry and to achieve MLA's mission of delivering world class services and solutions in partnership with industry and government. The Board's responsibilities include:
- providing input into and approving management strategies, budgets, programs and policies appointing and removing the Managing Director
- assessing performance against strategies to monitor both the performance of management as well as the continuing suitability of strategies
- overseeing the company and reviewing operating information
- approving and monitoring significant capital expenditure and significant commitments under agreed programs
- ensuring the company operates with an appropriate corporate governance structure
- ensuring the company operates in accordance with its objects and the Industry Memorandum of Understanding
- ensuring the company meets its obligations under the MLA/Commonwealth Deed of Agreement
Directors may, with the Chairman's approval, obtain independent professional advice on matters arising in the course of their Board and committee duties. Directors have access to company records and information.
Board meetings
The Board has 11 scheduled meetings each year, with additional meetings held when required. The Board met a further seven times during the year to address issues arising between meetings. Meeting agendas are formulated in preparation for each meeting, however the Board also has an annual agenda which sets items to be considered and reviewed throughout the year.
These items include monthly reviews of MLA's financial position and management reports, a detailed review of each of the company's strategic imperatives and 'health checks'. Health checks detail topics including industry dynamics and challenges; industry outlook and forecasts; consumer trends; human resources; and R&D programs.
The annual agenda also sets key review dates for items which must come before the Board under the categories of performance, compliance and governance.
The Board continually strives to ensure its meetings are conducted efficiently to enable sufficient discussion and contribution from all directors. The Board regularly considers and discusses key strategic issues at both a company and industry level. During the year, the Board participated in a strategic planning day with the Executive Committee.
Management attends and provides input into issues arising in Board meetings relevant to their portfolios. Directors regularly meet with management and have regular exposure to other employees through presentations given at Board meetings and attendance by directors at industry meetings, forums and workshops.
The Board has continued this year to undertake its activities with reference to the MLA board operating principles which set out a series of guidelines for Board behaviour, measurement of Board performance and Board meeting guidelines.
Board evaluation
The Board reviews its own performance during meetings and also evaluates its performance through a formal annual performance review, facilitated by an external specialist. As part of the review, each director, and members of the Executive Committee completed a survey and participated in an interview. Observations from the review were reported to, and discussed, by the Board. The Chairman also discussed individual results with each director.
Board training
The Board has scheduled a further whole-of-Board governance training program for September. In addition, a number of directors participated in individual training programs throughout the year.
Independence
The Board considers each director's independence. Directors are considered to be independent if they are not a member of management and are free of any business or other relationship that materially interferes with - or could reasonably be perceived to materially interfere with the independent exercise of their judgement. In assessing a director's independence, materiality is considered on a case-by-case basis by reference to each director's circumstances. In October, the Board implemented its Policy on the independence of directors, which requires that the Board will assess independence annually, or more regularly if a director's circumstances change.
The Board has determined that all of the nonexecutive directors are independent.
Conflicts of interest
Each director provides information about their business and other interests to the Board at the time of their appointment and this information is updated following further notifications by a director. In November, the Board implemented its Conflict of interest policy and procedures to provide a framework to effectively deal with conflicts of interest.
Diversity
In April, the Board implemented a company-wide Diversity policy. The Board also set a number of Board focussed measurable objectives, including that:
- the MLA Selection Committee be advised of the Board's commitment to diversity
- at least one suitable female candidate should be included on a Selection Committee interview shortlist
- at least one female should sit on the Selection Committee and Board Remuneration Committees by 2012
- an objective of 30% female MLA board directors by December 2014, with an objective of 20% female MLA board directors by December 2012
As at 30 June 2011, 48% of MLA's staff were women. On the senior executive team, two of the seven executives are female and on the current MLA Board of 10, one director is female.
A sub-committee of the Executive Committee has also been established to develop a company-wide diversity strategy and to recommend to the Board measurable targets for achieving diversity.
Board committees
There were two Board committees that met during the year:
- Audit and Risk Committee
- Remuneration Committee
These Board committees are comprised solely of non-executive directors, with management attending committee meetings by invitation only. A program of committee meetings is developed at the beginning of each year and committees also meet throughout the year to consider issues which may arise. The Chair of each committee provides a verbal update of each committee meeting to the Board and minutes of committee meetings are provided in the Board papers.
The role of each committee is set out in the committee charters, which are regularly reviewed. The members of each committee, together with each member's attendance at meetings are set out in the Director's report on page 44 of the Annual report.
Audit and Risk Committee
The Audit and Risk Committee oversees MLA's risk program and has oversight responsibility of the company's financial reporting, internal control structure, risk management and the internal and external audit functions. In keeping with community expectations, the chair of the committee is not the Chairman of the Board. The Audit and Risk Committee is required to meet at least three times a year and meets separately with the external auditor at least once each year.
The Audit and Risk Committee is responsible for making recommendations to the Board for the approval of the annual audit plan and annual financial statements.
The Committee holds discussions with the external auditors and management before the annual financial statements are submitted to the Board.
The Audit and Risk Committee is also responsible for making recommendations to the Board about the appointment of MLA's auditors. The Audit and Risk Committee reviews the adequacy and effectiveness of internal controls, including the company's policies and procedures, to assess, monitor and manage business risk and legal and ethical compliance programs. This review includes monitoring the implementation of MLA's Risk management plan, Fraud control plan and Intellectual property plan.
It also reviews the company's foreign exchange and treasury management and oversees the company's risk management program. During the year the Audit and Risk Committee completed a review of its Charter. Further information about MLA's risk management activities is on page 41 of the Annual report.
Remuneration Committee
The Remuneration Committee oversees remuneration practices across the company. The Committee reviews the policies and systems in place for managing remuneration to ensure they are appropriate and consistent with company objectives. The responsibilities of the Remuneration Committee include the review of:
- processes and guidelines for annual staff remuneration reviews and making recommendations to the Board accordingly
- the remuneration package of the Managing Director and making recommendations to the Board in this regard
- remuneration packages for the general managers and other executives nominated by the Committee, in consultation with the Managing Director
- any bonus or special incentive plans and making recommendations to the Board in this regard
- company policies relevant to any human resource issues and activities that impact on remuneration and compensation
Selection Committee
The role of the Selection Committee is to report to members of MLA on the suitability of candidates for re-election or election as a director at general meetings. The Selection Committee consists of:
- three persons elected by members of MLA
- three persons appointed by Peak Councils
- three directors
MLA's constitution sets out the requirements for the proceedings of the Selection Committee and the qualifications and skills of candidates in nominated fields which the Selection Committee must consider.
The Selection Committee assesses candidates against a range of criteria, including experience and skills, personal qualities and their available time commitment.
The composition of the Selection Committee, together with each member's attendance at meetings is set out in the Directors' report on page 47 of the Annual report.
Reporting framework
MLA is party to a Deed of agreement with the Commonwealth of Australia through its Department of Agriculture, Fisheries and Forestry (the deed). The deed sets out the requirements for the company's expenditure of levy funds and matching funds and provides a framework under which the company must report to the Department. Key reporting obligations include:
- Corporate plan (known as the Strategic plan) - a strategic plan which sets out the company's objectives, performance indicators and resource allocations
- Annual operating plan - linked to the Strategic plan, the Annual operating plan covers intended operations of the company for the current year and R&D and marketing programs and activities to be undertaken
- Risk management plan - specifies measures to manage risk
- Fraud control plan - sets out measures to minimise the risk of fraud within the company
- Intellectual property plan - specifies procedures for the management, adoption and commercialisation of intellectual property
MLA is currently in discussions with the Department in relation to a new statutory funding agreement with the Commonwealth.
Financial and risk management
MLA's risk management policies and assessments are documented in the Risk management plan (the plan). The plan outlines the process followed to identify risks and categorises risks as 'strategic risks' or 'operational risks'. Individual risks have been identified, assessed, categorised and entered into a risk register, which forms part of the plan.
The Board has delegated to the Audit and Risk Committee the responsibility to monitor and review risks relating to governance and finance and those risks that are operational/internal in nature.
The Committee receives regular updates on matters relating to financial management, treasury, foreign exchange, payroll management, system controls and levels of authority.
During the final months of the year MLA commenced a major review of the plan, as well as the company's Fraud control plan and Intellectual property plan.
The Audit and Risk Committee has received a written declaration from the Managing Director and Chief Financial Officer that the financial reports represent a true and fair view, in all material respects, of the company's financial condition and operating results and are in accordance with relevant accounting standards.
Code of business conduct and ethics
The Board has implemented a Code of business conduct and ethics (the code), which embodies the company's values and sets out the principles which must be met to ensure that the company meets its commitments to all stakeholders. Key principles outlined in the code are:
- acting with openness, integrity and fairness
- protecting our business and using company resources appropriately
- protecting confidential information
- acting responsibly towards individuals
- acting responsibly in relation to safety, health and the environment
- avoiding conflicts of interest
- integrity in financial reporting
- acting responsibly to members, stakeholders and the community
- complying with the law
The code also establishes a reporting framework to enable employees to report any breach of the code. All employees are required to confirm that they have read and understood the code each year. A copy of the code is provided to all new employees on commencement and is a feature of the formal induction training which is provided at least twice a year. During the year, the code was reviewed and updated, in particular to incorporate reference to two new internal policies: Anti-bribery policy and Social media policy.
Remuneration and performance arrangements
The total limit for directors' remuneration (excluding the Managing Director) is $750,000. This limit was determined by members at the 2008 annual general meeting. The Board determined in June 2010 that an increase of 3% for directors' fees would take effect from 1 July 2010, taking the total per annum costs to $458,628. This was the first increase in directors' fees since July 2004. No further increases were implemented during the year.
The remuneration arrangements for each member of the senior management team, including the Managing Director, comprise both fixed and performance-based remuneration.
The remuneration packages for the senior management team are reviewed each year and include a performance based component to ensure the remuneration structure:
- aligns management effort with organisational objectives
- attracts, retains and motivates quality management personnel
Communicating with members
MLA implements a member communications strategy that seeks to:
- create awareness of MLA and its activities amongst MLA members
- demonstrate the relevance and value of MLA and its programs
- proactively engage members to take advantage of the opportunities created by the company in partnership with industry and government
In implementing this strategy we employ a variety of communications tactics including radio and print media, magazines and publications, the corporate website, events and our feedbackTV DVDs. The success of these efforts is measured through member surveys, media and website monitoring, publication orders and increases in membership.
MLA employs a policy of ensuring all members have the opportunity to participate in our annual general meeting (AGM) by rotating its location around the nation. The 2010 AGM was held in Launceston, Tasmania and was preceded by Darwin, Northern Territory (2009), Orange, New South Wales (2008), Rockhampton, Queensland (2007), Adelaide, South Australia (2006), and Melbourne, Victoria (2005).
Events play an important role in giving members information and the direct opportunity to contribute to the direction of the company. In 2010-11 we collaborated with a range of industry organisations to participate in 59 producer events across the company.
Our 2009-10 Annual report was made available through our corporate website as well as in hard copy for members who requested it.
MLA's website www.mla.com.au provides information on on-farm tools and resources, post-farm research programs, domestic and international marketing activities, market information and links to websites for key industry systems such as Meat Standards Australia, the National Livestock Identification System and Livestock Production Assurance. The site is consistently ranked in the Top 10 by website monitoring company Hitwise and maintained 39,500 unique visitors a month during 2010-11.
Our flagship magazine feedback and DVD program feedbackTV continue to demonstrate the breadth of research and marketing activities that the company undertakes on behalf of industry to more than 47,500 members.
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