The Board of Directors of Enzumo Limited is responsible for the corporate governance of the Company. The Board guides and monitors the business and affairs of the Company on behalf of the shareholders by whom they are elected and to whom they are accountable. The Company is committed to implementing the highest standards of corporate governance.
Accordingly, the Board seeks to have its corporate governance arrangements comply with the recommendations of the ASX Corporate Governance Council 3rd edition, other than in the circumstances highlighted below where the size and scale of the Company and the Board requires some variations from those recommendations.
The Board undertakes regular reviews of the Company’s corporate governance policies in order to adopt a strengthened model that recognises and reflects the ongoing development of the Company in order to ensure that the model is relevant, efficient and cost effective to the Company and its shareholders.
The Corporate Governance Statement that follows discloses the extent to which the Company has followed the guidelines during FY 2017. A complete set of the Company’s corporate governance policies can be found on the Company’s website at www.enzumo.com.
PRINCIPLE 1: LAY SOLID FOUNDATIONS FOR MANAGEMENT AND OVERSIGHT
The functions reserved by the Board and those delegated to senior management are disclosed in the Company’s Board Charter and the Company’s Delegated Authorities Policy. The Board’s role is to govern the Company rather than to manage its operations. In governing the Company, the Directors must act in the best interests of the Company as a whole. It is the role of senior management to manage the Company in accordance with the direction and delegations of the Board and the responsibility of the Board to oversee the activities of management in carrying out these delegated duties.
The responsibilities of the Board include:
- Setting the strategic goals, objectives and plans in conjunction with management;
- Approving financial plans and annual budgets;
- Monitoring financial results and other performance indicators;
- Approving significant acquisitions and divestments;
- Identifying and monitoring business risks as well as reviewing and ratifying systems of risk management, internal compliance and control;
- Determining the governance policies of the Company and ensuring compliance with those policies including:
- Encouraging ethical behaviour and good corporate citizenship;
- Ensuring a healthy and safe work environment;
- Ensuring that the Company complies with all relevant legislation;
- Ensuring adherence to environmental standards;
- Establishing and reviewing the charters of all committees of the Board;
- Ratifying the appointment of senior management;
- Monitoring the appointment, performance, and terms and conditions of senior management; and
- Determining that satisfactory arrangements are in place for auditing the Company’s financial affairs.
PRINCIPLE 2: STRUCTURE THE BOARD TO ADD VALUE
Details regarding the structure of the Board and the names, qualifications and independence of each Director are provided in the Directors’ Report. The Board Charter details the Board’s composition and responsibilities. The Company’s policy on Director independence and access to independent advice at the expense of the Company is provided in the Company’s Director Independence Policy which can be found on the Company’s website.
Directors of the Company are considered to be independent when they are independent of management and free from any business or other relationship that could materially interfere with, or could reasonably be perceived to materially interfere with, the exercise of their unfettered and independent judgement. In the context of Director independence, ‘materiality’ is considered both from the Company and individual Director perspective.
The Board has assessed the independence status of the directors and has determined that there are no independent directors.
The Board considers that the Company is not currently of a size, nor are its affairs of such complexity to justify the appointment and further expense of additional independent Non-Executive Directors. The Board believes that the individuals on the Board can make, and do make, quality and independent judgments in the best interests of the Company on all relevant issues. As the Group's activities increase in size, nature and scope, the size of the Board will be reviewed periodically to address an appropriate balance of independent and non-independent representation.
INDEPENDENT PROFESSIONAL ADVICE
All Directors are entitled to seek independent professional advice in carrying out their duties. Further, in accordance with the Corporations Act 2001 and the Company’s policies, each member of the Board is required to keep the Board apprised of any potential conflict of interest with the Company and must absent themselves from any Board discussion and not vote if a conflict does exist.
The roles of Chief Executive Officer and Chairman of the Board are undertaken by separate people.
The Chairman of the Board is a non-independent Director and while this represents a divergence from ASX Corporate Governance Principles and Recommendations regarding the appointment of an independent Chairperson, the Directors believe that this appointment is appropriate given the current stage of the Company’s development.
The Board has established a number of committees to assist in the execution of its duties and to allow detailed consideration of complex issues. Current committees of the Board are the Remuneration and Nomination Committee and the Audit and Risk Management Committee. Each committee has its own written charter setting out its role and responsibilities, structure and the manner in which the committee is to operate. All matters determined by committees are submitted to the full Board as recommendations for Board decisions.
The Remuneration and Nominations Committee Charter describes the role of the Committee and process for evaluating the performance of the Board, its committees and individual Directors.
In accordance with its Charter, the Remuneration and Nomination Committee is responsible for ensuring that the Company:
- Has coherent recruitment, retention, succession and remuneration policies and practices which enable it to attract and retain Directors and senior management who have the skills to achieve the Company’s goals and add value for shareholders;
- Rewards Directors and senior management in a fair and responsible manner, while having due regard for the performance of the Company, the individual Director or senior management’s performance and the reward environment;
- Complies with all relevant employment legislation, as well as legislation and listing rules regarding Director and senior management remuneration and the disclosure of such remuneration; and
- Evaluate the performance of the Board, its committees and Directors to ensure that the Board composition meets the present and future needs of the Company and to make recommendations on Board composition and appointments.
Specifically in the case of appointment of new Directors, the Remuneration and Nomination Committee will:
- Identify the skills and characteristics the Board needs to enhance its operation;
- Establish a process, including obtaining third party advice, for identifying, selecting and recommending to the whole Board, individuals who meet the criteria established;
- Select and interview specific individuals for nomination and make recommendations to the Board on an individual’s appointment;
- Undertake appropriate checks before appointing a person, or putting forward to security holders a candidate for election, as a director;
- Ensure the individual understands their duties and responsibilities and the time and energy commitment needed to fulfil their role as a Director;
- Ensure the appointment letter covers all items required to reflect best practice;
- Develop and implement an effective induction process for new Directors; and
- Inform shareholders and stakeholders of the processes in selection and appointment of Directors;
- Provide shareholders with all material information in its possession relevant to a decision on whether or not to elect or re-elect a director.
When a new Director is to be appointed, the Remuneration and Nominations Committee reviews the range of skills, experience and expertise on the Board, identifies its needs and makes recommendations to the full Board. Where necessary, advice is sought from independent search consultants. The full Board then appoints the most suitable candidate who must stand for election at the next annual general meeting of the Company. The Committee’s nomination of existing Directors for reappointment is not automatic and is contingent on their past performance, contribution to the Company and the current and future needs of the Board and Company.
The membership of the Board, its activities and composition is subject to periodic review, either formally or informally, to ensure an appropriate mix of expertise and experience. The criteria for determining the identification and appointment of a suitable candidate for the Board shall be considered in light of achieving a balanced matrix of the following attributes and skills.
- Risk & Compliance
- Financial & Audit
- Policy Development
- Executive Management
- Gender diversity
- Age diversity
Each year the Board conducts an evaluation of its performance, the performance of its committees and its Directors under the guidance of the Remuneration and Nominations Committee. The assessment is both qualitative and quantitative and is conducted by the Board itself or an independent expert. The Chairperson is responsible for taking any actions that arise from the evaluation. The evaluation should lead to improved Board procedures, as well as goals for operation of the Board during the next year.
PRINCIPLE 3: ACT ETHICALLY AND RESPONSIBLY
CODE OF CONDUCT
The Company has a Company Code of Conduct that has been fully endorsed by the Board and applies to all Directors and employees. The Code of Conduct is regularly reviewed and updated as necessary to ensure it reflects the highest standards of behaviour and professionalism and the practices necessary to maintain confidence in the Group’s integrity and to take into account legal obligations and reasonable expectations of the Company’s stakeholders.
The Company has a Securities Trading Policy that regulates the dealings by its Directors, employees and contractors, in shares, options and other securities issued by the Company. Under the Company's Securities Trading Policy, a Director, employee or contractor must not trade in any securities of the Company at any time when they are in possession of unpublished price sensitive information in relation to those securities or the Company’s operations. Before commencing to trade, a Director, employee or contractor must first obtain appropriate approval to purchase (including the exercise of any options) or sell any securities of the Company. The policy has been formulated to ensure that Directors, employees and contractors who work on a regular basis for the Company are aware of the legal restrictions on trading in company securities while in possession of unpublished price-sensitive information.
All officers of the Company are apprised of the Company’s Security Trading Code of Conduct as part of their induction.
All officers are provided with the Company’s Security Trading Code of Conduct together with other pertinent matters.
Dealing in the securities of other companies
The Company’s Security Trading Code of Conduct is also expressly applied to other companies with which the Company may have dealings where an officer may have, or be perceived to have, price sensitive information.
The Company’s workforce including employees, contractors, management and the Board is made up of individuals with diverse skills, values, backgrounds and experiences that bring to the Company the skills and expertise that is required for the Company to enhance its performance.
Under recommendations 3.3 and 3.4 of the Corporate Governance Principles and Recommendations the Company should disclose the measurable objective for achieving gender diversity and the progress that has been made towards achieving those objectives, as well as disclose the proportion of female employees in the whole organisation, in senior executive position and on the Board.
The Company values diversity and recognises the benefit it can bring in achieving its goals. To this end, the Company has established a diversity policy which reflects its commitments and objectives.
Due to the current size and composition of the organisation, the Board does not consider it appropriate to provide measureable objectives in relation to gender. The Company is committed to ensuring that the appropriate mix of skills, experience, expertise and diversity are considered when employing staff at all levels of the organisation and when making new senior executive and Board appointments and is satisfied that the composition of employees, senior executives and members is appropriate considering its size and environment.
At the present time there is one female director on the Enzumo Board. However, of the Company’s senior management team of 10, 4 are female employees.
PRINCIPLE 4: SAFEGUARD INTEGRITY IN CORPORATE REPORTING
The Audit and Risk Management Committee Charter describes the role and responsibilities of the Audit and Risk Management Committee established by the Board to review and monitor financial, audit and risk management processes and reporting.
The composition and structure of the Audit and Risk Management Committee will vary from time to time however given the current composition of the Board strict compliance with the ASX Principles and Recommendations is not possible.
Separate discussions are held with the external auditor in the absence of management.
Each year, the Audit and Risk Management Committee reviews the performance and compensation of external auditors. Grant Thornton continues as the external auditor for the year ended 30 June 2017. It is Grant Thornton's policy to rotate audit engagement partners on listed companies at least every five years.
PRINCIPLE 5: MAKE TIMELY AND BALANCED DISCLOSURES
The Board has established a policy governing continuous disclosure and has designated the Company Secretary as the person responsible for overseeing and coordinating disclosure of information to the ASX as well as communicating with the ASX.
The identification and monitoring of matters which may require disclosure in accordance with the Company's continuous disclosure obligations occurs on a regular basis at management meetings attended by senior management to ensure that all information of this nature is brought to the attention of the Board.
If a matter is identified as potentially requiring disclosure it is provided to the Chairman or Company Secretary. All ASX announcements of a non-procedural nature are approved by the Chairman before release. In accordance with the ASX Listing Rules, the Company immediately notifies the ASX of information:
(a) Concerning the Company that a reasonable person would expect to have a material effect on the price or value of the Company's securities; and
(b) That would, or would be likely to, influence persons who commonly invest in securities in deciding whether to acquire or dispose of the Company’s securities.
PRINCIPLE 6: RESPECT THE RIGHTS OF SECURITY HOLDERS
The Company has adopted a communications policy, which ensures that it is committed to:
- Communicating effectively with shareholders through releases to the market via the ASX, the Company's website, information mailed and emailed to shareholders and the general meetings of the Company;
- Giving shareholders ready access to balanced and understandable information about the Group and corporate proposals; and
- Encouraging shareholders to participate in general meetings of the Company.
The Company also requests the external auditor to attend the Annual General Meeting and be available to answer shareholder questions about the conduct of the audit and the preparation and content of the auditor's report.
Shareholders are able to address issues directly with the Company either in writing or by email at email@example.com.
PRINCIPLE 7: RECOGNISE AND MANAGE RISK
The identification and effective management of risk, including calculated risk-taking is viewed as an essential part of the Company's approach to creating long-term shareholder value. Management is responsible for designing, implementing and reporting on the adequacy of the Company's risk management and internal control system. Management reports to the Audit and Risk Committee on the Company's key risks and the extent to which it believes these risks are being monitored at each Committee meeting. The Audit and Risk Committee review and monitor management's risk management and internal compliance and control systems.
The Board has charged the Committee with responsibility and authority to prescribe the necessary elements of an effective risk management system, including oversight, risk profiling, risk management, compliance and control, and annual assessment of system effectiveness.
The Board has received assurance from the Chief Financial Officer that the declaration provided in accordance with section 295A of the Corporations Act 2001 is founded on a sound system of risk management and internal control and that the system is operating effectively in all material aspects in relation to financial reporting risks.
The Group does not have an independent internal audit function. The Company Secretary and senior management are responsible for improving the effectiveness of the company’s risk management and internal control processes which is monitored by the Board.
The Company Secretary and senior management have full access to all functions, records, property and personnel of the Group in discharging their duties.
PRINCIPLE 8: REMUNERATE FAIRLY AND RESPONSIBLY
As described under Principle 2 above, the Board is responsible for determining and reviewing compensation arrangements for the Directors, the Non-Executive Chairman and the senior management team. The Board has established a Remuneration and Nominations Committee to help ensure that the Company remunerates Directors and senior management in a fair and responsible manner.
The performance of the Board, Committees, individual Directors and key management is reviewed regularly against both measurable and qualitative indicators. Senior management are given limited salary packaging options for their base salary including superannuation. It is intended that the manner of payment is optimal for the recipient without increasing the cost to the Company.
In relation to the payment of bonuses, options and other incentive payments to senior management and other staff, discretion is exercised by the Board having regard to individual, team and Company performance relative to specific targets during the period. The expected outcomes of remuneration structure are to retain and motivate Directors and key management, attract quality management and provide performance incentives which align performance and Company success in a manner that is market competitive, consistent with best practice and in the interests of shareholders. Details of the nature and amount of each element of remuneration, including both monetary and non-monetary components, for each Director and senior management paid during the year can be found in the Directors' Report.