Corporate Governance Statement – South Australian Produce Market Limited (SAPML)
INTRODUCTION
This Statement sets out the key corporate governance principles adopted by the Directors in governing the South Australian Produce Market Limited (“SAPML” or “Company“).
SAPML’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 is responsible for ensuring SAPML 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 Fourth Edition of the ASX Corporate Governance Principles and Recommendations dated February 2019 (“ASX Principles“), provided they do not conflict with any express provisions in the Company’s Constitution. These principles are the standard by which Australia’s largest and over 2,000 listed companies are judged.
Compliance with ASX Corporate Governance Principles and 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 require listed companies to include a statement in their Annual Report disclosing the extent to which they have followed the ASX Principles in the reporting period. In addition, listed companies must identify the recommendations that have not been followed and provide an explanation for this.
SAPML is not a listed company and therefore is not required to report against the ASX Principles nor include a Corporate Governance Statement in its Annual Report. However, the Board considers that publishing a corporate governance statement on its website facilitates transparency in relation to SAPML’s corporate governance practices, which will assist shareholders and other stakeholders to make informed judgments about SAPML.
SAPML considers that its governance practices comply with a substantial number of the ASX Principles. The Company’s Constitution contains specific requirements on a range of matters including Board composition, which prevail over the non-binding ASX Principles.
- Governance Principle 1: Lay solid foundations for management and oversight
1.1 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; and
- 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.
1.2 Board Committees
To assist it in carrying out its responsibilities the Board has established an Audit, Corporate Governance and Finance Committee (Committee). The purpose of the Committee is to consider certain matters (as set out in section 4.1 below) in detail and make recommendations to the Board.
Copies of Committee minutes are circulated to all Board members and the Chairman of the Committee reports findings and any recommendations to the full Board at its next meeting.
1.3 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; and
- i) developing and monitoring compliance with the Produce Market operating rules and leases.
The CEO also undertakes the role of Company Secretary of SAPML.
1.4 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 role is set out in a position description and letter of appointment which describes his term of office, duties, rights and responsibilities and entitlements on termination.
- Governance Principle 2: Structure the Board to be effective and add value
2.1 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 wholly comprised of non-executive Directors.
The Board’s structure is set out in SAPML’s Constitution. It requires that there be a minimum of 8 Directors and maximum of 11 Directors with up to three growers, three wholesalers, two retailers and three independent Directors appointed. Grower, wholesaler and retailer Directors are elected by shareholders holding that respective class of shares. Independent Directors are elected by all shareholders, including holders of non-industry 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 requirements of the Constitution set out above. There are presently 8 Directors, comprising:
- a) 2 grower appointments;
- b) 1 retailer appointment;
- c) 3 wholesaler appointments; and
- d) 2 independent appointment.
Details of each Director’s qualifications, experience and special responsibilities are set out in each year’s Annual Report (a copy of which is published on the SAPML website).
2.2 Nomination and Appointment of New Directors
Directors are appointed for a three year term. Directors are not required to be shareholders, but a grower, retailer or wholesaler appointment must be an eligible person operating a business in their respective category (in accordance with the requirements set out in the Company’s Constitution).
As the majority of the Directors are nominated and elected by the industry representative groups (i.e. 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 will from time to time conduct an independent performance review to measure the performance of Board Members.
2.3 Retirement
The Board is conscious of the benefits of board renewal. In 2020, one new independent Director and chair joined the Board. In 2021 the Board established a next Generation Committee as one way for succession planning and Board renewal SAPML’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 that a Director ceases to be an ‘eligible’ person in accordance with the Constitution, they must retire from the Board.
2.4 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 in carrying 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 to discharge their duties as a Director.
Any request from a Director for independent professional advice is considered by the Board on a case by case basis.
2.5 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 SAPML 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:
- A Wholesaler Director must be a person who (or director of a corporation that) carries on a bona fide business of the wholesale sale of fruit, vegetables, flowers or other horticultural products:
- from a lock up premises at the South Australian Produce Market;
- which has been carried on for a minimum of three years; and
- which constitutes 50% of that person or corporation’s revenue,
unless otherwise determined by the Board in its absolute discretion.
- A Grower Director must be a person who (or director of a corporation that) carries on a bona fide business of a farmer or the grower of fruit, vegetables, flowers or other horticultural products:
- on not less than five hectares of land in South Australia;
- which has been carried on for a minimum of three years;
- which constitutes 50% of that person or corporation’s revenue; and
- which constitutes a “primary production business” under the Income Tax Assessment Act 1997 (Cth),
unless otherwise determined by the Board in its absolute discretion; and
- A Retailer Director must hold (or must be a director of a corporation that holds) an ID card with the classification of Buyer under the South Australian Produce Market Rules and must carry on a bona fide business selling inter alia, fruit, vegetable, flowers or horticultural products:
- in South Australia from a retail outlet;
- which has been carried on for a minimum of three years; and
- which constitutes 50% of that person or corporation’s revenue,
unless otherwise determined by the Board in its absolute discretion.
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 overrides any implied obligation to report matters of 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 SAPML. Where a significant conflict exists, the Director concerned must declare their interests in the matter to the Board and must not take part in decisions or discussions relating to those matters.
2.6 Chairman
Joanna Andrew is the Chairman of the Board and was first appointed in 2020. 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.
2.7 Vice Chairman
Michael Ruggiero is the Vice Chairman of the Board and was first appointed to the Board in 2008 The Vice Chairman is selected by the Board and is appointed for a one year term. The Vice Chairman’s role includes:
- a) providing leadership to the Board in the absence of the Chairman;
- b) managing the Board in the discharge of its duties in the absence of the Chairman;
- c) chairing shareholders meetings (including determining the general conduct and procedures to be adopted at meetings) in the absence of the Chairman;
- d) being the primary point of contact with the Board and the CEO and provide support to the CEO in the absence of the Chairman; and
- e) responding to media enquiries on behalf of the Board in the absence of the Chairman.
The Vice Chairman is also the Charman of the Finance Audit and Corporat Governance Committee .and will be the Chairman of the Board in the absence of the Chairman
2.7 Board Meetings
The Board meets each month. In addition to the 12 scheduled Board meetings per annum, meetings are often held throughout the year to address strategy, Board performance and other specific matters which may arise.
The CEO is invited to attend all Board meetings and other SAPML managers present on relevant matters at Board meetings as required.
Information on Director meeting attendance is included in the Directors’ Report contained in each year’s Annual Report.
2.8 Review of Strategic Plan and Board Performance
As part of its commitment to continuous improvement, the SAPML Board initiated a strategic plan review during 2021.
The Board set aside a formal committed period of time outside of a normal Board meeting to review and discuss the results of the strategic plan review. A new five year strategic plan has consequently been adopted to guide management on the Company’s strategic objectives.
2.9 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. As noted above, the Company Secretary is the CEO.
- Governance Principle 3: Instil a culture of acting lawfully, ethically and responsibly
3.1 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 the Directors and employees through the SAPML Code of Conduct.
The Board has established a whistle-blower policy and can be accessed as follows:
3.2 Trading in Company Securities
As an unlisted public company, SAPML’s securities are not traded on the Australian Securities Exchange. Information on the procedure for buying and selling Company shares is provided on the Company’s website.
In 2021, the Company appointed Ord Minnett as the Company’s dedicated share broker who will deal with the trading of the Company’s securities. Ord Minnett will facilitate the exchange of contact details of potential buyers and sellers of Company shares for the purposes of arranging a sale and purchase of shares. Ord Minnett has published the process and procedures 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 must comply with the Constitution and are subject to Board review and approval.
In 2021, the Company appointed Computershare to act as the Company’s share registry service provider to ensure that all dealings with shareholders with respect to share transfers are handled in a manner independent from the Company’s employees.
The Company also has a Securities Trading Policy, which imposes certain restrictions on share trading by the Company’s Directors and key Employees.
- Governance Principle 4: Safeguard the integrity of corporate reports
4.1 Audit, Corporate Governance and Finance Committee
The Company has established an Audit, Corporate Governance and Finance Committee comprised of four non-executive Directors and chaired by the Vice Chairman of the Board Michael Ruggiero
The members of the Committee possess a range of expertise including in accounting, taxation and legal areas. Specific information about their qualifications and meeting attendance can be found in the Directors’ Report in each year’s Annual Report.
The Vice Chairman of the Board sits on the Committee in an ex-officio capacity. The CEO and the Financial Controller 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:
- recommending the external auditor’s appointment / removal and reviewing their scope of work and performance;
- assisting the Board with overseeing the risk management framework;
- reviewing, in consultation with the external auditor, internal and external audit management letters to monitor management’s remedies to address deficiencies;
- reviewing the Company’s financial results;
- providing assistance and guidance to the Board with respect to the Company’s bank and loan facilities and management remuneration;
- reporting to the Board on the adherence to internal accounting policies; and
- reviewing corporate governance policies and any legal and regulatory compliance issues.
4.2 External Auditor
Following an external tender process in 2019 and a recommendation from the Committee, the Board re-appointed Grant Thornton (SA) as the Company’s external auditor
- 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.
- Governance Principle 6: Respect the rights of security holders
The Annual General Meeting is the central forum by which the management of a company can communicate with shareholders face to face. In addition, the AGM also enables shareholders to participate in the decision making processes of the company.
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’s website has a dedicated section for shareholder-related information and matters.
The Company’s shareholders are also given the option to receive and send communications electronically, to promote efficiency.
- Governance Principle 7: Recognise and manage risk
7.1 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 and 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 include risk. The Committee assists the Board in overseeing the risk management framework, including the determination of the scope and maintenance of internal control procedures.
7.2 Material Business Risks
Material business risks are those with significant areas of uncertainty that could have an impact on Company objectives.
SAPML’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 2021.
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.
7.3 Declaration by CEO and Financial Controller
The Company has procedures in place which require the CEO and the Financial Controller 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.
- Governance Principle 8: Remunerate fairly and responsibly
8.1 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 to assist the Committee undertake this process.
8.2 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 year’s Annual Report.
8.3 Board Remuneration
The non-executive Board members of SAPML 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 permitted to be paid to the total number of non-executive Directors per annum is $400,000
The non-executive Directors receive additional Committee attendance fees. Compulsory 11% Superannuation Guarantee Levy contributions are also paid to the Directors.
Non-executive Directors may be reimbursed travel and sustenance expenses arising from Board related or Company business.
