Corporate Governance Statement
This Section summarises the main corporate governance practices which have been adopted by the Company. The Board recognises the importance of good corporate governance and establishing accountability of the Board and management and has adopted a set of policies to assist it in discharging its corporate governance responsibilities. Patties Foods’ corporate governance policies centre on the Board, the Board committees and the principles that govern their interaction with, and oversight of, management.
Patties Foods’ corporate governance policies and practices will remain under regular review as expectations and requirements develop to ensure the continued effective management and operation of Patties Foods.
6.4.1 Role Of The Board
The Board is committed to act in the best interests of Patties Foods to ensure Patties Foods is properly managed and constantly improved. The Board has developed a charter to provide a framework for the effective operation of the Board. The Board Charter sets out specific duties and responsibilities of the Board and includes:
setting the Company’s strategy;
overall management of general risk;
providing the Company with appropriate management expertise;
assessing the overall performance of the Company’s officers;
ensuring a sufficient level of corporate governance to meet ethical and legislative requirements;
establishing and monitoring Board committees responsible for key Board responsibilities; and
performing such other functions as prescribed by law.
The Board Charter allows the Board to seek independent advice.
6.2.1 Board Composition
The Board currently comprises four non-executive directors, the Managing Director and the Deputy Managing Director. Details of the Directors are set out in Section 6.1. The minimum number of directors is three and the maximum number of directors is ten. Directors will be elected at annual general meetings of the Company.
The Managing Director will not retire by rotation. Provided that Patties Foods has three or more directors, one third of the directors (rounded down to the nearest whole number) will retire at each annual general meeting. In any case, no director may retain office for more than three years or beyond the third annual general meeting, following the director’s last election or appointment, whichever is the longer period. In each case, if the retiring director is eligible, they may then seek re-election.
6.1.2.1 INDEPENDENCE OF DIRECTORS
Each member of the Board is required to apply independent judgement to decision making in their capacity as a director. A non-executive director will be considered independent by the Board if no relationship exists between the director and Patties Foods that may interfere with the exercise of their independent judgement. The Directors have had regard to the definition of ‘independence’ contained in the ASX Guidelines.
As such, the Directors consider that Peter Kempen, Ernest Barr, Curt Leonard and Michele Allan are independent directors, giving the board a majority of independent non-executive directors (including the Chairman).
The Directors acknowledge that, by virtue of the ASX Guidelines, Ernest Barr may not be considered to be independent on the basis of his length of service as a director of Patties Foods. However, under his stewardship, Patties Foods has grown to become a leading Australian manufacturer, supplier and marketer of frozen savoury and dessert products. The Directors believe the continued contribution of Ernest Barr will be important as the Board oversees the management of the Company in a listed environment and the development of its corporate strategy, particularly in the period of transition that will immediately follow Listing. The Directors do not consider Ernest Barr’s independence to be compromised by his length of service, as evidenced by the significant contribution he continues to make and the independent judgement he brings to his role.
The Directors have considered Patties Foods’ immediate requirements as the Company completes its transition to a listed company and are satisfied that the composition of the current Board reflects the appropriate range of independence, skills and experience for the Company at present.
The Directors consider that the current number of directors is sufficient to enable it to effectively discharge its responsibilities. In accordance with its charter, the Remuneration and Nomination Committee will continue to monitor and assess the appropriateness of the Board’s composition and its individual directors.
6.4.2.2 Company Secretary
The Company Secretary acts as secretary to the Board. The appointment is ratified by the Board upon such
conditions as it thinks fit. The Company Secretary may also be removed by the Board, subject to the terms of any agreement between Patties Foods and the Company Secretary. The Company Secretary is Andrew Beeson, whose qualifications and experience are set out in Section 6.2.
6.4.3 Board Committees
The Board may from time to time establish appropriate committees to assist in the discharge of its responsibilities.
The Board has established the following Board committees, each with its own charter:
Role Audit, Risk and Compliance Remuneration and Nomination
Chairman Peter Kempen Peter Kempen
Members Curt Leonard Curt Leonard
Ernest Barr Ernest Barr
Michele Allan Richard Rijs1
1 Richard Rijs does not participate in the setting of the remuneration for the Managing Director.
Other committees may be established by the Board as and when required. Membership of Board committees will be based on the needs of Patties Foods, relevant legislative and other requirements and the skills and experience of individual directors. Committee members will be appointed for a three year term of office after which their appointment may be subject to annual rotation at the discretion of the Board.
Performance of all committee members will be reviewed annually by the Board.
6.4.3.1 Audit, Risk and Compliance Committee
The Audit, Risk and Compliance Committee has been established to assist the Board in fulfilling its corporate governance and oversight responsibilities in relation to the Company’s financial reports and financial reporting process, internal control structure, risk management systems (financial and non-financial) and the internal and external audit process.
The committee reports to the Board following each meeting of the committee. Among the matters for which the committee is responsible are the following:
overall control over external statutory financial reporting;
assessment of accounting, financial and internal controls;
appointment of external auditors, scope of the external audit, approval of any additional non audit services to be provided by the external auditor and assessment of the external auditor; and
ensuring compliance with laws and regulations.
The committee pursuant to its charter must have a minimum of three non-executive directors, a majority of which are independent. The Chairman of the committee is Peter Kempen. Given Peter’s background and strength of his financial skills, the Directors consider this position appropriate, notwithstanding Peter is Chairman of the Board.
At the discretion of the committee, the external auditor and members of management may be invited to Audit, Risk and Compliance Committee meetings. The committee will meet at least two times per year and additionally as required for it to undertake its role effectively.
6.4.3.2 Remuneration and Nomination Committee
The Remuneration and Nomination Committee has been established to assist the Board by:
providing advice in relation to remuneration packages of key management, non-executive directors and
executive directors, equity-based incentive plans and other employee benefit programs;
ensuring the performance of key management and members of the Board is reviewed at least annually;
evaluating the performance of the Board as a whole;
reviewing the Company’s recruitment, retention and termination policies and succession plans of key management and executive directors; reviewing the Company’s superannuation arrangements;
recommending individuals for nomination as members of the Board and its committees;
considering those aspects of the Company’s remuneration policies and packages, including equity-based incentives, which should be subject to Shareholder approval; and monitoring the size and composition of the Board.
The committee will have a minimum of three directors with the majority being non-executive. The committee will be chaired by the Chairman of the Board. At the discretion of the committee, internal specialists or external advisers may be invited to the Remuneration and Nomination Committee meetings. The committee will meet at least two times per year and additionally as required for it to undertake its role effectively.
6.4.4 Remuneration
Patties Foods’ aim is to offer competitive remuneration designed to assist it to attract, motivate and retain employees to deliver on corporate objectives.
6.4.4.1 Short Term Incentives
As part of their remuneration package, certain employees in the Company may be entitled to receive a specified portion of their base salaries by way of a performance linked cash incentive payment. The relevant employee will be entitled to receive part or all of a specified percentage of his or her salary as a cash incentive payment if the Company achieves certain specified EBIT targets. The total cash incentive available is structured to provide sufficient incentive to the employee to achieve the targets set while being reasonable in the circumstances. The Company has predetermined benchmarks which must be met in order to trigger any payments under the incentive program.
6.4.4.2 Long Term Incentive Plan
The long term incentive plan (in the form of options and performance rights) is directly linked to time and performance based criteria that relate to the performance of Patties Foods, to ensure appropriate alignment to Shareholder value over a specified timeframe (generally three years). Both types of instrument provide the right to acquire Shares only if and when particular time and performance based vesting conditions are met.
The primary performance vesting conditions for instruments granted under the long term incentive plan will be growth in the Company’s earnings per Share and total Shareholder return (comprising dividend returns and Share price appreciation) from the date of grant of the instrument. Whilst annual grants of instruments will be made, a three year performance period will apply to achieve the requisite performance hurdles. The exercise period for both instruments will expire on the tenth anniversary of their grant.
Details of the long term incentive plan are set out in Section 10.4.2.
6.4.4.3 Employee Equity Participation
Patties Foods has adopted an exempt employee share plan, whereby Eligible Employees may acquire Shares in the Company by way of salary sacrifice arrangement.
Details of the exempt employee share plan are set out in Section 10.4.1.
6.4.5 Risk Management
The Board, together with management, constantly seeks to identify, monitor and mitigate material risks.
Internal controls are actively monitored and will continue to be kept under regular review. Review takes place at both Audit, Risk and Compliance Committee level, with meetings at least two times per year,
and Board level.
6.4.6 Securities Trading
Patties Foods does not have a formal securities trading policy. As such, the Company will not be monitoring
trading in its Shares (or other securities) by employees. However, the Company will endeavour to ensure all
employees are fully aware of their obligations with regard to trading in Shares (or other securities), in particular the restriction on trading while in possession of price sensitive, non-public information about the Company. Every current and new employee will receive a document which outlines these obligations, and this document will also be made available to all employees via the Company’s website.
6.4.7 Continuous Disclosure
The Company has adopted a continuous disclosure policy so as to comply with its continuous disclosure obligations once listed on ASX. The aims of the policy are to:
ensure that the Company, as a minimum, complies with its continuous disclosure obligations under the Corporations Act and Listing Rules;
provide Shareholders and the market with timely, direct and equal access to information issued by the Company; and promote investor confidence in the integrity of the Company and its securities. The Company Secretary is responsible for overseeing, and, if appropriate, coordinating the disclosure of price sensitive information relating to the Shares to ASX.
6.4.8 Deeds of Indemnity, Insurance and Access
Each Director has entered into a deed of indemnity, insurance and access with the Company. Refer to Section 10.7.4 for further information.