- Delegation of Authority
- Education and Review
- Board Performance and Renewal Committee
- Selection of Directors
- Ethical Standards
- Remuneration Arrangements
- Audit Arrangements
- Risk Management
- Continuous Disclosure
- Shareholder Communication
- Ethical Policies
- Statement of Professional Practice
- Our People
- Behaviour Policy
- Code of Conduct
This statement outlines the key aspects of the Group’s corporate governance framework. The Board has consistently placed great importance on good corporate governance practices of the Group, which it believes is vital to the Group’s well-being. The Board has adopted a comprehensive framework of Corporate Governance Guidelines, designed to properly balance performance and conformance. This enables the Group to undertake, in an effective manner, the prudent risk-taking activities which are the basis of its business. The Guidelines and practices of the Group comply with the revised “Corporate Governance Principles and Recommendations”, dated 30 June 2010, released by the ASX Corporate Governance Council.
The Board's role and responsibilities are set out in the Board Charter. The responsibilities include:
- The Group’s corporate governance, including the establishment of Committees;
- Oversight of the business and affairs of the Group by:
- Establishing with management and approving the strategies and financial objectives;
- Approving major corporate and capital initiatives, capital expenditure acquisitions and divestments in excess of limits delegated to management;
- Overseeing the establishment of appropriate risk management systems including defining the Group’s risk appetite and establishing appropriate financial policies such as target capital and liquidity ratios; and
- Monitoring the performance of management and the environment in which the Group operates.
- Approving documents (including reports and statements to shareholders) required by the Bank’s Constitution and relevant regulation;
- Approval of the Group’s major HR policies and overseeing the development strategies for senior and high performing executives; and
- Employment of the Chief Executive Officer (CEO).
The Board carries out the legal duties of its role in accordance with the Group’s values of integrity, collaboration, excellence, accountability and service. It has regard to the interests of the Group’s customers, people, shareholders and the broader community in which the Group operates at all times.
View Board Charter.
Delegation of Authority
The Board delegates to the CEO the responsibility to achieve the Group’s objective of creating long term value for its shareholders in part through excelling at securing and enhancing the financial wellbeing of people, businesses and communities.
The CEO is responsible for the day to day management of the business and maintaining a comprehensive set of management delegations under the Group’s Delegation of Authorities framework. These delegations cover commitments around project investment, operational expenditure and non-financial activities and processes. They are designed to accelerate decision-making and improve both efficiency and customer service.
An overview of the Group’s Corporate Governance framework is outlined on page 36 of the 2013 Annual Report.
There are currently nine Directors of the Bank and details of their period of office, experience, qualifications, special responsibilities and attendance at meetings are set out on pages 42 to 46 of the Directors’ Report.
Membership of the Board and Committees is set out below:
|Board Membership||Position Title||Committee Membership|
|Director||Board Performance & Renewal||Remuneration||Audit||Risk|
|David J Turner||Non-executive, Independent||Chairman||Chairman||Member||-||Member|
|Ian M Narev||Executive||Chief Executive Officer||-||-||-||Member|
|John A Anderson||Non-Executive, Independent||-||Member||-||-||Member|
|Jane S Hemstritch||Non-Executive, Independent||-||-||Chairman||-||Member|
|Launa K Inman||Non-Executive, Independent||-||-||-||Member||Member|
|S Carolyn H Kay||Non-executive, Independent||-||-||Member||Member||Member|
|Brian J Long||Non-Executive, Independent||-||-||-||Chairman||Member|
|Andrew M Mohl||Non-Executive, Independent||-||-||Member||-||Member|
|Harrison H Young||Non-Executive, Independent||-||Member||-||Member||Chairman|
The Constitution of the Bank specifies that:
- The CEO and any other Executive Directors are not eligible to stand for election as Chairman of the Bank;
- The number of Directors will not be less than nine nor more than thirteen (or such lower number as the Board may from time to time determine). The Board has decided that there will be nine Directors; and
- At each Annual General Meeting (AGM) one third of Directors (other than the CEO) will retire from office and may stand for re-election.
The policy of the Board is that Non-Executive Directors are normally expected to serve a term of six years from the date of first election by shareholders, subject to re-election by shareholders as required under the Constitution and the ASX Listing Rules. That term may be extended to nine years where, at the end of the initial six year period, the Board determines that such an extension would be a benefit to the Bank and the Director is agreeable. On an exceptional basis, the Board may annually exercise its discretion to further extend the term of a Director should circumstances deem it appropriate, subject to the total term of appointment not exceeding twelve years. The Chairman would normally be expected to serve a term of at least five years in that capacity.
View Commonwealth Bank Constitution, incorporating amendments up to and including all amendments passed at the Annual General Meeting on 13 November 2008.
The Group’s Non-Executive Directors are required to be independent of management and free of any business or other relationship that could materially interfere with the exercise of unfettered and independent judgment. The Board regularly assess each Director’s independence to ensure ongoing compliance with this requirement.
Directors are required to conduct themselves in accordance with the ethical policies of the Group and be meticulous in their disclosure of any material contract or relationship in accordance with the Corporations Act 2001. This disclosure extends to the interests of family companies and spouses. Directors must also strictly adhere to the participation and voting constraints in relation to matters in which they may have an interest in. Each Director may from time to time have personal dealings with the Group or be involved with other companies or professional firms which may have dealings with the Group. Details of offices held by Directors with other organisations are disclosed in the Directors' Report and on the Group's website. Full details of related party dealings are set out in the notes to the Financial Statements as required by law.
All the current Non-Executive Directors of the Bank have been assessed as independent Directors. In reaching that determination, the Board has taken into account (in addition to the matters set out above):
- The specific disclosures made by each Director;
- Where applicable, the related party dealings referrable to each Director;
- That no Director is, or has been associated directly with, a substantial shareholder of the Bank;
- That no Non-Executive Director has ever been employed by the Bank or any of its subsidiaries;
- That no Director is, or has been associated with, a supplier, professional adviser, consultant to or customer of the Group which is material under accounting standards;
- That no Non-Executive Director personally carries on any role for the Group otherwise that as a Director of the Bank; and
- That no Non-Executive Director has a material contractual relationship with the Group other than as a Director of the Bank.
Education and Review
Directors participate in an induction program upon appointment and in a refresher programme on a regular basis. This program of continuing education ensures that the Board is kept up to date with developments in the industry both locally and globally. It also includes sessions with local and overseas experts in the particular fields relevant to the Group’s operations.
Board Performance and Renewal Committee
The Non-Executive Directors meet at least annually without management, in a forum intended to allow for an open discussion on Board and management performance. This is in addition to the consideration of the CEO’s performance and remuneration, which is conducted by the Board in the CEO’s absence.
The Board Performance and Renewal Committee annually review the Group’s corporate governance procedures. It considers the composition and effectiveness of the Commonwealth Bank of Australia Board and also the boards of the major wholly owned subsidiaries. It also considers the effectiveness of the Board and ensures that the Board annually reviews its own performance, policies and practices. These reviews seek to identify where improvements can be made in Board processes. They also assess the quality and effectiveness of information made available to Directors. The review process includes a performance assessment of the Board Committees and each Director. Every two years, this process is also facilitated by an external consultant.
The Board used an independent facilitator in this year’s performance review. The review endorsed the current Board and Committee processes. The assessment has been considered by the Board and individual Director assessments have been diarised with Directors by the Chairman of the Board.
Performance evaluations in accordance with the above processes have been undertaken during the year. Details on management performance evaluations are contained in the Remuneration Report section of the Directors’ Report, on pages 49 to 66.
In accordance with the Board’s policies, the Committee consists solely of independent Non-Executive Directors, with the CEO attending the meeting by invitation.
Selection of Directors
The Board Performance and Renewal Committee’s set of criteria for Director appointments are reviewed annually and adopted by the Board. These are aimed at creating a Board capable of challenging, stretching and motivating management to achieve sustained, outstanding performance in all respects. The Group’s aim is to ensure that any new appointee is able to contribute to the Board constituting a competitive advantage for the Group. Based on these criteria, each Director should:
- Be capable of operating as part of an exceptional team;
- Vigorously debate and challenge management in a constructive manner;
- Contribute outstanding performance and exhibit impeccable values;
- Be capable of inputting strongly to risk management, strategy and policy;
- Provide a mix of skills and experience required to challenge and contribute to the future strategy of the Group;
- Be excellently prepared and receive all necessary education; and
- Provide important and significant insights, input and questions to management from their experience and skill.
Professional intermediaries are engaged to identify a diverse range of potential candidates for appointment as Directors based on the identified criteria.
The Board Performance and Renewal Committee will assess the skills, experience and personal qualities of these candidates. It will also take into consideration other attributes including diversity to ensure that any appointment decisions adequately reflect the environment in which the Group operates. Information on the Group’s diversity strategy more generally can also be found in the Sustainability section of the 2013 Annual Report on pages 32 to 35.
Candidates who are considered suitable for appointment as Directors by the Board Performance and Renewal Committee are then recommended for decision by the Board and, if appointed, will stand for election at the next AGM, in accordance with the Constitution.
The Chairman will provide a letter to all new Directors setting out the terms of appointment and relevant Board policies. These include time commitment, code of ethics and continuing education. All current Directors have been provided with a letter confirming the terms of their appointment.
View form of letter of appointment.
Board policies relevant to the composition of Committees and functions of Directors include:
- The Board will consist of a majority of independent Non-Executive Directors;
- The Board Performance and Renewal, Remuneration and Audit Committees should consist solely of independent Non-Executive Directors. The Risk Committee should consist of a majority of independent Non-Executive Directors;
- The Chairman will be an independent Non-Executive Director;
- The Audit Committee will be chaired by an independent Non-Executive Director other than the Chairman;
- The Board will meet on a regular and timely basis. The meeting agendas will provide adequate information about the affairs of the Group. It also enables the Board to guide and monitor management, and assist in its involvement in discussions and decisions on strategy. Strategic matters are given priority on regular Board meeting agendas. In addition, ongoing strategy is the major focus of at least one Board meeting annually;
- An agreed policy on the basis that Directors are entitled to obtain access to Group documents and information, and to meet with management; and
- A procedure whereby, after appropriate consultation, Directors are entitled to seek independent professional advice, at the expense of the Group, to assist them to carry out their duties as Directors. The policy of the Group provides that any such advice is generally made available to all Directors.
Conflicts of Interest
In accordance with the Constitution and the Corporations Act 2001, Directors are required to disclose to the Board any material contract in which they may have an interest. In compliance with section 195 of the Corporations Act 2001 any Director with a material personal interest in a matter being considered by the Board will not vote on or be present when the matter is being considered. If the material personal interest is disclosed or identified before a Board or Committee meeting takes place those Directors will also not receive a copy of any paper dealing with the matter.
The Board has adopted a Group Securities Trading policy which prohibits Directors, employees and contractors of the Group from:
- Dealing in the Group’s securities if they are in possession of unpublished price-sensitive information; and
- Communicating unpublished price-sensitive information to other people.
Directors are also only permitted to deal with the Group’s securities within certain periods, as long as they are not in the possession of unpublished price-sensitive information. These periods include the 30 days after the half yearly and final results announcements, and 14 days after quarterly trading update releases.
The Policy also requires that Directors do not deal on the basis of considerations of a short term nature or to the extent of trading in those securities. Similar restrictions apply to Executives of the Group, which is in addition to the prohibition of any trading (including hedging) in positions prior to vesting of shares or options.
Directors and Executives who report to the CEO are also prohibited from:
- Any hedging of publicly disclosed shareholding positions; and
- Entering into or maintaining arrangements for margin borrowing, short selling or stock lending, in connection with the securities of the Group.
Details of the governance arrangements and policies relevant to remuneration are set out in the Remuneration Report on pages 49 to 66 of the 2013 Annual Report.
The Audit Committee assists the Board in fulfilling its statutory and fiduciary responsibilities. It provides an objective and independent review of the effectiveness of the external reporting of financial information and the internal control environment of the Group, as well as obtaining an understanding of the Group’s tax and accounting risks. The Audit Committee is responsible for overseeing accounting policies, professional accounting requirements, internal audit (GAA), external audit, APRA statutory and regulatory reporting requirements, and the external auditor’s appointment.
The Charter of the Audit Committee incorporates a number of policies and practices to ensure that the Committee is independent and effective.
- The Audit Committee will comprise at least three members. All members must be Non-Executive, Independent Directors and be financially literate. At least one member should be a financial expert with relevant qualifications and experience as referred to in the technical expertise guidance of the ASX Corporate Governance Principles and Recommendations;
- The Chairman of the Audit Committee cannot be the Chairman of the Board. The term of each member will be determined by the Board through annual review. The Risk Committee Chairman will be a member of the Audit Committee and vice-versa to ensure the flow of relevant information between the two committees;
- Meetings will be at least quarterly and as required. The external auditor will be invited to all meetings;
- Meetings will be held from time to time with GAA and the external auditor without management or others being present;
- The Committee has the power to call attendees as required, including open access to management, GAA, external audit and the right to seek explanations and additional information;
- Senior management and the internal and external auditor have free and unfettered access to the Audit Committee with the Group Auditor having a direct reporting line, whilst maintaining a management reporting line to the Chief Financial Officer; and
- It has the option, with the concurrence of the Chairman of the Board, to retain independent legal, accounting or other advisors to the extent the Committee considers necessary at the Group’s expense.
View Audit Committee Charter.
PricewaterhouseCoopers (PwC) was appointed as the external auditor of the Bank at the 2007 AGM, effective from the beginning of the 2008 financial year.
The PwC partner managing the Group’s external audit will attend the 2013 AGM and be available to respond to shareholder questions relating to the external audit.
In line with current legislations, the Group requires that the partner be changed within five years of being appointed. The lead partner was changed with effect from 1 July 2012.
The Group and its external auditor must continue to comply with US Auditor independence requirements. U.S. Securities and Exchange Commission (SEC) rules still apply to various activities that the Group undertakes in the United States, even though the Bank is not registered under the Exchange Act.
The External Auditor Services Policy requires the Audit Committee (or its delegate) to approve all audit and non-audit services before engaging the external auditors to perform the work. The policy also prohibits the external auditors from providing certain services to the Group or its affiliates. The objective of this policy is to avoid prejudicing the external auditor’s independence.
The policy is designed to ensure that the external auditors do not:
- Assume the role of management or act as an employee;
- Become an advocate for the Group;
- Audit their own work;
- Create a mutual or conflicting interest between themselves and the Group;
- Require an indemnification from the Group to themselves;
- Seek contingency fees; nor
- Have a direct financial or business interest or a material indirect financial or business interest in the Group or any of its affiliates, or an employment relationship with the Group or any of its affiliates.
Under the policy, the external auditor will not provide certain services including the following services:
- Bookkeeping or other services relating to accounting records or Financial Statements of the Group;
- Financial information systems design and implementation;
- Appraisal or valuation services (other than certain tax only valuation services) and fairness opinions or contribution-in-kind reports;
- Actuarial services unless approved in accordance with independence guidelines;
- Internal audit outsourcing services;
- Management functions, including acting as an employee and secondment arrangements;
- Human resources;
- Broker-dealer, investment adviser or investment banking services;
- Legal services;
- Expert services for the purpose of advocating the interests of the Group;
- Services relating to marketing, planning or opining in favour of the tax treatment of certain transactions;
- Tax services in connection with certain types of tax transactions;
- Tax services to individuals, and any immediate family members of any individuals, in a Financial Reporting Oversight Role; and
- Certain corporate recovery and similar services.
- Audit services to the Group or an affiliate;
- Related services connected with the lodgement of statements or documents with the ASX, ASIC, APRA or other regulatory or supervisory bodies;
- Services reasonably related to the performance of the audit services;
- Agreed-upon procedures or comfort letters provided by the external auditor to third parties in connection with the Group’s financing or related activities; and
- Other services pre-approved by the Audit Committee.
Risk Management governance originates at Board level, and cascades through to the CEO and businesses, via Group and Business Unit risk appetite statements, policies, delegated authorities. This ensures Board level oversight and a clear segregation of duties between those who originate and those who approve risk exposures. Independent review of the risk management framework is carried out through GAA.
The Board and its Risk Committee operate under the direction of their respective charters. The Board Charter stipulates, amongst other things that:
- The Board is responsible for “overseeing the establishment of systems of risk management by approving accounting policies, financial statements and reports, credit policies and standards, risk management policies and procedures and operational risk policies and systems of internal controls”; and
- The CEO is responsible for “implementing a system, including a system of internal controls and audits, to identify and manage risks that are material to the business of the Group”.
The CEO and the Chief Financial Officer have given the Board their declaration in accordance with section 295A of the Corporations Act 2001. The CEO and Chief Financial Officer have confirmed that the declarations are founded on a sound system of risk management and internal control and also that the system is operating effectively in all material respects in relation to financial risks.
The Risk Committee oversees the Group’s risk management framework. This includes credit, market (including traded interest rate risk in the banking book, lease residual values, non-traded equity and structural foreign exchange), liquidity and funding, operational, insurance, compliance (including regulatory), and reputational risks assumed by the Group in the course of carrying on its business. It reviews regular reports from management on the measurement of risk and the adequacy and effectiveness of the Group’s risk management and internal controls systems.
Strategic risks are governed by the Board, with input from the various Board sub-committees. Tax and accounting risks are governed by the Audit Committee.
A key purpose is to help formulate the Group’s risk appetite for consideration by the Board, and agreeing and recommending a risk management framework to the Board that is consistent with the approved risk appetite.
This framework, which is designed to achieve portfolio outcomes consistent with the Group’s risk-return expectations, includes:
- The Group Risk Appetite Statement;
- High-level risk management policies for each of the risk areas it is responsible for overseeing; and
- A set of risk limits to manage exposures and risk concentrations.
The Committee monitors management’s compliance with the Group risk management framework (including high-level policies and limits). It also makes recommendations to the Board on the key policies relating to capital (that underpin the Internal Capital Adequacy Assessment Process), liquidity and funding and other material risks. These are overseen and reviewed by the Board on at least an annual basis.
The Committee also monitors the health of the Group’s risk culture, and reports any significant issues to the Board.
As part of the remuneration policy, the Risk Committee provides written input to the Remuneration Committee to assist in the alignment of executive remuneration with appropriate risk behaviours.
The Committee reviews significant correspondence with regulators, receives reports from management on regulatory relations and reports any significant regulatory issues to the Board.
Levels of insurance cover on insurance policies maintained by the Group to mitigate some operational risks are disclosed to the Risk Committee for comment.
The Risk Committee charter states that the Committee will meet at least quarterly, and as required. In practice this is at least six times a year. To allow it to form a view on the independence of the function, the Risk Committee meets with the Group Chief Risk Officer (CRO) in the absence of other management at least annually or as decided by of the Committee or the CRO. The Chairman of the Risk Committee provides a report to the Board following each Committee meeting.
View Risk Committee Charter.
Risk Management Framework
The Group has an integrated risk management framework in place to identify, assess, manage and report risks and risk adjusted returns on a consistent and reliable basis.
A description of the functions of the framework and the nature of the risks is set out in Notes 37 to 40 to the Financial Statements (pages 146 to 169).
Matters which could be expected to have a material effect on the price or value of the Company’s securities must be disclosed under the Corporations Act 2001 and the ASX Listing Rules. The Group’s “Guidelines for Communication between the Bank and Shareholders” is available on the Group’s website. These set out the processes to ensure that shareholders and the market are provided with full and timely information about the Group’s activities in compliance with continuous disclosure requirements.
Continuous Disclosure policy and processes are in place throughout the Group to ensure that all material matters which may potentially require disclosure are promptly reported to the CEO. This is achieved via established reporting lines or as a part of the deliberations of the Group’s Executive Committee. Matters reported are assessed and, where required by the ASX Listing Rules, advised to the market. A Disclosure Committee has also been formed to provide advice on the requirements for disclosing information to the market. The Company Secretary is responsible for communications with the ASX and for ensuring that such information is not released to any person until the ASX has confirmed its release to the market.
View Group’s guidelines for Communication between the Bank and Shareholders.
The Group believes it is very important for its shareholders to make informed decisions about their investment in the Group. In order for the market to have an understanding of the business operations and performance, the Group aims to provide shareholders with access to quality information in the form of:
- Interim and final results;
- Annual Reports;
- Shareholder newsletters;
- Quarterly trading updates and Business Unit briefings where considered appropriate;
- All other price sensitive information will be released to the ASX in a timely manner; and
- The Group’s website at www.commbank.com.au; and
- The investor relations app, refer to page 197.
The Group employs a wide range of communication approaches, including direct communication with shareholders, publication of all relevant Group information on the shareholder centre section of the website and webcasting of most market briefings for shareholders. Upcoming webcasts are announced to the market via ASX announcements and publicised on the website to enable interested parties to participate. To make its general meetings more accessible to shareholders, the Group moves the location between Australian capital cities each year and live webcasts are available for viewing online. The Group has taken these actions to encourage shareholder participation at general meetings.
A summary record of issues discussed at one-on-one or group meetings with investors and analysts, including a record of those present, time and venue of the meeting, are kept for internal reference only.
The Group is committed to maintaining a level of disclosure that meets the highest of standards and provides all investors with timely and equal access to information.
The values of the Group are integrity, collaboration, excellence, accountability and service. The Board carries out its legal duties in accordance with these values and having appropriate regard to the interests of the Group’s customers, shareholders, people and the broader community in which the Group operates.
Policies and codes of conduct have been established by the Board and the Group Executive team to support the Group’s objectives, vision and values.
Statement of Professional Practice
The Group’s code of ethics, known as a Statement of Professional Practice, sets standards of behaviour required of all employees and directors including:
- To act properly and efficiently in pursuing the objectives of the Group;
- To avoid situations which may give rise to a conflict of interest;
- To know and adhere to the Group’s Equal Employment Opportunity policy and programs;
- To maintain confidentiality in the affairs of the Group and its customers; and
- To be absolutely honest in all professional activities.
These standards are regularly communicated to the Group’s people. The Group has also established the Group Securities Trading policy to ensure that unpublished price-sensitive information is not used in an illegal manner for personal advantage.
The Group has implemented various policies and systems to enable its people to carry out their duties in accordance with the Group’s values. These include:
- Fair Treatment Review;
- Equal Employment Opportunity;
- Occupational Health and Safety;
- Recruitment and selection;
- Performance management;
- Talent management and succession planning;
- Remuneration and recognition;
- Employee share plans; and
- Supporting Professional Development.
Information on the Group’s diversity strategy can be found in the Sustainability section on pages 32 to 35 of the 2013 Annual Report.
The Group is strongly committed to maintaining an ethical workplace and to complying with legal and ethical responsibilities. The Group’s Behaviour policy requires its people to report fraud, corrupt conduct, mal-administration or serious and substantial waste by others. A system has been established which allows people to remain anonymous, if they wish, for reporting of these matters.
The policy includes reporting of auditing and accounting issues. These are reported to the Chief Compliance Officer by the Chief Security Officer, who administers the reporting and investigation system. The Chief Security Officer reports any such matters to the Audit Committee, noting the status of resolution and actions to be taken.
Code of Conduct
The Board will operate in a manner reflecting the Group’s values and in accordance with its agreed corporate governance guidelines, the Bank’s Constitution, the Corporations Act and all other applicable regulations.
The Board employs and requires at all levels, impeccable values, honesty and openness. Through its processes, it achieves transparent, open governance and communications under all circumstances, and addressing both performance and compliance.
The Board’s policies and codes include detailed provisions dealing with:
- The interaction between the Board and management to ensure there is effective communication of the Board’s views and decisions, resulting in motivation and focus towards long term shareholder value behaviours and outcomes;
- Disclosure of relevant personal interests so that potential conflict of interest situations can be identified and appropriate action undertaken to avoid compromising the independence of the Board; and
- Securities dealings in compliance with the Group’s strict guidelines and in accordance with its values of integrity, collaboration, excellence, accountability and service.