2014 Corporate Governance Statement – Adelaide Produce Markets Limited
This Statement sets out the key corporate governance principles adopted by the Directors in governing the South Australian Markets (“SAPM”).
SAPM’S Approach to Corporate Governance
Corporate governance is the framework of rules, systems, processes and relationships by which the company’s business is conducted, directed and controlled. The Board has the responsibility for ensuring SAPM is properly managed so as to protect and enhance shareholders’ interests in a manner that is consistent with the company’s responsibility to meet its obligations. For this reason, the Board is committed to applying appropriate standards of corporate governance across the organisation.
As part of its commitment to enhancing its corporate governance the Board has elected to adopt relevant practices which are consistent with the 3rd Edition of the Australian Securities Exchange Corporate Governance Principles and Recommendations, providing they do not conflict with the express provisions of the company’s Constitution. These principles are the standard by which Australia’s largest and over 2000 listed companies are judged.
Compliance with ASX Best Practice Governance Recommendations
The ASX recognises that there is no single model of corporate governance which suits all organisations at each stage of their life and that some governance structures may be better than others for the generation of shareholder wealth at different times. Accordingly the ASX Listing Rules requires listed companies to include in their annual report a statement disclosing the extent to which they have followed the ASX best practice recommendations in the reporting period. In addition listed companies must identify the recommendations that have not been followed and provide reasons for the company’s decision.
SAPM is not a listed company and as such is not required to report against the ASX’s Best Practice Recommendations nor include a Corporate Governance Statement in its Annual Report however the Board believes that by publishing a corporate governance statement on its website it is facilitating transparency about SAPM’s corporate governance practices which will assist shareholders and other stakeholders to make informed judgments about SAPM.
SAPM considers that its governance practices comply with a substantial number of the ASX Best Practice Recommendations. The company’s Constitution contains specific requirements on a range of matters including Board composition. The Board is obliged to comply with the Constitution which prevails over the non-binding ASX best practice recommendations.
4. Governance Principle 1: Lay Solid Foundations for Management and Oversight
4.1 The Role of the Board
The company’s Constitution vests management and control of the business and the company’s affairs in the Board. In summary the Board’s accountabilities and responsibilities include:
a) Overseeing management and providing a leadership role to the company.
b) Representing shareholders and effectively translating the Produce Market’s needs and aspirations into strategy.
d) Providing overall stewardship of the organisation and ensuring that sound financial management and accountability are achieved in relation to the company’s and the Produce Market’s finances.
e) Reviewing and approving policies, goals, targets and budgets.
f) Monitoring business performance and ensuring that appropriate mechanisms are in place to deal with the prompt handling of concerns.
g) Improving shareholder value and identifying and pursuing commercial opportunities which are consistent with the company’s long term strategies.
h) Having an awareness of the statutory obligations imposed on Board members and ensuring there are appropriate standards of corporate governance.
i) Practicing and exhibiting the company’s values (which include having a Produce Market user focus, shareholder value, communication and co-operation, compliance with the director code of conduct and internal controls, encouraging leadership & innovation, management by fact and providing a safe and healthy workplace and teamwork)
Responsibility for day to day management and administration of the company is delegated by the Board to the CEO.
4.2 Board Committees
To assist it in carrying out its responsibilities the Board has in place an Audit, Corporate Governance and Finance Committee (Committee). The purpose of the Committee is to consider certain matters in detail and make recommendations to the Board.
Copies of Committee minutes are circulated to all Board members and the Chairman reports findings together with any recommendations to the full Board at its next meeting.
4.3 The Role of the CEO
Angelo Demasi was appointed CEO of the company in 2002. Directors have determined that the Board should be independent of management. Accordingly the CEO is not a member of the Board. The CEO is reports to the Chairman of the Board and is accountable to the Board for the following functions:
a) Leadership and management of the organisation
b) Provision of strategic input to the Board’s planning process
c) The implementation of the corporate, business and strategic plans
d) Financial management of the company
e) Policy development
f) Business development
g) Project management
h) Overseeing Produce Market operations and provision of services to Produce Market users
i) Developing and monitoring compliance with the Produce Market operating rules and leases
The CEO also undertakes the role of Company Secretary of APML.
4.4 Evaluating the CEO
The CEO’s performance is evaluated annually by the Committee against a range of key performance indicators and targets. The Committee makes a recommendation to the Board on the CEO’s remuneration which is based on both performance and external market data.
The CEO’s has a current position description and a letter of appointment which describes his term of office, duties, rights and responsibilities and entitlements on termination.
5. Governance Principle 2: Structure the Board to Add Value
5.1 Board Expertise, Size and Composition
The Board has a broad range of relevant skills, experience and expertise to meet its objectives including accounting/taxation and legal expertise. It is comprised wholly of non-executive directors.
The Board’s structure is determined by SAPM’s Constitution. It requires that there be a minimum of 8 directors and a maximum of 11 directors with up to three growers, three wholesalers, two retailers and three independent directors appointed. Grower, wholesaler and retail directors are elected by shareholders holding that respective class of shares. Independent directors are elected by all shareholders including holders of unclassified shares.
While the Constitution allows for executive directors to be appointed, the Board has determined that a Board comprised solely of non-executive directors provides for the most robust corporate governance approach. The CEO attends all Board and Committee meetings.
The Board’s size and composition complies with the Constitution. There are presently 9 Directors and include:
a) 3 grower appointments
b) 2 retailer appointments
c) 3 wholesaler appointments
d) 1 independent appointment
Details of each Director’s qualifications, experience and special responsibilities are set out in each years’ Annual Report.
5.2 Nomination and Appointment of New Directors
Directors are appointed for a three year term. Directors are not required to be shareholders however a grower, retailer or wholesaler appointment must be an eligible person operating a business in their respective category.
As the majority of the Directors are nominated and elected by the representative groups, namely eligible growers, wholesalers and retailers, the Board does not have a nomination committee.
The Board as a whole undertakes the functions of a Nomination Committee including succession planning and the appointment and re-election of Directors. From time to time the Board assesses the eligibility of all nominations and also identifies people with relevant skills and expertise for nomination as independent directors.
All new Directors are provided with an induction kit containing a range of relevant information.
The Board is conscious of the benefits of board renewal. In 2014 three new Directors have joined the Board. SAPM’s Constitution specifies that all Directors must retire from office no later than the third Annual General Meeting following their last election. Where eligible a Director may stand for re-election.
In the event a Director ceases being an eligible person in accordance with the Constitution they must retire from the Board.
5.4 Board Access to Records and Advice
All Directors receive regular detailed financial and operational reports from management as part of their meeting materials to assist them carry out their duties. In addition Directors are provided with unrestricted access to company records during business hours. Directors are permitted to take copies provided the access assists them discharge their duties as a Director.
Any request from a Director for independent professional advice is considered by the whole Board on a case by case basis.
5.5 Director Independence and Avoidance of Conflicts
The Board is comprised solely of non-executive directors. None of the directors are or have been employees of the company. Many but not all of the Directors are shareholders of SAPM and some hold substantial holdings. Details of Directors’ shareholdings are disclosed in the Directors’ Report in each years’ Annual Report.
At various times directors with specific professional expertise provide professional services to the company at usual commercial rates and on usual commercial terms. The Board has adopted a policy of requiring detailed invoices with respect to any services rendered and each invoice is submitted to the Board for approval. Any director who provides such services does not take part in the process of approving the payment of any fees. The quantum of any such fees are fully disclosed in the Annual Report.
The Constitution requires the appointment of a certain number of directors by the three produce industry shareholder classes. Specifically it requires that the wholesaler Directors must be wholesalers of fruit, vegetables, flowers or other horticultural products operating from lock up premises at the market in Pooraka. It also requires grower Directors must be a grower of such products in South Australia operating on at least ½ hectare of land and carrying on a primary production business. Similarly retail Directors must be in the business of retailing fruit, vegetable, flowers or horticultural products in South Australia from a retail outlet and be a registered Produce Market buyer. Industry class Directors also lease or licence premises within the Produce Market at usual Produce Market rates and pursuant to standard lease and licence agreements. The extent of any related party transactions are fully disclosed in the Annual Report.
While our representative (or nominee) Directors are encouraged to bring the issues of their constituency to the Board for discussion they are aware that they have an obligation to make decisions in the best interests in the company as a whole. In addition they are also aware that their duty of confidentiality to the company over-rides any implied obligation to report matters of company interest to their appointers.
In accordance with the Corporations Act, any Director with a material personal interest in a matter being considered by the Board must not be present when the matter is being considered and may not vote on the matter. Directors must keep the Board advised, on an ongoing basis, of any interest that could potentially conflict with those of SAPM. Where a significant conflict exists, the Director concerned declares their interests in the matter to the Board must not take part in decisions or discussions relating to them.
David Schirripa is the Chairman and was appointed in 2011. The Chairman is selected by the Board and is appointed for a one year term. The Chairman’s role includes:
a) Providing leadership to the Board;
b) Managing the Board in the discharge of its duties;
c) Chairing shareholders meetings (including determining the general conduct and procedures to be adopted at meetings);
d) Being the primary point of contact with the Board and the CEO and provide support to the CEO; and
e) Responding to media enquiries on behalf of the Board.
The Chairman is also an ex-officio member of all Board Committees and task forces.
5.7 Board Meetings
The Board meets in full each month. In addition to the 12 scheduled Board meetings, meetings are also often held throughout the year to address strategy, Board performance and other specific matters which arise.
The CEO attends all Board meetings and the other managers present on relevant matters as required.
Information on Director meeting attendance is included in the Directors’ Report shown in each years Annual Report.
5.8 Review of Strategic Plan and Board Performance
As part of its commitment to continuous improvement the APML Board initiated a strategic plan review during 2015.
A formal committed period of time outside of a normal Board meeting was set aside to review and discuss the results as a Board. A new five year strategic plan has been adopted to guide management on the company’s strategic objectives.
5.9 Company Secretary
All Directors have access to the Company Secretary. The appointment and removal of the Company Secretary is a matter for decision by the Board as a whole.
6. Governance Principle 3: Act Ethically and Responsibly
6.1 Code of Conduct
The Board acknowledges its responsibility to set the ethical tone and standards of the company. Accordingly it has clarified the standards of ethical and professional behaviour required of Directors and employees through the establishment of a Code of Conduct.
6.2 Trading in Company Securities
As an unlisted public company, SAPM’s securities are not traded on the Australian Securities Exchange or any other share trading exchange system. Information on the procedure for buying and selling company shares is provided on the company’s website.
The company’s Constitution has certain provisions to protect the company from a takeover and also to prevent the loss of majority control by the South Australian fresh produce industry. All applications for share transfers are subject to Board review and approval.
The company has put in place a Share Transfer Introduction Register (STIR) which assists in facilitating the exchange of contact details of potential buyers and sellers of company shares for the purposes of the parties negotiating the sale and purchase of shares. The company has published a set of STIR procedures and Rules on its website.
In 2015 the company adopted a policy which prevents the purchase of the company’s shares by any company employee unless the shares purchased have been listed in STIR for a minimum period of seven days.
Also in 2015, the company has appointed David Garry & Associates to act as the company’s share registry service provider so as to ensure that all dealing with shareholders with respect to share transfers are handled in a manner independent from the company’s employees.
7. Governance Principle 4: Safeguard Integrity in Corporate Reporting
7.1 Audit, Corporate Governance and Finance Committee (Committee)
The company has established the Committee comprised of four non executive directors and chaired by the Chairman of the Board.
The members of the Committee possess a range of expertise including accounting, taxation and legal. Specific information about their qualifications and meeting attendance can be found in the Directors’ Report in each years Annual Report.
The Chairman of the Board sits on the Committee in an ex-officio capacity. The CEO and the Finance Manager attend the meetings at the invitation of the Committee.
The Committee has a written charter and meets at least twice a year for the release of audited financial statements. Its primary functions include:
7.2 External Auditor
Following an external tender process in 2014 and a recommendation from the Audit Committee, the Board re-appointed Grant Thornton (SA) as the company’s external auditor.
8. Governance Principle 5: Make Timely and Balanced Disclosure
The Board aims to keep shareholders informed about the company’s state of affairs and progress through the distribution of the Annual Report. The Annual Report is also available on the web site.
The company also sends all shareholders the half year interim and full year results reports together with a brief commentary. Any major developments or significant matters are communicated to shareholders as they arise on a timely basis.
9. Governance Principle 6: Respect the Rights of Shareholders
The Annual General Meeting is the central forum by which companies can communicate with shareholders face to face. In addition the AGM also enables shareholders to participate in decision making.
The company’s Annual General Meeting is usually held in late November of each year. Shareholders are encouraged to attend and participate in the meeting. The CEO and the external auditors also attend the AGM and are available to answer questions as required.
The company has a website which has a dedicated section for shareholder related information and matters.
10. Governance Principle 7: Recognise and Manage Risk
10.1 Policies for the Oversight and Management of Risk
The Board acknowledges that risk management is a core component of director and executive duties and an essential element of good governance.
The company utilises accounting controls and reconciliations, segregation of duties, documented policies and procedures, regular management reporting, annual budgeting as well as physical security over company assets as part of its internal control environment. Due to the small number of employees, the company is unable to segregate all duties and does not have a dedicated internal audit function. The annual review of internal controls is undertaken by the external auditor.
The Committee’s terms of reference includes risk. The Committee assists the Board oversee the risk management framework, including the determination of the scope and the maintenance of internal control procedures.
10.2 Material Business Risks
Material business risks are those with significant areas of uncertainty that could have an impact on company objectives.
SAPM’s property insurance underwriters undertake regular risk reviews of the company’s market operations. An extensive and independent review and tender process with respect to the Company’s insurances was conducted in 2015.
The Board recognises that modern organisations face a variety of risks including strategic, reputation, compliance, and technological, environmental, financial as well as operational risks. The Board constantly reviews these risks with the CEO with a view to establishing strategies to mitigate material risks.
10.3 Declaration by CEO and Finance Manager
The company has procedures for the CEO and the Finance Manager to provide assurances that the financial statements are founded on a sound system of risk management and internal control and that the system is operating effectively in all material aspects in relation to reporting financial risks.
11. Governance Principle 8: Remunerate Fairly and Responsibly
11.1 Audit, Corporate Governance and Finance Committee
The Committee meets several times per year on a range of matters and is responsible for reviewing the CEO’s remuneration as well as making recommendations to the Board on fees for non-executive Directors. External advice and market data is sought assist it undertake this process.
11.2 CEO Remuneration
All aspects of the CEO’s remuneration package is fully documented and contained within an up to date employment contract. There is no equity component in the package and the company does not have an executive or employee share plan. Details of the CEO’s package can be found in the Remuneration Report in each years Annual Report.
11.3 Board Remuneration
The non-executive Board members of APML are remunerated by way of director fees and Committee attendance fees.
In accordance with the resolution of shareholders at the 2011 Annual General Meeting, the maximum aggregate amount of Directors’ fees that is permitted to be paid to the entire non-executive Directors is $360,000.
The non-executive Directors receive additional Committee attendance fees. Compulsory 9% Superannuation Guarantee Levy contributions are also paid.
Non-executive Directors may be reimbursed travel and sustenance expenses arising from Board related or company business.