Announcement PDF 16 November 2015 Corporate Governance Statement and Appendix 4G Please find attached, in accordance with ASX Listing Rules 4.7 and 4.10.3, a copy of Elders Limited (ASX: ELD) Corporate Governance Statement and completed Appendix 4G, for release to the market. Peter Hastings Company Secretary 1 Corporate Governance Statement This corporate governance statement summarises the key elements of the Company’s governance framework and practices. Live it. 1 Elders. Live it. Love it. Corporate Governance Statement 2015 In FY15 the Company reports its governance structure and practices against the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations 3rd Edition (ASX Recommendations). The Company has adopted sound governance practices over many years that are in many instances in advance of the revised ASX Recommendations. This demonstrates our commitment to quality corporate governance that aims for transparency in the way we conduct business. The Company is pleased to deliver this corporate governance statement which adopts in full the 3rd edition of the ASX Recommendations. It also builds on its existing robust framework to recognise the cyclical review of policies and practices necessary to maintain currency with best market practice and the evolving nature of corporate governance practices. It is our hope that shareholders will benefit from the disclosure of the Company’s governance arrangements to assist them in making informed decisions about their investment choices. 2 In FY15, the Company has complied with all of the ASX Recommendations. More information on compliance of the Company’s governance practices with the ASX Recommendations can be found in the ASX Listing Rules Appendix 4G that appears on our website at www.elderslimited.com in the Corporate Governance section (along with other complementary information such as key policies and charters discussed in this governance statement). This Corporate Governance Statement was approved by the Board on 13 November 2015. 1. BOARD STRUCTURE AND OPERATION Relevant policies and charters: • Board Charter • Company Constitution • Prudential Criteria • Director Independence Policy • Board Performance Assessment • Director Induction and Ongoing Education The Board The Board is ultimately responsible for the governance of the Company. The key responsibilities of the Board include: • provide input into, and adopt, the strategic plan and budget of the Company as prepared by management; • monitor performance against the business plan and budget; • approve and monitor the progress of all material acquisitions, divestments, contracts and capital expenditure; • approve debt or equity raisings by the Company; • oversee the audit, compliance, financial and operational risk management functions of the Company; • oversee the Company’s financial reporting and communication to the Company’s shareholders and the investment community and shareholder- relations generally; • appoint and remove the Chief Executive Officer (CEO) and determine that person’s remuneration (including termination benefits); • review the performance of the Board as a whole and of individual directors; and • monitor and assess the performance of the CEO and the Company’s senior executive team. The Board has adopted a Board Charter that, in addition to the above main responsibilities, defines those duties reserved for the Board and its Committees and those that are delegated to the CEO. The Board delegates responsibility for the day-to-day operation and administration of the Company to the CEO, Mr Mark Allison. The Board monitors the CEO’s performance on an ongoing basis through regular management reporting and through the reporting of the various Board Committees. The Company has in place comprehensive Delegations of Authority under which the CEO and executive management operate. The Board regularly reviews the obligations set out in the Board Charter and the Delegations of Authority to ensure they remain appropriate to the needs of the Company. The Chairman The Board Charter prescribes that the Chairman of the Board should be an independent director and details his responsibilities. Hutch Ranck has been non-executive Chairman since 1 May 2014 and is determined by the Board to be independent. The Chairman’s role includes: • providing effective leadership to the Board in all Board matters; • publicly representing the Board’s views to stakeholders; • promoting effective relations between the Board and management; • leading the process of review of the performance of the Board, Committees and individual directors; • guiding the setting of agenda items and conduct of Board and shareholder meetings; and • overseeing succession of nonexecutive directors and the CEO. Board Composition The composition of the Board is determined by the Company’s Constitution and by Board policy, which includes the following requirements: • the number of directors may not be less than 3 and not more than 12 (although the Company will at its 2015 AGM seek approval from shareholders to a constitutional amendment reducing the maximum number of directors to 8); • the majority of directors must be independent non-executive directors; • the Chairman should be an independent director; and • the Board be comprised of directors who are financially literate and who together have an appropriate mix and depth of skills, experience and knowledge. There are currently five directors on the Board, comprising four nonexecutive directors and the MD/CEO. The qualifications, experience, special responsibilities and period of office of each director can be found on page 30 and 31 of the Company’s 2015 Annual Report. In FY15, Board membership remained relatively unchanged except for the addition of a new non-executive director Ms Robyn Clubb who was appointed on 21 September 2015. Appointment of Directors and re-election The composition of the Board is reviewed on an annual basis coinciding with the Annual General Meeting (AGM) cycle to ensure that the Board has the appropriate mix of expertise and experience. At each AGM of the Company, one third of directors (other than the managing director and directors who have been appointed since the previous AGM) and any other director who will at the conclusion of the meeting have been in office for 3 or more years and AGMs since they were last elected to office are required to retire and may stand for re-election. The director obliged to retire under this rule in 2015 is Mr J H (Hutch) Ranck who has advised the Nomination and Prudential Committee that he will offer himself for re-election at the forthcoming AGM. The resolution to re-elect Mr Ranck has the support of the Board which considers him to be an independent director. The Board Charter prescribes that before a director is recommended for reelection, the Chairman consults with the other directors regarding the director’s effectiveness. Based upon the outcome of these consultations, the Board then determines whether or not to recommend the director for re-election. The Nomination and Prudential Committee assists in this review process. When a vacancy exists, or when it is considered that the Board would benefit from the services of a new director with particular skills, the Nomination and Prudential Committee selects candidates with appropriate expertise and experience for consideration by the full Board. The Committee also takes into account the assessment of the candidate under the Fit and Proper Policy criteria and may seek advice from external consultants if necessary in selecting candidates for board positions. The Board then appoints the most suitable candidate who must stand for election at the next general meeting of shareholders and re-election at three yearly intervals. Non-executive director Robyn Clubb, having been appointed since the last AGM, will stand for election in 2015. The Board unanimously supports the election of Ms Robyn Clubb and if elected, considers her to be an independent director having satisfactorily completed fitness and propriety testing conducted under the Fit and Proper Policy. Formal letters of appointment setting out key terms and conditions of appointment are in place for all directors. 3 Elders. Live it. Love it. Corporate Governance Statement 2015 ELDERS DIRECTOR SKILLS MATRIX Essential requirements The Board considers that each director must have the following essential personal attributes to be suitable to serve as a director of the Company: • High standards of personal integrity and ethical behaviour • Independence of thought • Sound judgement and decision making • Team player Skill / Knowledge / Experience Out of 5 directors Leadership and Governance Organisational governance 4 Government relations 2 Previous ASX NED experience 3 Previous CEO experience 3 Operations Environment, health and safety 3 Work Health and Safety Committee experience 2 • Good listener Agribusiness 5 • Strong interpersonal and communication skills Farmer or producer 2 • Active networker Sectoral Experience Livestock 3 • Available to serve the needs of the Company Agricultural Chemicals and Fertiliser 2 Grain 2 Skills, Knowledge and Experience Banking or Insurance 3 The Board recognizes that each director will not necessarily possess experience in all areas relevant to the Company’s operations so seeks to ensure that its membership includes an appropriate mix of directors with skills, knowledge and experience in agriculture, other relevant industry sectors, general management and finance. Legal 0 Marketing 2 Sales 2 A summary of the Board’s skills, knowledge and experience is set out in the table below: Finance, Capital Management and Risk Formal accounting and finance qualifications (CPA or CA) 2 Financial advisory 3 Capital restructuring 2 Audit Committee experience 4 Risk management 4 Risk Committee experience 3 Workout and turnaround expertise 3 People People & Culture (HR) 2 Remuneration Committee experience 3 Geographic Experience 4 International markets 4 Asian markets 2 Fit and Proper Policy The Company continues to adopt and comply with its fitness and propriety regime given its distribution arrangements with Rural Bank Limited (a prudentially regulated Authorised Deposit Taking Institution) and its own Australian Financial Services Licence. This regime ensures a robust selection process for directors generally consistent with the standards set by APRA. The criteria set down in the Company’s Fit and Proper Policy are available on the Company’s website at www.elderslimited. com. The policy undertakes a rigorous assessment process and includes, amongst other things, background checks as to the person’s criminal record and bankruptcy history. It also requires verification of work history, reference checking with relevant professional industry bodies and qualification confirmation with issuing institutions. In addition, the policy requires persons to provide declarations relating to various matters such as material personal interests and external directorships held. The assessment is undertaken with the person’s full consent and knowledge. This process provides the Company with assurance that existing and potential directors and persons appointed to senior executive positions within the Company are able to satisfy appropriate fitness and propriety standards that will enable them to discharge their governance responsibilities. It also serves to protect the Company and the interests of shareholders by minimising risks associated with appointing and employing persons who may not be fit and proper. near Tamworth, NSW, and its cattle feedlot and abattoir facilities in Indonesia. Director Independence The Company has adopted an Independence Policy that is published on the Company’s website. The Policy states that the majority of the Board must comprise independent directors. In determining whether or not a director is considered independent, the Board will have regard to whether the director: • is a substantial shareholder in the Company; • within the last 3 years, has been an employee of the Company, a material adviser to the Company or a principal or employee of any material adviser to the Company; • is a material supplier to, or a material customer of, the Company; • is directly or indirectly associated with any of the above persons; • is otherwise free from any interest and any business or other relationship which could, or could reasonably be perceived to, materially interfere with the director’s ability to act in the best interests of the Company; and • is of independent character and judgement. Materiality is assessed on a case-bycase basis, taking a qualitative approach rather than setting strict quantitative thresholds from the perspective of both the Company and the relevant director. Each of the current non-executive directors is considered by the Board to be independent. Director Induction and Training All new directors are given a detailed briefing on key board issues, including appropriate background documentation coordinated by the Company Secretary and by the CEO on the nature of the Company’s business and its key drivers. Directors undertake training and development on an “as needs” basis. Directors are also regularly briefed on the Group’s businesses and on industry, technical and legislative issues impacting the Group. Directors aim to have at least one meeting a year in conjunction with a tour of one of the Company’s operations. At all other times, non-executive directors are encouraged to visit the Company’s operations. Access to Management and Independent Professional Advice All directors have complete access to senior management through the Chairman, CEO and Company Secretary at all times and may seek information from the Company’s External and Internal Auditors provided that all such enquiries are first advised to the Chairman and the CEO. Directors may obtain independent, professional advice, at the Company’s expense, on matters relevant to the Company’s affairs to assist them in carrying out their duties as directors, subject to providing prior notice to the Chairman. Board and Director Performance Assessment The Board reviews its own performance and that of its Committees annually. The Chairman also holds individual discussions with each director to discuss their performance on a needs basis. The non-executive directors are responsible for evaluating the performance of the CEO, who in turn evaluates the performance of all other senior executives. The evaluations are based on specific criteria, including the Company’s business performance, whether longterm strategic objectives are being achieved and the attainment of individual performance objectives. Periodically, the Board conducts a review of its performance with the aid of an external provider. A formal board review was conducted in FY15 with the assistance of an external facilitator. The process involved: • Overall Board evaluation • Evaluation of the performance of the Chairman and each Committee Chairman • Evaluation of the performance of each director • Evaluation of Committee performance Each of the standing Board Committees also reviewed their performance in FY15, the results of which were provided to the Board for assessing the effectiveness of each of those committees in conjunction with the Chairperson of the relevant committee. The Nomination and Prudential Committee assists in regularly reviewing and making recommendations to the Board on appropriate processes for reviewing the performance of the Board. Company Secretary Under the Board Charter, the Company Secretary is accountable to, and reports directly to, the Board (through the Chairman where appropriate) on all governance matters. All Directors have unfettered access to the Company Secretary. Under the Company’s Constitution a Company Secretary is appointed by the directors. The Company also has a joint Company Secretary to serve the Board on occasion when the need arises or when the Company Secretary takes a leave of absence. This ensures that the Board is appropriately supported in governance and administration matters at all times. In FY15, directors conducted board meetings (outside of its traditional Adelaide head office) at its domestic owned cattle feedlot (Killara) situated 5 Elders. Live it. Love it. Corporate Governance Statement 2015 Board meetings During the financial year, Directors held 19 Board meetings. The attendance of Directors at Board meetings is set out in the Directors’ Report on page 33 of the Company’s 2015 Annual Report. Where directors are unable to attend meetings either in person or by telephone (e.g. if they are overseas) the Chairman or the CEO endeavours to canvass their views on key matters prior to the meeting in order to represent their views at the meeting. The CFO has a standing invitation to attend all Board meetings. Relevant senior executives and management are invited on occasion to give presentations and inform the Board of important issues and developments within their area of responsibility. The Chairman sets the agenda for each meeting, in conjunction with the Company Secretary and CEO. All directors are welcome to suggest to the Chairman that particular items of business be included in the agenda. Standing items at all full scheduled Board meetings include Non-Executive Director only and Non-Executive Director and CEO only sessions, declarations of interest, and continuous disclosure. Papers are distributed to all Directors in advance of the meetings. 2. BOARD COMMITTEES Relevant Charters: • Nomination and Prudential Committee • Remuneration and Human Resources Committee • Audit, Risk and Compliance Committee • Work Health and Safety Committee A copy of each Charter can be found on the Company’s website at www.elderslimited.com Purpose To increase the effectiveness of the Board’s functioning and to allow the Board to spend additional and more focused time on specific issues, the Board has four standing committees, being the Nomination and Prudential Committee, the Remuneration and Human Resources Committee, the Audit, Risk and Compliance Committee and the Work Health and Safety Committee. Membership and attendance Each of the Board Committees, other than the Nomination and Prudential Committee (which includes the CEO as a member), is comprised solely of independent Non-Executive Directors. The CEO has a standing invitation to attend all Board Committee meetings – except where the relevant Committee is discussing the CEO’s employment arrangements or non-executive director only sessions are being held – and may participate in discussions on matters concerning the main Board but has no voting rights with respect to such matters. Other senior executives are regularly invited to attend Board Committee meetings where the Committee Chairman believes that person’s attendance would be useful and relevant. The members of each Board Committee during the financial year are set out below. Each Board Committee has a formal Charter which details the Committee’s role and responsibilities. The main responsibilities of each Board Committee are detailed further in this report. Attendance by directors at Board and Committee meetings held during the financial year are detailed in the Directors’ Report section of the Company’s 2015 Annual Report on page 33. Board Committee meetings Board Committee meetings are held at scheduled intervals during the year, with additional meetings convened as required. The Board Committees are scheduled to meet a day prior to the board meeting. Following each Committee meeting, the Board receives a report from that Committee Chairman on its deliberations, conclusions and recommendations. Minutes of each Board Committee meeting are formally approved at the subsequent Board Committee meeting. Prior to their approval, draft minutes are circulated to all committee members for review. As membership on each of the Board Committees is currently comprised of all the non-executive directors, committee minutes are not included separately in Board papers. Other ad hoc committee meetings are convened as and when required to consider matters of special importance or to aid the efficient functioning of the Board. Work Health and Safety Committee The Board continued its commitment to the Company’s vision that nothing is so important it cannot be done safely. The Work Health and Safety Committee (WHS Committee) exists to assist the Board in meeting this vision. Committee membership Audit, Risk and Compliance Committee Remuneration and Human Resources Committee Nomination and Prudential Committee WHS Committee Member Member Chairman Chairman M C Allison - - Member - I Wilton Chairman Member Member Member J A Jackson Member Chairman Member Member R Clubb2 Member Member Member Member J H Ranck 1 1 Non-voting on Board matters. 2 Ms Clubb was appointed a member of each committee on 21 September 2015 6 Role The Committee’s objectives are to: • oversight of FY15 Safety Engagement Campaign, Stand Up Speak Up • ensure the appropriate policies and procedures are in place to assist the Company to meet its statutory obligations and the Board’s commitment to health and safety; • continued analysis of the Company’s obligations under WHS laws; and • ensure appropriate policies, procedures and systems are in place to effectively manage, measure and improve WHS activities; and Nomination and Prudential Committee • oversee the provision by management of a healthy and safe working environment and culture for all employees, contractors, clients and other visitors to the Company’s work premises. The Committee meets its objectives by discharging the responsibilities set out in its charter, namely reviewing and making recommendations to the Board on: • the plans and targets for WHS management; • cultural initiatives designed to build and foster WHS leadership and demonstration of appropriate WHS behaviours consistently at all levels; • Company performance in relation to WHS matters; • the adequacy, integrity and effectiveness of management processes and procedures used to manage WHS as well as the performance of the Company’s WHS function and management; • the adequacy, integrity and effectiveness of Company management’s processes for ensuring and monitoring compliance with WHS statutory and reporting obligations; • the internal process for determining and managing key WHS risk areas, particularly compliance with laws, regulations, standards and best practice guidelines; • the impact of changes and emerging issues in WHS legislation, community expectations, research findings and technology; • reports by Company management on WHS performance and issues including reports on material WHS issues associated with the Company’s operations; and • WHS issues associated with the operations on Company controlled sites (including, if feasible, visits to those sites). Key Activities During the Year The Committee oversaw the following significant activities during the reporting period: • development and implementation of Safety Strategy FY15 • continued focus on high risk activities undertaken by Elders. Objective The Board’s objective in relation to Board nomination and review is to ensure that: • the Company has adopted selection, appointment and review practices that result in a board: - with an effective composition, size, mix of skill sets, experience and commitment to adequately discharge its responsibilities and duties and add value to the Company and its shareholders; - that has a proper understanding of, and competence to deal with, the current and emerging issues of the businesses of the Company; and - that can effectively review and challenge the performance of management and exercise independent judgement. • shareholders and other stakeholders understand and have confidence in the Company’s selection, appointment and review practices. Responsibilities The Committee’s principal responsibilities are to regularly review and make recommendations to the Board on: • the necessary and desirable competencies of members of the Board and its committees; • appropriate processes for the review of the performance of the Board and its committees; • appropriate policies with respect to the maximum period of service and retirement age for directors; • appropriate succession plans for directors and the CEO; • the appropriate size of the Board so as to encourage efficient decision-making; • recommendations for the appointment (including re-appointment in the case of directors retiring by rotation) and removal of directors of the Company; • the scope and content of letters of appointment of non-executive directors; skills development and continuing education programs for directors of the Company; and • appropriate induction procedures designed to allow new directors to participate fully and actively in board decision-making at the earliest opportunity and the effectiveness of those procedures. Remuneration and Human Resources Committee Objective The Board’s objective is to ensure that the Company has adopted remuneration and human resources policies that meet the needs of the Company and encourage a performance oriented culture. A summary of the Company’s remuneration policies and practices is set out in the Remuneration Report commencing on page 36 of the Company’s 2015 Annual Report. The CEO has a standing invitation to attend Committee meetings but must leave the meeting during those periods in which consideration is being given to his employment arrangements. The Company notes that the composition of the Remuneration and Human Resources Committee meets the requirements of Recommendation 8.1 of the ASX Recommendations. Role The objectives of the Committee are to: • ensure appropriate policies and procedures are in place to assess the remuneration levels of the CEO, executive management, the Company’s employees generally and the Board; • ensure appropriate policies and procedures are in place to attract and retain the Chairman, Non-Executive Directors, Executive Directors, CEO and executive management; • ensure the Company (which includes all subsidiaries and, as appropriate, associated companies) adopts, monitors and applies appropriate remuneration policies and procedures that align with the creation of shareholder value; • engage and motivate directors and senior executives to pursue the long-term growth and success of the Company; • ensure a clear relationship between business performance and the key performance indicators and remuneration of the CEO and executive management; • align executive incentive awards with the creation of shareholder value; • ensure that the Company’s human resources strategy, policies and procedures are appropriate to the Company’s needs and clearly designed and executed; and • to achieve diversity in the Company’s 7 Elders. Live it. Love it. Corporate Governance Statement 2015 workplaces and on the Board and to achieve equal treatment of employees and Directors regardless of sex, race, age, disability, religion, sexual orientation or family responsibilities. The Committee meets its objectives by reviewing and making recommendations to the Board on: • appropriate policies for compensation arrangements for the CEO, executive management, the Company’s employees generally and the Board itself; • the remuneration package for the CEO; • KPIs relevant to the remuneration of the CEO and the performance of the CEO against those KPIs; • the CEO’s recommendations with respect to the remuneration of executive management; • the CEO’s plans for the remuneration of employees in general; • the annual remuneration review applying generally across the Company; • the competitiveness and appropriateness of the Company’s remuneration policies and practices; • remuneration of Company employees by gender; • human resources policies and procedures to ensure alignment between remuneration and shareholder value creation; • remuneration of directors; • employee share, option and rights schemes and other performance incentive programs; • recruitment, retention, retirement and termination policies and benefits; • Company superannuation arrangements; • human resources strategy, policies and procedures (but not work health and safety); • employment contracts for all directors, the CEO and those executive management contracts which are outside normal parameters; • organisational development, including training and education; • succession planning for executive management; • policies regarding diversity, including measurable objectives for achieving diversity; • policies regarding equal treatment of employees; 8 • policies regarding workplace behaviour expected of employees; and • disclosures in the Company’s annual report on remuneration matters. Key Activities During the Year The Committee oversaw the following significant activities during the reporting period: • performance against measurable diversity objectives; and • ongoing review and simplification of the remuneration arrangements, policy and structure for the Group. Audit, Risk and Compliance Committee Objective The Board is concerned to ensure the integrity of the Company’s financial reporting, its management of risk and its legal, regulatory and policy compliance. The Audit, Risk and Compliance Committee assists the Board in achieving this objective. At least one member of the Committee is required by the Committee Charter to be a qualified accountant or other financial professional with experience of accounting and financial matters. Mr Wilton, an independent director, is a Certified Practicing Accountant and Chairman of the Committee since April 2014. • monitoring the effectiveness of the Company’s financial reporting and internal control policies and its procedures for