A strategic investor
Approach to corporate governance
Tag Pacific Limited is committed to achieving and demonstrating the highest standards of corporate governance, consistent with the size and nature of the company.
As a listed entity, the company must comply with the Corporations Act 2001, the Australian Securities Exchange Listing Rules (ASX Listing Rules) and other laws.
ASX Listing Rule 4.10.3 requires ASX listed companies to report on the extent to which they have followed the Principles of Good Corporate Governance and Best Practice Recommendations (‘Recommendations’) released by the ASX Corporate Governance Council.
The Recommendations encourage the board to carefully consider the development and adoption of appropriate corporate governance policies and practices founded on the ASX Principles.
Compliance with ASX Best Practice RecommendationsEach listed company is required to provide a statement in its annual report disclosing the extent to which it has followed the Recommendations during the reporting period.
A listed company must identify any Recommendation that has not been followed and give reasons for not following it. Where a Recommendation has been followed for only part of the period, the company must state the period during which it has been followed.
ASX Principle 1:Lay solid foundations for management and oversight
Recommendation 1.1
Establish the functions reserved to the board and those delegated to senior executives and disclose those functions.
The board’s objective is to increase shareholder value within an appropriate framework that ensures the company’s affairs are properly managed and controlled and sets the strategic business direction to be followed.
The powers reserved to the board include the following:
> establishment and maintenance of appropriate governance structures;
> the review and oversight of the company’s strategic plan, setting goals and long term objectives with a view to
maximising shareholder value;
> adopting an annual budget and reviewing financial performance;
> establishment of the control environment to provide for meaningful and timely information;
> providing the basis for the review of the performance of the board and its members and the senior management
and their remuneration;
> the provision of a communication capability and the relevant procedures with all stakeholders in accordance with
the continuous disclosure provisions and to comply with the relevant legal requirements;
> reviewing and ratifying systems of risk management;
> establishing a basis for approvals of capital expenditure, acquisitions and divestment; and
> setting high standards for ethical and corporate behaviour.
With the exception of matters reserved for the board, all other powers are delegated to senior management.
Senior managers who are not board members have formal contracts with the company which include details of their role and job descriptions.
Recommendation 1.2:
Disclose the process for evaluating the performance of senior managers.
All senior managers, other than the Executive Chairman, are subject to a performance appraisal and remuneration review at least annually. As noted in Recommendation 8.1, such reviews are undertaken by the Remuneration Committee in accordance with the company’s performance based remuneration policy, details of which are set out in the Remuneration Report in the Directors’ Report.
Recommendation 1.3:
Provide the information indicated in the Guide to reporting on Principle 1.
A performance evaluation for all senior managers other than the Executive Chairman took place during the reporting period. The Executive Chairman works closely with the board and senior managers of the Tag Group. A performance evaluation for the Executive Chairman was not appropriate given the nature of the role and the structure of the company.
ASX Principle 2:Structure the board to add value
Recommendation 2.1:
A majority of the board should be independent directors.
A Tag director is considered independent when he or she is independent of management (that is, non-executive), and free from any business or other relationship that could materially interfere with, or could be reasonably perceived to materially interfere with, the exercise of his or her unfettered and independent judgement.
Materiality is considered on a case by case basis by reference to the director’s individual circumstances rather than general materiality thresholds.
The Tag board has made its own assessment to determine the independence of each director on the board.
The Tag board comprises an executive chairman, Peter Wise, and five non-executive directors being Gary Cohen, Robert Constable, Robert Moran, Richard Peterson and Gary Weiss.
The composition of the board is based on the following factors:
> size of company;
> nature and extent of head office operations;
> tenure of directors; and
> limited trading in the company’s securities.
Notwithstanding the nature of the board composition, the board maintains protocols to ensure that any potential or actual conflicts of interest and duty are properly identified and managed, and to ensure directors act in accordance with their fiduciary responsibilities.
The criteria for board membership and the selection of appropriate members of the board are determined by the board itself. Election and rotation of directors is governed by the company’s constitution. Shareholder approval is sought where appropriate. In determining the appointment and retirement of non-executive directors, a cross section of skills and experience is sought.
The company’s constitution specifies that:
> one third of the directors (with the exception of new appointees who must retire under a different rule); and
> any director, who would have held office for more than 3 years at the time of the annual general meeting,
must retire from office at that general meeting but may stand for re-election.
Details of the directors who are considered independent appears under Recommendation 2.6. The company has adopted the recommendation for a majority of the board to be independent directors notwithstanding the nature and extent of the company’s operations and the fact that interests associated with directors hold a majority of the company’s issued securities.
Recommendation 2.2:
The chairman should be an independent director.
Tag has not adopted this recommendation as interests associated with the chairman hold a significant percentage of the company’s issued securities. This recommendation is inappropriate to the company’s particular circumstances.
Recommendation 2.3:
The roles of chairman and chief executive officer should not be exercised by the same individual.
Tag has not adopted this recommendation as interests associated with the chairman hold a significant percentage of the company’s issued securities. This recommendation is inappropriate to the company’s particular circumstances.
Recommendation 2.4:
The board should establish a nomination committee.
Tag has not adopted this recommendation as the practices relating to the selection and appointment of directors, detailed within this statement, are an efficient means of meeting the needs of the company, having regard to the relative size of the company which is reflected in the board structure and composition.
The board consists of six directors, of whom four are considered independent, and it is considered that Tag has the capacity to consider director nomination practices within the duly constituted meetings of the board, and that the establishment of a formal committee structure would not add greater value to this process. The company has not adopted this recommendation as it is inappropriate to its particular circumstances.
Recommendation 2.5:
Disclose the process for evaluating the performance of the board, its committees and individual directors.
The performance of the board, its committees and individual directors is considered on an informal, as needs basis, given that interests of directors have a beneficial or non-beneficial interest in a majority of the company’s issued securities.
All directors have direct access to the entire senior management team, including the company secretary, and are provided with information on a timely basis.
Recommendation 2.6:
Provide the information indicated in the Guide to reporting on Principle 2.
Skills, experience and expertise of directors
Information relevant to the position of each director in office at the date of this report is set out in the Directors’ Report.
Independent directors
Robert Constable, Robert Moran, Richard Peterson and Gary Weiss are considered “independent” in terms of the ASX recommendations, with each holding nominal numbers of shares as set out in the Directors’ Report. The board has not set a materiality threshold for determining “independence”.
No independent director has undertaken employment with a group entity, has acted as a principal of a material professional adviser or material consultant of a group entity, is a material supplier or customer of a group entity, or has a material contractual relationship with a group entity other than as a director.
Independent professional advice
Directors are able to seek reasonable independent professional advice, as appropriate, in the furtherance of their duties. Any such advice may be at the company’s expense, subject to prior approval of the board.
Period of office held by each director
Information in relation to the period of office held by each director can be found in the Directors’ Report.
Process for selection and appointment of directors
Given the length of service of directors, the board does not consider it necessary to develop succession plans or procedures for the appointment and re-election of directors.
Performance evaluation
A performance evaluation of the board, its committees and directors did not take place in the reporting period for the reasons given under Recommendation 2.5.
Departures from recommendations
Any departure from Recommendations 2.1 to 2.6 is explained under the relevant Recommendation.
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 the company’s legal obligations and the reasonable expectations of
shareholders; and
> the responsibility and accountability of individuals for reporting and investigating reports of unethical practices.
As part of the board’s commitment to the high standards of conduct, the company has established operating protocols to deal with various issues including:
> conflicts of interest;
> employment practices;
> fair trading;
> health and safety; and
> relations with customers and suppliers.
These are designed to:
> clarify the standards of ethical behaviour required of the board, senior managers and employees and encourage
compliance with those standards; and
> assist the company to comply with its legal obligations and have regard to the reasonable expectations of
shareholders.
The recommendation to establish and publish a formal code has not been adopted in view of the nature and extent of company operations, the long-standing tenure of directors and the close relationship with the senior management team.
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 an informal policy to restrict directors and senior managers from acting on material information to trade in the company’s securities until such information has been released to the market and adequate time has passed for it to be reflected in the price of those securities.
Material information means information concerning the company’s financial position, strategy or operations and any other information which a reasonable person might consider, if it were made public, would be likely to have a material impact on a decision to buy or sell the company’s securities.
The recommendation to publish details of the trading policy has not been adopted in view of the limited dealings undertaken by directors and senior managers in the company’s securities and the fact that interests associated with the directors and senior managers hold a majority of the company’s issued securities.
Recommendation 3.3:
Provide the information indicated in the Guide to reporting on Principle 3.
Any departure from Recommendations 3.1 to 3.3 is explained under the relevant recommendation.
ASX Principle 4:Safeguard integrity in financial reporting
Recommendation 4.1:
Establish an audit committee.
The board has established an audit committee to assist it to ensure the truthful and factual presentation of the company’s financial position.
Notwithstanding the existence of the audit committee, ultimate responsibility for the integrity of the company’s financial reporting rests with the full board.
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; and
> has at least three members.
The audit committee comprises two of the four independent, non-executive directors and is chaired by Robert Constable who is not chairman of the board.
The board considers that the skills, experience and expertise of Messrs Constable and Moran are entirely suited to the effective discharge of the responsibilities of the committee.
The board has not adopted the recommendation for the committee to maintain at least three directors, given the nature and extent of company’s activities and the relative size of the board.
Recommendation 4.3:
The audit committee should have a formal charter.
The role and responsibilities of the Tag audit committee are to:
> oversee the existence and maintenance of internal controls and accounting systems;
> ensure the integrity of the financial reporting process;
> review the annual and half-yearly financial statements;
> oversee the independence of the external auditor; and
> ensure the existence of a process for identification and management of key business risks.
The committee has rights of access to management, rights to seek explanations and additional information, and access to external auditors without management being present.
The committee meets at least twice each year and reports to the board on all matters relevant to its role and responsibilities. Minutes of its meetings are made available to the full board.
The board has not adopted the recommendation to establish a committee charter in view of the nature and extent of company operations, the experience of each committee member, and close access to the executive team.
Recommendation 4.4:
Provide the information indicated in the Guide to reporting on Principle 4.
The qualifications of committee members are listed in the Directors’ Report.
The number of committee meetings held during the reporting period and the attendance of each member at those meetings is set out in the Directors’ Report.
The board has not published a committee charter, or information on procedures for the selection and appointment of the external auditor, and for the rotation of external audit engagement partners as these matters are dealt with informally.
Any departure from Recommendations 4.1 to 4.4 is explained under the relevant Recommendation.
ASX Principle 5:Make timely and balanced disclosure
Recommendation 5.1:
Establish written policies designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior management level for that compliance and disclose those policies or a summary of those policies.
The company secretary has been nominated as the person responsible for communication with the Australian Securities Exchange (ASX). This role includes responsibility for ensuring compliance with the continuous disclosure requirement in the ASX listing rules and overseeing and co-ordinating information disclosure to the ASX and the public.
The company secretary and/or the executive chairman jointly ensure that any proposed announcement is drafted in a timely manner, is factual, expressed in a clear and consistent manner and does not omit material information.
Except for standard secretarial and procedural matters, all material announcements to the ASX are authorised by the board.
The recommendation to establish and publish written policies regarding compliance with ASX Listing Rule disclosure requirements has not been adopted in view of the nature and extent of company operations.
Recommendation 5.2:
Provide the information indicated in the Guide to reporting on Principle 5.
Any departure from Recommendations 5.1 and 5.2 is explained under Recommendation 5.1 above.
ASX Principle 6:Respect the rights of shareholders
Recommendation 6.1:
Design a communications policy for promoting effective communication with shareholders and encouraging their participation at general meetings and disclose the policy or a summary of that policy.
The recommendation to publish a communications policy has not been adopted in view of the nature and extent of company operations.
Recommendation 6.2:
Provide the information indicated in the Guide to reporting on Principle 6.
The company aims to keep shareholders informed of its performance and all major developments in an ongoing manner. Information disclosed to the ASX is available by a link on the company’s website.
Additionally, information is communicated to shareholders through:
> the annual report which is distributed to all shareholders;
> the half annual report which is distributed to all shareholders in an abbreviated form; and
> other correspondence regarding matters impacting on shareholders as required.
Any departure from Recommendations 6.1 and 6.2 is explained under Recommendation 6.1 above.
ASX Principle 7:Recognise and manage risk
Recommendation 7.1:
Establish policies for the oversight and management of material business risks and disclose a summary of those policies.
In view of the nature and extent of company operations, the tenure, experience and understanding of directors, the company has established informal policies for the oversight and management of material business risks. Formal policies would be inappropriate to the company’s particular circumstances.
Recommendation 7.2
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. Disclose that management has reported to the board as to the effectiveness of the company’s management of its material business risks.
In view of the nature of the company’s investment activities, formal and informal policies for the oversight and management of the various business risks associated with the company’s specific investments are conducted at the relevant subsidiary board level.
A formal and documented risk management and internal control system has not been adopted as it is inappropriate to the company’s particular circumstances.
Recommendation 7.3:
Disclose whether the board has received assurance from the chief executive (or equivalent) and the chief financial officer (or equivalent) 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 board has received the declaration in accordance with section 295A of the Corporations Act and has had an opportunity to question whether the declaration is founded on a system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks.
Recommendation 7.4:
Provide the information included in the Guide to reporting on Principle 7.
Any departure from Recommendations 7.1 to 7.4 is explained under the relevant Recommendation.
ASX Principle 8:Remunerate fairly and responsibly
Recommendation 8.1:
Establish a remuneration committee.
The remuneration committee comprises two non-executive directors.
The role and responsibilities of the Tag remuneration committee are to:
> make recommendations to the board on an appropriate remuneration policy for directors and senior managers;
> undertake the performance reviews of senior managers; and
> determine the remuneration and employment terms of senior managers in accordance with the adopted
remuneration policy.
Remuneration for non-executive directors is determined by the full board and is subject to shareholder approval.
The board considers that the skills, experience and expertise of Messrs Cohen and Constable are entirely suited to the effective discharge of the responsibilities of the committee.
The board has not established a committee charter in view of the nature and extent of company operations and the relative size of the board.
The committee meets at least once per annum.
The committee reports to the board on all matters relevant to its role and responsibilities. Minutes of its meetings are made available to the full board.
Recommendation 8.2:
Clearly distinguish the structure of non-executive directors’ remuneration from that of directors and senior managers.
The company’s remuneration policy for senior managers and non-executive directors is set out in the Remuneration Report.
Recommendation 8.3:
Provide the information indicated in the Guide to reporting on Principle 8.
The number of committee meetings held during the reporting period and the attendance of each member at those meetings is set out in the Directors’ Report.
There are no schemes for retirement benefits for non-executive directors.
The recommendation to publish information in relation to the role, rights, responsibilities and membership requirements for the remuneration committee has not been adopted in view of the nature and extent of company operations and the relative size of the board.
The company has not published a summary of the company’s policy on prohibiting entering into transactions in associated products which limit the economic risk of participating in unvested entitlements under any equity-based remuneration scheme as the directors consider that such a policy is inappropriate to the company’s particular circumstances.
Any departure from Recommendations 8.1 to 8.3 is explained under the relevant Recommendation.
New Zealand Stock Exchange Corporate Governance
Fully paid ordinary shares issued by Tag Pacific Limited are quoted on the Australian Securities Exchange (under the code TAG) and on the New Zealand Stock Exchange (under the code TPC). The corporate governance rules and principles of the Australian Securities Exchange may materially differ from the New Zealand Stock Exchange’s corporate governance rules and the principles of the New Zealand Corporate Governance Best Practice Code. Further information about the corporate governance and principles of the Australian Securities Exchange may be found on the Australian Securities Exchange website (www.asx.com.au).
