CPA Australia Ltd (CPA Australia) is a leading advocate of sound corporate governance. It is committed to best practice and is a member of the Australian Stock Exchange Corporate Governance Council (ASXCGC) that developed the Corporate Governance Principles and Recommendations (CGPR).
As an unlisted company limited by guarantee, CPA Australia is not required to report against the CGPR. However, CPA Australia uses the CGPR as a guide to best practice, and has implemented these principles as far as they are relevant to it as a member organisation. CPA Australia reports against the CGPR in this corporate governance statement as part of its commitment to preserving stakeholder confidence.
Principle 1: Lay solid foundations for management and oversight
Board of directors
The Board of Directors (Board) is the principal governing body of CPA Australia and is appointed by a Representative Council. Details of the council are set out later in this document. All Directors undergo Australia and New Zealand police checks before their appointment.
The Board is responsible for the overall governance of CPA Australia. The Board has adopted a formal charter detailing its functions and responsibilities, which is reviewed regularly. Matters specifically reserved to the Board are set out in its charter.
While the Board has overall control and management of CPA Australia, it has delegated a range of its powers, duties and responsibilities to its committees, management, divisions and the disciplinary tribunals. The Board reviews each delegation at least annually.
Each Board meeting agenda includes statutory matters, governance and management reports, which include strategic risks, strategic projects and operational items. From time to time the Board meet without management.
Management of CPA Australia’s operations and the implementation of corporate strategy and policy initiatives are the responsibility of the Chief Executive (CEO) and management.
In 2014, the Board approved a five-year corporate plan for 2015-2019 established by management. The Board approves an annual performance contract setting the priorities, direction and performance targets for CPA Australia within the parameters of the corporate plan. Monthly performance reports are prepared by management and the most recent report is made available to the Board at each Board meeting and Finance Committee meeting.
The CEO is appointed by the Board. He is responsible for the management of CPA Australia in accordance with approved strategy, policies, performance contract and delegated authority framework. He is responsible for ensuring that the Board is provided with the relevant strategic options, policy and financial issues on which to deliberate, and with the necessary administrative support to enable the Board to work effectively.
The CEO attends Board and Board committee meetings; however, he is not a Director and is not entitled to vote.
Senior executives including the CEO, the company secretary, and the chief operating officers (COOs) have formal job descriptions.
The company secretary
All Directors have access to the company secretary who is appointed by the Board. The company secretary is accountable to the Board, through the Chair, on governance matters.
All Directors and senior executives have written agreements with CPA Australia that set out the terms of their appointment.
The Board reviews its performance and that of each Director regularly throughout the year. A peer and self-assessment review is undertaken annually and was completed in 2015.
The Nomination and Remuneration Committee recommends to the Board the skills and competencies required on the Board, and assesses the extent to which those skills are represented on the Board.
All staff and management including the senior executives of CPA Australia are subject to annual performance planning and reviews. The performance of each executive is assessed by the CEO or COO. They are assessed against achievement of their job specifications and goals, contribution towards specific business and strategic objectives and adherence to CPA Australia’s REACH (Respect, Empowerment, Accountability, Cooperation and Honesty) values.
Upon commencement at CPA Australia, all senior management take part in a leadership on-boarding program which assists in accelerating our new leaders’ transition into our organisation. The program is designed to integrate the new leader into the organisation’s culture, to assist them in understanding strategy as well as process, establishing relevant networks, and navigating political frameworks.
Along with all staff, all executives of CPA Australia including the CEO have an at risk component of their remuneration that is tied to both their own performance and that of the organisation. The Board is remunerated as a percentage of the Australian Auditor-General’s annual total salary package, as set out in the Constitution (Article 45). The Board benchmarks Director remuneration annually in determining the percentage to be applied.
Principle 2: Structure the board to add value
The Board consists of 12 independent non-executive Directors (as defined by the CGPR), ten member Directors and two external Directors (who are neither members nor employees). A diagram of the governance structure in place at year end is available on page 57 of the 2015 Integrated Report.
The Board assesses annually the independence of each Director. Directors must disclose to CPA Australia, any matter which may affect their independence as soon as they become aware of it. All Board members are requested to disclose related party transactions on an annual basis and a summary of related party transactions for each Director is disclosed in the notes to the financial statements on page 89 of the 2015 Integrated Report. Other board membership of directors is included on pages 60 to 61.
The Chair is an independent Director, and is not the CEO. Directors are selected on the basis of their skills, experience and other relevant capabilities with due regard to the mix of skill recommended by the Board and to proper succession planning. The skills mix of the Board and its committees is detailed in the table below. Further information on Directors’ skills, expertise and their terms of office, are set out on pages 60 to 61 of the 2015 Integrated Report. The Board has adopted an organisation diversity and inclusion policy, a copy of which is available on our website.
The Nomination and Remuneration Committee regularly considers diversity issues and they are consciously managing the diversity of the Board and its committees. The Board recommends that a minimum of 25 per cent of Directors on the Board should be female, which is reflected in the current composition. For further information relating to diversity, refer to our people section of our 2015 Integrated Report.
Directors are appointed by the Representative Council. The Representative Council is comprised of members selected by the divisions and advisory committees, and other members representing various groups as selected by the Nomination and Remuneration Committee. Its charter is available on our website.
Under the Constitution the Representative Council’s only direct power is to appoint the Board.
Nomination and remuneration committee
The Nomination and Remuneration Committee (PDF) assists the Representative Council in selecting appropriate candidates for appointment to the Board. It reviews candidates and makes recommendations to the Representative Council. The council must have due regard to, but is not bound by, the recommendations of the Nomination and Remuneration Committee. It also advises the Board and the Representative Council on succession plans for the Board. It recommends to the Board appointments for all membership committees.
The Nomination and Remuneration Committee consists entirely of Directors. The Chair is a Director.
The composition of the committee and meeting attendance is set out in the notes to the financial statements on page 67 of the 2015 Integrated Report. The same note sets out Directors’ attendances at Board and other Board committee meetings.
Director Induction and education
New Directors receive information outlining their duties and responsibilities. New Directors attend a formal induction meeting with senior executives including the CEO and COOs. In 2015 all Directors completed a compliance training program which provided a high level understanding of the organisations key legal and compliance obligations.
Access to information
Senior executives supply the Board with information to allow it to make decisions on an informed basis, and regularly attend meetings
Information required by principle 2
Directors are entitled to serve a maximum of three terms consisting of three years each. The Board is moving to a rotational model of one-third of the Board, so during a transitional period, some Directors will have longer terms to effect the transition. Full information on this transition is located in the Constitution.
Directors are entitled to obtain reimbursement of the reasonable costs of any independent advice obtained in respect of their office. If a Director wishes to obtain independent external advice, then he or she must notify the Board before seeking that advice and obtain the prior approval of the Chair, whose approval shall not be unreasonably withheld.
The respective compositions and details of meeting attendance of the committees are set out in the Directors’ Report on pages 67 of the 2015 Integrated Report. Minutes of committee meetings are provided to the Board at its next meeting.
The Board currently has three Board committees: Nomination and Remuneration, Audit and Risk, and Finance. The Policy Governance Committee was disbanded effective 30 September 2015. Key policy issues will be referred directly to the Board as required.
Each committee has a charter describing its role and composition. The charters are reviewed regularly to ensure that the role and responsibilities of each committee are consistent with CPA Australia’s strategic and operational objectives. The Audit and Risk, and Finance Committees may co-opt members who, whilst they are not Directors, bring particular experience to the committees.
The Board committees are each scheduled to meet approximately four times per year. Attendance at Board committee meetings is set out on page 67 of the 2015 Integrated Report.
Principle 3: Promote ethical and responsible decision making
Directors, members and employees of CPA Australia are required to act in accordance with the highest standards of honesty and integrity.
The respective codes of conduct, as approved by the Board, are given to all new Directors, volunteer members and employees, which among other things set out expected standards of behaviour.
CPA Australia promotes diversity across the organisation with regards to age, gender, ethnicity and the cultural background of its Directors, committee members and employees. For further information relating to diversity, refer to the Organisational Diversity and Inclusion Policy, which is available on our website, and pages 48 to 49 of the 2015 Integrated Report. CPA Australia is a member organisation limited by guarantee and does not have securities (shares etc.) so does not report on share trading policies.
Principle 4: Safeguard integrity in financial reporting
Audit and risk committee
CPA Australia has established an Audit and Risk Committee (PDF) to verify and safeguard the integrity of the Company’s financial and non-financial reporting. The committee consists of four independent Directors. It is chaired by an independent Director who is not the Chair of the Board.
Specifically, the Audit and Risk Committee assists the Board to discharge its responsibilities for external reporting including assurance over our integrated report, external and internal audit and internal control and risk management. There is a mix of accounting, legal and business professionals currently serving on the committee.
Each year before financial statements are approved, management provide a representation letter to both the Board and external auditors expressing an opinion as to whether the financial reports give a true and fair view in accordance with the Australian Accounting Standards and the Corporations Act 2001.
The Audit and Risk Committee has a formal charter and its meetings and attendance are set out on page 67 of the 2015 Integrated Report.
External Auditors Deloitte Touche Tohmsatsu have been CPA Australia’s external auditor since 2005. The performance of the external auditor is reviewed annually by the Board with advice from the Audit and Risk Committee.
An analysis of fees paid to the external auditor, including a breakdown of any non-audit fees paid or received by the auditor, is provided in note 18 to the financial reports. The Audit and Risk Committee has developed principles for the supply of non-audit services which have been endorsed by the Board. It is the policy of the external auditors to provide an annual declaration of their independence to the Audit and Risk Committee.
The Audit and Risk Committee undertakes a full review of the terms of engagement of the external auditor and the rotation of external audit engagement partners, before deciding to re-appoint the existing audit firm or seek tenders on the open market. A representative from Deloitte Touch Tohmatsu attends the AGM and is able to answer audit related questions.
The Finance Committee (PDF) consists entirely of Directors and assists the Board to discharge its responsibility to manage the business planning, budgeting processes and general financial management of CPA Australia. The Finance Committee has a formal charter.
Principle 5: Make timely and balanced disclosure
As CPA Australia is not a listed company; it is not bound by the requirement for continuous disclosure.
Principle 6: Respect the rights of shareholders (members)
CPA Australia provides its members with timely access to information about its activities and changes in legislation that may affect the profession. Its three principal communication channels with members are its monthly publication, INTHEBLACK, its weekly enewsletter CPA Update and its website.
The Notice of Annual General Meeting is provided to all members via their preferred method of communication and notice is also provided via the three principal communication methods.
Information about our organisation, our governance principles and the charters of our Board and its committees are available.
Members may elect to receive information from, and send information to, CPA Australia electronically.
Principle 7: Recognise and manage risk
Risk management is a key aspect of CPA Australia’s governance arrangements. We have a risk management framework, risk policy and risk management program, which includes formal processes to update the Board through the Audit and Risk Committee. This framework, policy and management program are used throughout the organisation. The goal of our risk management processes and structures is to maximise opportunities to achieve our objectives and goals without exposing the organisation to unnecessary risk.
In addition, the Board discusses strategic and major operational risks as part of its regular meeting agenda.
We have established and implemented a system for identifying, assessing, monitoring and managing material risks throughout CPA Australia and this is independent of the external auditor.
The organisation’s risk management framework and risk profile, including identification and treatment of risks and mitigating controls, are reviewed regularly and were approved by the Audit and Risk Committee during 2015. Senior management continuously monitor the risk profile and report any risks to the Board via the Audit and Risk Committee.
As part of our approach to risk and our ongoing planning, the key trends in our operating environment are regularly reviewed. This review covers our key strategic risks, taking into account our most material issues and the key environmental trends that we see impacting our ability to create value now and into the future. Our risk assessment is a key part of our operational planning and as well as our strategic risks our assessment covers our governance, operational, financial and compliance risks.
CPA Australia has an internal audit function that reports directly to the Chief Executive. The internal auditor attends all Audit and Risk Committee meetings and is directly available to advise all members of the Audit and Risk Committee independently of management. The Internal audit function assess the appropriateness of our risk management framework and our internal controls on an annual rolling basis. Audit plans are approved by the Audit and Risk Committee.
The three committees of the Board share responsibility for decision making on economic, environmental and social impacts and risks. These risks are disclosed through our Annual Integrated Report. The Audit and Risk Committee reviews this report and ensures that all material issues are covered. The Audit and Risk Committee recommends the report to the Board for approval.
Principle 8: Remunerate fairly and responsibly
The Constitution of CPA Australia provides that the Board may approve payments to Directors based on percentages of the Auditor-General’s salary. Directors do not receive retirement benefits.
The Nomination and Remuneration Committee approves the salary bands for management and increases, based on external advice from qualified specialists.
The Board has the responsibility to approve the terms of the CEO’s appointment.
The CEO has personal performance indicators and is eligible for a bonus payment subject to the approval of the Board after its evaluation of the performance of the CEO. This evaluation involves an assessment of a range of factors including the overall performance of CPA Australia and the achievement of predetermined goals.
The Nomination and Remuneration Committee considers overall management remuneration. Under the terms of CPA Australia’s annual performance contract, attainment of demanding performance targets can result in a performance bonus being approved by the Board and paid to staff who reach individual performance targets. The Finance Committee approves the amount of bonus pool available under the annual performance contract.