The ASX Corporate Governance Council's revised Principles of Good Corporate Governance and Best Practice Recommendations provide recommendations relating to eight key principles relevant to ASX-listed companies. While EFIC, as a Government-owned corporation, is not required to disclose the extent to which our corporate governance complies with the recommendations (some of which are not directly applicable to us), the following details demonstrate our commitment to good corporate governance.
Lay solid foundations for management and oversight
1.1 Under the EFIC Act, the Minister for Trade appoints Board members, other than the Managing Director, who is appointed by the Board after consultation with the Minister.
1.2 EFIC provides Board members with a Director’s Induction Pack, including a document entitled ‘Corporate Governance Information for Directors’. The pack contains details of:
• the legal framework in which EFIC and the Board operate, including the way that conflicts of interest are managed, and the statutory confidentiality obligations applying to Board members and employees
• the policies and procedures adopted by the Board
• the corporate plan and business strategy
• the financial information presented to the Board
• the circumstances in which a Board member can seek independent professional advice at EFIC’s expense.
1.3 The Board has formally determined its own responsibilities and set those out in its Board Charter, and defined the powers of the Managing Director, and set out those powers in an instrument entitled ‘Statement of the Powers of Managing Director’. Powers beyond the scope of this statement are reserved for the Board.
1.4 The Board assesses the performance of the Managing Director each year, including eligibility for any performance-related remuneration. The Managing Director’s remuneration is determined by the Board within a framework set by the Government’s Remuneration Tribunal.
1.5 The Managing Director assesses annually the performance of senior executives under EFIC’s Performance Management Program.
Structure the Board to add value
2.1 A majority of the Board consists of independent members.
• The Chair is an independent member.
• Different individuals exercise the roles of Chair and Managing Director.
• In addition to their ongoing statutory obligation to disclose material personal interests when they arise, Board members’ independence is regularly assessed through annual disclosure of external interests, updated at each Board meeting.
• With the approval of the Chair, a Board member in the furtherance of his or her duties may seek independent professional advice at EFIC’s expense.
2.2 The Board’s performance is reviewed, at a minimum, every two years. The most recent evaluation was completed in December 2009 and addressed issues such as Board composition and skills, quality of information received, roles and responsibilities, exercise of powers and effectiveness, operation of meetings, induction and education, stakeholder obligations and risk management. The main findings of the review were that the Board operates professionally and effectively.
2.3 The Board holds ‘in camera’ discussions without management at the end of each meeting to assess the effectiveness of the meeting and identify areas for improvement.
2.4 Management provides the Board with comprehensive and timely information on relevant matters to enable the Board to discharge its duties effectively, including provision of Board papers one week before each Board meeting. Directors are able to obtain additional information if they wish and have access to all members of the EFIC Executive team.
2.5 EFIC publishes its key performance indicators in its Annual Report.
Promote ethical and responsible decision making
3.1 EFIC has a Code of Conduct.
3.2 In addition, EFIC’s Corporate Responsibility Policy (CRP) sets out many of the principles that enable EFIC to attain an appropriate balance between the responsibilities EFIC owes to its varied stakeholders. It assists EFIC to balance the need to achieve its purpose of overcoming financial barriers for exporters while fulfilling its responsibilities to its broader, non-customer stakeholders. The CRP covers:
• responsibilities to exporters, particularly under EFIC’s Customer Service Charter, and confidentiality and privacy obligations
• responsibilities to the Australian Government
• responsibilities to EFIC’s employees
• assessment of environmental and social issues (under EFIC’s Policy for Environmental and Social Review of Transactions) in relation to transactions, information disclosure and anti-corruption initiatives.
3.3 As a statutory authority of the Commonwealth, EFIC regularly consults entities and groups that have an interest in its operations. These include state government departments, business associations and community groups.
Safeguard integrity in financial reporting
4.1 EFIC has had an Audit Committee since inception. The Board has set out the accountabilities of the Committee in an Audit Committee Charter. The Committee has broad responsibilities to the Board regarding risk oversight and management, including:
• overseeing the work of both the external and internal auditors
• overseeing the preparation of comprehensive and accurate financial statements and reports
• overseeing compliance with statutory obligations
• the effective management and control of financial risks.
All three Committee members, including the Committee Chair, are independent, non-executive Board members. The Committee Chair is not Chair of the Board. EFIC has a risk management system under the review of the Audit Committee.
4.2 The Managing Director and Chief Financial Officer state in writing to the Audit Committee that EFIC’s financial reports present a true and fair view, in all material respects, of its financial condition and that the operational results are in accordance with relevant accounting standards.
4.3 In accordance with the CAC Act, the Auditor-General conducts the annual external audit of EFIC. The Auditor-General has contracted Ernst & Young to assist with the audit work.
Make timely and balanced disclosure
5.1 EFIC places media releases, corporate announcements and its Annual Report (incorporating the Financial Statements) on its website.
5.2 EFIC keeps the Minister for Trade and the Minister for Finance informed regarding EFIC’s operations, in accordance with its obligations under the CAC Act.
5.3 EFIC also keeps the Minister for Trade informed of developments in the financial markets that have an impact on exporters and provides information to assist the Government with policy development.
Respect the rights of the shareholder
6.1 EFIC has a close working relationship with the Australian Government, its sole owner, at various levels.
6.2 EFIC’s CRP sets out guiding principles to enable it to establish an appropriate balance between the responsibilities EFIC owes to the Australian Government as its sole owner and other stakeholders.
6.3. EFIC respects the international agreements to which Australia is a party that relate to its business. Among the key agreements for EFIC are the following:
• The World Trade Organization (WTO) Agreement on Subsidies and Countervailing Measures;
• The OECD Arrangement on Officially Supported Export Credits;
• The OECD Recommendation on Common Approaches on Environment and Officially Supported Export Credits;
• The OECD Recommendation to Deter Bribery in Officially Supported Export Credits;
• The OECD Principles and Guidelines to Promote Sustainable Lending Practices in the Provision of Official Export Credits to Low Income Countries;
• OECD Guidelines for Multinational Enterprises; and
• The Berne Union Guiding Principles.
Recognise and manage risk
7.1 EFIC’s risk management systems and procedures are structured around key requirements of the CAC Act, the EFIC Act, other relevant legislation, regulatory guidance and prudential standards, as well as prudent commercial practice.
7.2 EFIC has identified, prioritised and documented all significant risks, and has documented associated risk management systems. EFIC’s Risk Management Framework describes the manner in which EFIC’s risk appetite and tolerance are established and subsequently controlled. The Framework sets out core principles, outlines responsibilities, categorises the risks that EFIC faces and identifies the strategies it has adopted to manage those risks. EFIC recognises that risk identification and management is ongoing. At a minimum, EFIC’s risks are reviewed twice each year, with a focus on potential new risks on the horizon.
7.3 EFIC’s senior executives, after consultation with relevant staff regarding any control deficiencies or lapses, or any compliance breaches or incidents, provide six-monthly written assurances to the Audit Committee regarding the currency of EFIC’s risk profile and the effectiveness of compliance and control measures.
7.4 EFIC has contracted Deloittes to carry out the internal audit function within EFIC.
7.5 The internal auditor reports to management and is accountable to the Audit Committee. The Audit Committee is responsible for overseeing the scope of the internal audit and recommending to the Board the appointment or dismissal of the internal auditor. The Audit Committee has access to the internal audit function without the presence of management.
Remunerate fairly and responsibly
8.1 In accordance with legislative requirements, the Government’s Remuneration Tribunal determines the fees and other amounts payable to Board members. The Tribunal also determines the parameters within which the Managing Director’s remuneration package is set by the Board. Therefore, key remuneration decisions are made outside EFIC.
8.2 Board members (other than the Managing Director) do not receive any performance-related remuneration. Board members are not entitled to any retirement benefits beyond statutory superannuation entitlements. An explanation of the Remuneration Tribunal’s operations and practices is available on its website (www.remtribunal.gov.au).
8.3 Under the EFIC Act, the Board determines the terms and conditions of EFIC’s employees. The remuneration of EFIC’s employees is established with reference to market data from the Financial Institutions Remuneration Group (FIRG). The FIRG data is provided twice yearly by the 100-plus financial institutions which are its members. EFIC benchmarks each position, comparing relevant experience and skills as well as key accountabilities.