Corporate Governance Principles
Corporate Governance
The Directors of Watpac support the core principles developed by the ASX Corporate Governance Council (“Council”) as is documented in the Council’s revised principles and recommendations (2nd edition).
The Group has in place structures, policies, and procedures that have been developed by the Board and management progressively to ensure that operations are founded on the same core principles advocated by the Council.
The principles aim to provide guidance for optimising corporate performance and accountability and state that applicability of these principles will depend upon each company’s particular circumstances. In this regard the Board believes that Watpac’s corporate governance policies should be tailored to account for the size and structure of the Group and risks associated with its operations. The ASX concurs with this view and allows companies to deviate from certain Council’s recommendations where deemed appropriate by the Board.
Documented below is an assessment of the Group’s corporate governance policies and procedures against the framework of 8 core Council principles. Areas where Watpac does not comply with the Council’s recommendations are discussed. The Directors believe non-conformance with certain recommendations does not impact on the Group’s ability to operate with the highest standards of governance.
Principle 1: LAY SOLID FOUNDATIONS FOR MANAGEMENT AND OVERSIGHT
Establish and disclose the respective roles and responsibilities of the Board and management.
Recommendation 1.1: Establish the functions reserved to the Board and those delegated to senior executives and disclose those functions. Formalise and disclose the functions reserved to the Board and those delegated to management.
The respective roles of the Board and management generally comply with the principles set out in Recommendation 1.1, and are contained within various formal documents.
The Board is responsible to shareholders for the Group’s corporate governance practices, and is responsible for the direction and oversight of the Company’s businesses on behalf of the shareholders. The Board delegates responsibility for the implementation of strategy and daily business operations to the Managing Director and other members of the Group’s Executive Management team.
The Board has adopted a formal Board Charter, which sets out the role and responsibilities of the Board of Directors, and a schedule of delegated authority to management. The Directors also clearly understand the terms and conditions relative to their appointments, and the corporate expectations of them.
Recommendation 1.2: Disclose the process for evaluating the performance of senior executives.
An evaluation of the performance of the Managing Director is undertaken each year by the Board. Details on the process for evaluating the performance of the Managing Director and members of the Executive Management team have been included in the Remuneration Report, which forms part of the Directors’ Report.
Back to Top
Principle 2: STRUCTURE THE BOARD TO ADD VALUE
Have a board of an effective composition, size and commitment to adequately discharge its responsibilities and duties.
Recommendation 2.1: Majority of the board should be independent directors.
The Board comprises six Non-executive Directors (including the Chair) and one Executive Director (being the Managing Director). The names and details of each Director are set out in the Directors’ Report.
All Non-executive Directors meet the stated requirements for independence, notwithstanding that the financial statements may record business transactions with Director related entities, which are undertaken on an arm’s length basis. The Board has considered discussion by the Council as to how to assess the independence of the Directors, however does not believe that length of service (in the case of Mr Seymour, Mr McGruther, Mr Lette, and Mr Little) nor significant shareholding (in the case of Mr Seymour) gives rise to the Directors no longer being able to exercise independent judgement in performing their roles.
Recommendation 2.2: The Chair should be an independent Director.
The Company complies with this recommendation. As stated above, the Directors are aware of Mr Seymour’s significant shareholding in the Company and his length of service as a Director, however have concluded that this does not result in him not being able to exercise independent judgement on behalf of the Company.
Recommendation 2.3: The roles of the Chair and the Managing Director should not be exercised by the same individual.
The Company has always complied with this recommendation.
Recommendation 2.4: The Board should establish a Nomination Committee.
The Board has established a Nomination Committee, which meets at least annually, to ensure the Board continues to operate within the established guidelines, including where necessary, selecting candidates for the position of director. Due to the small size of the board, the Nomination Committee comprises all non-executive Directors.
Any Director may make recommendations to the Board regarding the membership of the Board, including proposed new appointments.
While the Board believe it is currently sufficient for all non-executive Directors to act as a nomination committee, this Council recommendation is regularly reviewed in light of the growing nature of the Group’s operations.
Recommendation 2.5: Disclose the process for evaluating the performance of the board, its committees and individual directors.
Watpac has both formal and informal procedures in place to allow all Directors to participate fully and actively in Board decision making. Board members are also provided comprehensive information on a regular basis by the Executive Management team so that they can discharge their Director responsibilities effectively. The Company Secretary coordinates the timely completion and dispatch of such materials to the Board.
The Chairman is responsible for evaluating the performance of the individual members of the Board, its committees and the Company Secretary, in consultation with the Nomination Committee.
Back to Top
Principle 3: PROMOTE ETHICAL AND RESPONSIBLE DECISION-MAKING
Actively promote ethical and responsible decision-making.
Recommendation 3.1: Establish a code of conduct and disclose the code or a summary of the code as to:
- the practices necessary to maintain confidence in the company’s integrity
- the practices necessary to take into account their legal obligations and the reasonable expectations of their stakeholders
- the responsibility and accountability of individuals for reporting and investigating reports of unethical practices.
The Board encourages the highest standards of ethical conduct by all Directors and employees of the Group. The Group has a Code of Conduct, which is set by the Board and through the Managing Director and Executive Management team, is filtered down to Group employees. The code includes principles and standards with which all Group Officers and employees are expected to comply.
The Executive Management team investigates all unethical and irresponsible conduct by employees, with appropriate levels of disciplinary action applied where departures from the Group’s principles are found.
Recommendation 3.2: Establish a policy concerning trading in company securities by directors, senior executives and employees, and disclose the policy or a summary of that policy.
The Board has established written guidelines setting out dealings in shares by Directors and relevant employees in the Company’s shares. The guidelines identify certain periods when, in the absence of knowledge of unpublished price-sensitive information, Directors and relevant employees may buy and sell shares and similarly trading blackout periods. The Board recognises that it is the responsibility of each Director and employee to ensure they comply with the insider trading laws of the Corporations Act 2001.
Back to Top
Principle 4: SAFEGUARD INTEGRITY OF FINANCIAL REPORTING
Have a structure to independently verify and safeguard the integrity of financial reporting.
Recommendation 4.1: The Board should establish an audit committee.
The Company has an Audit and Risk Committee, which operates in accordance with a formal Charter approved by the Board. In addition to monitoring the Group’s general risk management framework, the Audit and Risk Committee’s objective is to assist the Board in fulfilling its responsibilities relating to accounting, reporting and financial risk management.
Recommendation 4.2: The audit committee should be structured so that it:
- consists only of non-executive directors
- consists of a majority of independent directors
- is chaired by an independent chair, who is not chair of the board
- has at least three members.
Details of the members of the Audit and Risk Committee are included in the Directors’ Report. Watpac complies with the Council’s recommended audit committee structure.
Recommendation 4.3: The audit committee should have a formal charter.
Watpac’s Audit and Risk Committee operates under a formal charter. Minutes of all Audit and Risk Committee meetings are provided to the Board, and the Chairman of the Committee also reports to the Board after each Committee meeting.
Back to Top
Principle 5: MAKE TIMELY AND BALANCED DISCLOSURE
Promote timely and balanced disclosure of all material matters concerning the Company.
Recommendation 5.1: Promote timely and balanced disclosure of all material matters concerning the Company.
The Directors have established processes and procedures to ensure the Group complies with this Council recommendation. Procedures are in place to ensure that matters having a material effect on the price of the Company’s securities are notified to ASX in a timely manner. The Managing Director and the Company Secretary are responsible for interpreting the Company’s policies in respect of this matter and where necessary informing the Board.
All announcements made to ASX by the Company are published on the Company’s website. In addition, the Group’s website includes other information about the Group that, while important, is not suitable for public distribution via the ASX reporting platform.
Back to Top
Principle 6: RESPECT THE RIGHTS OF SHAREHOLDERS
Respect the rights of shareholders and facilitate the effective exercise of those rights.
Recommendation 6.1: Companies should design a communications policy for promoting effective communication with shareholders and encouraging their participation at general meetings and disclose their policy or a summary of that policy.
The Company aims to keep shareholders informed of all major developments in an ongoing manner as follows:
- Any shareholder who requests is provided with a copy of:
- A full annual report, which includes relevant information about the operations of the Group during the past financial year, changes in the state of affairs and details of future developments.
- A half-yearly update containing summarised information relating to the financial performance for the half year including a review of the activities of the Company for that period.
- The annual and half-yearly financial reports are lodged with ASX, and are available to view both via ASX and on the Watpac website.
- A Company newsletter is prepared annually and sent to shareholders to keep them informed of the Company’s activities.
- All other ASX announcements and media releases relating to the Group’s activities are made available on the Watpac website.
The Board encourages full participation of shareholders at the annual general meeting to ensure a high level of accountability and identification with the Company’s strategy and goals. The Group’s auditors also attend the AGM and are available to shareholders should they have any questions.
Back to Top
Principle 7: RECOGNISE AND MANAGE RISK
Establish a sound system of risk oversight and management and internal control.
Recommendation 7.1: Establish policies for the oversight and management of material business risks and disclose a summary of those policies.
The Group places a high priority on the management of risk, with major business risks arising from such matters as actions by competitors, customer contractual conditions, movements in the price and availability of subcontract labour and raw materials, and the acquisition and delivery of property development projects.
The Company’s risk management policies and procedures cover environment, occupational health and safety, construction contracts, property development project acquisition, fixed assets, financial reporting and internal accounting controls. Each business operational unit is responsible and accountable for managing the risks applicable to that business.
The Managing Director and Company Secretary work closely with the Audit and Risk Committee and report regularly to the Chair on the status of business risks. The assessment of risk is an ongoing process.
Comprehensive practices are established such that:
- Capital expenditure and revenue commitments above a certain size require prior Board approval
- Property developments are properly controlled and approved through due diligence and feasibility analysis requiring Board approval
- Financial exposures are appropriately reviewed
- Company assets are properly insured
- Project forecasts and remaining costs to complete are reviewed regularly
- Occupational health and safety standards and management systems are monitored and reviewed to achieve high standards of performance and compliance with regulations
- Environmental management standards and systems are monitored and reviewed to achieve high standards of performance and compliance with regulations
- Business transactions are properly authorised and executed with input from external advisors where appropriate.
Recommendation 7.2: The Board should require management to design and implement the risk management and internal control system to manage the Company’s material business risks and report to it on whether those risks are being managed effectively. The Board should disclose that management has reported to it as to the effectiveness of the company’s management of its material business risks.
Risk management and internal controls are in place to manage assessed key business risks throughout the Group.
A committee of the Executive Management team, which includes both the Managing Director and Company Secretary, undertake regular reviews of significant projects. Key projects and business risk areas are continually monitored and reported within each operating division in accordance with the Group’s risk management framework, with a report provided to the Board at each Board meeting. The Group’s internal control environment is also continually monitored and reported to and discussed by the Audit and Risk Committee. Amendments to the Group’s internal control environment are overseen by either the Company Secretary or the Group Commercial Manager.
Recommendation 7.3: The Board should disclose whether it has received assurance from the Managing Director and the Chief Financial Officer that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks.
The Managing Director and the Chief Financial Officer provide a statement of this kind to the Board each year prior to the
Directors’ Declaration being made to adopt the Annual Financial Report.
Back to Top
Principle 8: REMUNERATE FAIRLY AND RESPONSIBLY
Ensure that the level and composition of remuneration is sufficient and reasonable and that its relationship to performance is clear.
Recommendation 8.1: The Board should establish a Remuneration Committee.
The Board has an established Remuneration Committee, membership details of which are provided in the Directors’ Report.
The Remuneration Committee reviews and makes recommendations to the Board on remuneration packages and policies applicable to the Non-executive Directors, the Managing Director, and the members of the Executive Management team. It also evaluates the performance of the Managing Director and monitors management succession planning. The Remuneration Committee monitors Group wide remuneration levels with reference to independent market assessments and is responsible for the Company’s policies in respect of short and long term incentives, and retirement and termination benefits.
Remuneration levels are competitively set to attract and retain the most qualified and experienced Directors and senior executives. The Remuneration Committee obtains independent advice on the appropriateness of remuneration packages, given trends in comparative companies, both locally and nationally.
Recommendation 8.2: Clearly distinguish the structure of non-executive Directors’ remuneration from that of executive directors and senior executives
This Council recommendation is complied with. Details of the nature and amount of the remuneration of each Director are set out in the Directors’ Report and in the notes to the financial statements.
As far as the Group is aware, no Director or Executive uses hedging instruments to limit their exposure to risk on either shares or options in the Company.
Back to Top
Audit & Risk Committee Charter
1. INTRODUCTION
The Watapc Limited (Watpac or Company) Board of Directors (Board) has established an Audit and Risk Committee (Committee).
The Committee is guided by the following Audit and Risk Committee Charter (Charter) and the constitution of Watpac.
Back to Top
2. PURPOSE
The primary purpose of the Committee will be to review and report to the Board on the following matters:
- Financial integrity;
- Risk management and all internal controls;
- Internal and external audit effectiveness; and
- Corporate governance controls.
Back to Top
3. AUTHORITY
The Committee has authority to conduct or authorise investigations into any matters within its scope of responsibility or as requested by the Board. It is authorised to:
- Appoint, compensate, and oversee the work of any registered public accounting firm.
- Oversee and direct the internal audit function, as required.
- Resolve any disagreements between management and the external / internal auditor(s) regarding financial and assurance reporting.
- Pre-approve all external / internal audit services and non-audit services provided by the external auditor.
- Implement and oversee the internal control structure and risk management systems
- Retain independent counsel, accountants, or others to advise the Committee or assist in the conduct of an investigation.
- Seek any information it requires from employees or officers of Watapc, all of whom are directed to cooperate with the Committee's requests
- Seek any information it requires from external parties.
- Meet with company officers, external auditors, or outside counsel, as necessary.
Back to Top
4. COMPOSITION
The Committee will consist of at least three members of the Board. The Board will appoint the Committee members and the Committee chair (“the Chair”). A member’s position on the Committee is automatically terminated if he/she ceases to be a director of Watapc.
Each Committee member:
- Must be an independent, non-executive director;
- Financially literate with a familiarity of finance and accounting principles;
- Understand the operational, financial and strategic risk profile of Watapc; and
- Must notify the Committee Secretary if, as a result of a change in circumstances, he/she no longer meets the criteria for independence.
The Chair, who shall not be the chair of the Board, shall have leadership experience and a strong finance, accounting and / or business background.
Back to Top
5. MEETINGS
The Committee will meet at least four times a year, with at least two meetings to coincide with half-year and annual financial reporting. A quorum for a meeting of the Committee will comprise any two members.
The Committee has the authority to convene additional meetings at any other time as the Chair considers appropriate. The Chair will be required to call a meeting of the Committee if so requested by any member of the Committee, the external auditor or the chair of the Board.
Committee members are expected to attend each meeting. Members may attend a meeting in person, via telephone or via videoconference, provided that all Committee members involved in the meeting are able to participate in discussion.
Each Committee member is entitled to reasonable notice of a meeting. Meeting agendas will be prepared and provided in advance to members, along with appropriate briefing materials.
The Committee may invite others to join Committee meetings. This may include members of management and the Company’s auditors, as is deemed necessary by the Committee. However, the committee shall meet separately with the external auditors and internal auditors, where applicable, without the presence of management at least annually.
The Watapc Company Secretary will be the secretary of the Committee (“the Secretary”). The Secretary will take minutes of the proceedings and resolutions of the Committee and circulate these minutes to the members of the Committee for their comments as soon as possible.
The Chair, or in his absence any other member of the Committee in his place, shall attend the Annual General Meetings of the Company and be prepared to answer questions or respond to issues raised at those meetings.
Back to Top
6. REPORTING
The Committee will ensure the Secretary circulates the minutes of each meeting to the full Board for review at the next Board meeting.
The Committee may also prepare and submit to the Board any additional reports as appropriate.
Back to Top
7. DUTIES AND RESPONSIBILITIES
The Committee shall ensure it understands Watpac’s structure, controls and types of transactions in order to adequately assess the significant risks faced by the company.
In addition to the functions specified under sections 2 and 3 above, the Committee will assist the Board in discharging its responsibilities to exercise due care, diligence and skill by accepting the following areas of responsibility:
Financial Integrity
- Review significant accounting and reporting issues, including complex or unusual transactions and highly judgmental areas.
- Review recent professional and regulatory pronouncements, and understand their impact on the financial statements.
- Ensure compliance with taxation law(s) and review the accounting implications of Watpac’s tax position.
- Review, with management and the external auditors, all matters required to be communicated to the Committee under generally accepted auditing standards.
- Review, with management and the external auditors, the results of the full year audit and half year review, including any difficulties encountered.
- Review the annual and interim financial statements, and consider whether they are complete, consistent with information known to the Committee members, and reflect appropriate accounting principles.
- Review other sections of the annual and half year financial reports and related regulatory filings before their release and consider the accuracy and completeness of included information.
- Ensure financial reports and associated filings and announcements adequately address shareholders' needs.
Risk Management and Internal Controls
- Consider the effectiveness of the company's internal control systems, including information technology security and control.
- Advise on significant changes to that structure so as to obtain reasonable assurance that assets are safeguarded, including against error and fraud, and that reliable financial records are maintained.
- Understand the scope of the external auditor’s review of internal controls, and obtain reports on significant findings and recommendations, together with management's responses.
- Implement internal audit processes as necessary to ensure adequacy of risk management procedures and internal controls.
- Discuss with management, internal auditors and external auditors the adequacy and effectiveness of accounting and financial controls, including policies and procedures to assess, monitor and manage business risk, and conduct reviews of Occupational Health and Safety and Human Resources procedures and practise.
Audit Effectiveness
- Review the external auditor’s proposed audit scope and approach. The Committee must ensure that the audit approach covers all financial statement areas where there is a risk of material misstatement and that audit activities are carried out in the most effective, efficient and comprehensive manner.
- Review the performance of the external auditors and the cost effectiveness thereof, and exercise final approval on the appointment or discharge of the auditors.
- Review and confirm the independence of the external auditors by obtaining statements on relationships between the auditors and the company, including the provision of non-audit services.
- Review the performance of the internal audit function, as required, and exercise final approval on the appointment or discharge of any internal audit consultants.
Corporate Governance Controls
- Responsible for reviewing management’s application of the ASX Corporate Governance Council’s guidelines in respect of financial reporting and risk management.
- Provide assurance that Watapc is adequately managing corporate governance and market integrity risks and is maintaining appropriate controls against fraud.
- With Board approval, the Committee may investigate other areas of Watpac’s business activities, with the objective of enhancing risk management policies and protection against corporate governance failures.
Reporting
- Regularly report to the Board about Committee activities, issues, and related recommendations.
- Provide an open avenue of communication between the external auditors and the Board.
- Report annually to shareholders, describing the Committee's composition, responsibilities and how they were discharged, and any other required information.
Other
- Institute and oversee special investigations as needed and / or as requested by the Board.
- Establish procedures for the receipt, retention and treatment of complaints received by the company regarding accounting and audit related matters.
- Review reports on violations of the Corporations Act, the ASX Listing Rules and other breaches of fiduciary duties.
- Confirm annually that all responsibilities outlined in this charter have been carried out.
- Evaluate the Committee's and individual members' performance at least annually to determine whether the Committee is functioning effectively.
The duties and responsibilities of a member of the Committee shall be in addition to those set out for them as a director of Watapc.
8. REVIEW OF CHARTER
The Committee must review the Charter annually.
Any changes to the Charter recommended by the Committee must be approved by the Board.
Back to Top