Corporate Governance Statement
Role Of The Board Of Directors
The Directors are elected by the shareholders and are responsible to the shareholders for the performance of the Group. Their focus is to enhance the interests of shareholders and other key stakeholders and to ensure the Group is properly managed. The Board draws on relevant corporate governance best practice principles to assist and contribute to the performance of the Group.
The Board has developed a charter that outlines responsibilities that encompass the following:
• Setting the strategic direction of Trustpower and monitoring Management’s implementation of that strategy.
• Selecting and appointing (and, if appropriate, removing from office) the Chief Executive, determining his/ her conditions of service and monitoring his/her performance against established objectives.
• Ratifying the appointment (and, if appropriate, removing from office) the Chief Financial Officer and Company Secretary.
• Ratifying the remuneration of senior management consistent with their employment agreements.
• Monitoring financial outcomes and the integrity of reporting, and, in particular, approving annual budgets and longer-term strategic and business plans.
• Setting specific limits of authority for management to commit to new expenditure enter contracts or acquire businesses without prior Board approval.
• Ensuring that effective audit, risk management and compliance systems are in place to protect the Group’s assets and to minimise the possibility of the Group operating beyond legal requirements or beyond acceptable risk parameters.
• Monitoring compliance with regulatory requirements (including continuous disclosure) and setting ethical standards and then monitoring compliance with those standards.
• Reviewing, on a regular basis, senior management succession planning and development.
• Ensuring effective and timely reporting to shareholders.
Each year the Board has nine scheduled one day meetings, at least one extended strategic planning meeting, at least four Audit and Risk Committee meetings and several unscheduled meetings to consider and/or review substantial projects and any other special circumstances that may arise from time to time.
The full Board determines the board size and composition, subject to limits imposed by the Company’s Constitution which is required to comply with the NZX Listing Rules. The Constitution provides for a minimum of three directors and a maximum of seven.
The Constitution and NZX Listing Rules also require that while there are a total of six or seven directors, two must be independent directors. As at 31 March 2014, the Board has determined that the independent directors of Trustpower are RH Aitken, GJC Swier, and IS Knowles and the non-independent directors of Trustpower are MJ Cooney, BJ Harker, and M Bogoievski.
The Board has established two standing Subcommittees being; the Audit and Risk Committee and the Remuneration Committee.
Audit And Risk Committee
The Board has established a standing Audit and Risk Committee consisting of three directors. The Committee meets at least four times a year. Members of the Committee are: GJC Swier (Chairman), BJ Harker, and IS Knowles.
The role of the Audit and Risk Committee is formally recorded in a charter document approved by the Board of Directors. The primary objective of the Committee, as set out in the charter, is to assist the Board in fulfilling its responsibilities relating to accounting and reporting practices of the Group. In particular, the Committee’s main responsibilities are to:
• Review and report to the Board on the annual report, the interim financial report and all other financial information published by the Group or released to the market.
• Assist the Board in reviewing the effectiveness of the organisation’s internal control environment.
• Determine the scope of the internal audit function and ensure that its resources are adequate and used effectively, including co-ordination with external auditors.
• Oversee the effective operation of the risk management framework.
• Recommend to the Board the appointment, removal and remuneration of the external auditors, and review the terms of their engagement, and the scope and quality of the audit.
• Review and approve, within established procedures, and before commencement, the nature and scope of non-audit services being provided by the external auditors. These procedures include quantitative and qualitative thresholds for the review, and include all relatively significant projects.
In fulfilling its responsibilities, the Audit and Risk Committee receives regular reports from management and the internal and external auditors. It also meets with the internal and external auditors at least three times a year – more frequently if necessary. The internal and external auditors have a clear line of direct communication at any time to either the Chairperson of the Audit and Risk Committee or the Chairperson of the Board.
The Remuneration Committee
The Board has established a Remuneration Committee which has two directors as members, BJ Harker and GJC Swier. The role of the Remuneration Committee is formally recorded in a charter document approved by the Board of Directors.
The primary objectives of the Remuneration Committee are to:
• Help enable the Group to attract, retain and motivate executives and directors who will create value for shareholders.
• Fairly and reasonably reward executives having regard to the performance of the Group, the performance of the executives and the general pay environment.
• Help the Group comply with the provisions of the Employment Relations Act 2000, the Companies Act 1993, the NZX Listing Rules and any other relevant legal requirements.
The responsibilities of the Committee include:
• Reviewing and recommending to the Board for approval the remuneration policy for directors and senior executives and ensuring that the structure of the policy allows the Group to attract and retain directors and senior executives of sufficient calibre to facilitate the efficient and effective management of the Company’s operations.
• Annual review and recommendation to the Board for approval of the remuneration packages of all directors and senior executives of the Group.
• With reference to the Board, managing the employment or removal of the Chief Executive and negotiation of employment terms.
• Participation in the process of employment of the Chief Financial Officer and recommendation to the Board of its confidence in any appointment.
• Establishment of appropriate performance criteria, from time to time, for short and long term employee incentive schemes and to make recommendations to the Board.
Other Sub Committees
The Board has established a sub committee including BJ Harker, MJ Cooney and IS Knowles to oversee any transaction to be undertaken by the Group in relation to on-market share buybacks.
The Board will review the need to establish a separate Health and Safety Committee over the next 12 months once it has had an opportunity to assess best practice guidance for health and safety governance following the recent introduction of the Health and Safety Reform Bill.
Review Of Board Performance
An annual review of the performance of the Board and individual directors is undertaken by the Chairman.
Compliance With NZX Corporate Governance Best Practice Code And Other Guidelines
As a listed issuer Trustpower is required to disclose in its Annual Report whether, and to what extent, its corporate governance principles materially differ from the NZX Corporate Governance Best Practice Code.
Trustpower believes that it complies in all material respects with the Code. However, it should be noted that the Trustpower Board has chosen not to constitute a Nominations Committee as recommended by the Code. The Board has decided that director nominations are able to be handled more effectively by the full Board.
Code Of Ethics
A Code of Ethics has been developed and approved by the Board. Trustpower is committed to maintaining the highest standards of honesty, integrity and ethical conduct and has adopted a Code of Ethics to deter wrongdoing and to promote:
• Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships.
• Full, fair, accurate, timely and understandable disclosure in reports and documents filed by the Company and in other public communications made by the Company.
• Compliance with applicable laws, rules and regulations.
• Internal reporting to the Board of Directors of violations of this Code of Ethics.
• Accountability for adherence to the Code of Ethics.
The Code of Ethics is not an exhaustive list of acceptable or non-acceptable behaviour, rather it is intended to guide decisions so they are consistent with Trustpower’s values, business goals and legal and policy obligations.
Failure to follow the Code of Ethics may lead to disciplinary action being taken, which may include dismissal. The Code of Ethics applies to the Board of Directors and the Company’s employees.
The Group has adopted a system of internal control. The system is based upon written procedures, policies, guidelines and organisational structures that provide an appropriate division of responsibility, sound risk management, a programme of internal audit, and the careful selection and training of qualified personnel.
While the Board acknowledges that it is responsible for the overall control framework of the Group, it recognises that no cost effective internal control system will preclude all errors and irregularities.
The Group has developed a comprehensive, enterprise wide risk management framework. Management actively participates in the identification, assessment, and monitoring of new and existing risks. Particular attention is given to market risks that could impact on the Group. Management undertakes regular reporting to appraise the Audit and Risk Committee and the Board of the Group’s risks and the treatment of those risks.
The Audit and Risk Committee reviews and if considered satisfactory, recommends for approval by the Board annually, the Group’s insurance programme.
Wholesale Energy And Carbon Trading Policy
The Group has adopted a Wholesale Energy and Carbon Trading Policy to manage the risk relating to the purchasing of electricity and gas from wholesale energy markets and the trading of carbon related products. Derivative instruments are used to set the price of electricity at a future nominated time. The Wholesale Energy and Carbon Trading Policy allows wholesale energy and carbon trading to occur within risk limits set by the Board.
The Group has a Board approved Treasury Policy to manage finance, interest rate, foreign exchange and foreign investment risks. The Policy approves the use of certain instruments for risk management purposes, and it prohibits any activity that is purely speculative in nature. It also sets out exposure limits, delegated authorities and internal controls. The Policy is reviewed by Management annually and independently every three years.
Delegated Authorities Policy
The Group has a Delegated Authorities Policy in place that has been approved by the Board. The Policy provides limited authority to certain Group employees to purchase goods and services, enter into sales contracts and approve credit, sign deeds, indemnities and guarantees, and sign other contracts and documents. The Policy is reviewed annually.
The Group recognises the importance of environmental issues and is committed to the highest levels of performance. To help meet this objective the Group has developed and implemented both environmental policies and a comprehensive environmental management system. These have been established to facilitate the systematic identification of environmental issues and to ensure that they are managed in a structured manner. These measures allow the Group to:
• Monitor its compliance with all relevant legislation.
• Continually assess and improve the impact of its operations on the environment.
• Encourage employees to actively participate in the management of environmental issues.
• Use energy and other resources efficiently.
• Encourage the adoption of similar standards by the Group’s principal suppliers, contractors and distributors.
• Ensure procedures are in place to appropriately deal with any adverse environmental event that may occur.
Group Information Policy
The following is the Group’s policy regarding the disclosure of Group information:
No Director of the Group may disclose information which that Director has received in his or her capacity as a Director or employee of the Group, being information that would not otherwise be available to the Director, to
a. a person whose interests that Director represents; or
b. a person in accordance with whose directions or instructions the Director may be required, or is accustomed to act in relation to the Director’s powers and duties,
without the prior consent of a subcommittee of the Board established to authorise the disclosure.
Conflicts Of Interest
Where any Trustpower Director has a conflict of interest or is otherwise interested in any transaction, that Director is required to disclose his or her conflict of interest, and thereafter neither participate in the discussion nor vote in relation to the relevant matter. The Group maintains a register of disclosed interests.
In order to protect Trustpower’s reputation and safeguard employees who may want to buy or sell Trustpower securities, the Group’s Securities Trading Policy requires an approved procedure to be followed by all staff and Directors. Certain employees of the Company are required to make additional disclosures under the Securities Markets Act 1988.
Trustpower has established a Whistleblowing Policy in order to facilitate the disclosure and impartial investigation of any serious wrongdoing. This policy advises employees of their right to disclose serious wrongdoing, and sets out Trustpower’s internal procedures for receiving and dealing with such disclosures. The policy is consistent with, and facilitates, the Protected Disclosures Act 2000.
Other Corporate Policies
The Group has a number of other policies covering but not limited to human resource activities, health and safety, buildings and security, business continuity and disaster recovery planning. These policies are regularly reviewed and approved by senior management and where appropriate the Board.
The Group has established an outsourced internal audit function that is responsible for monitoring the Group’s system of internal financial control and the integrity of the financial information reported to the Board. Internal audit operates independently from the Board and reports its findings directly to the Audit and Risk Committee. Internal audit liaises closely with the external auditor, who reviews the internal audit work undertaken to the extent necessary to support its audit opinion.
The Role Of Shareholders
The Board aims to ensure that shareholders are informed of all major developments affecting the Group’s state of affairs. Information is communicated to shareholders in the annual, interim reports, and various announcements to NZX. Quarterly operational information is also provided following the end of each quarter via NZX announcement. The Board encourages full participation of shareholders at the annual meeting to ensure a high level of accountability and identification with the Group’s strategies and goals.