The Board of Directors is responsible to shareholders for the performance of Billabong International Limited and its subsidiaries (collective, the "Group") and believes that high standards of corporate governance underpin the Company's objective of maximising returns to shareholders. The Board is committed to a high level of governance and endeavours to foster a culture that rewards ethical standards and corporate integrity. As required by the ASX Listing Rules, this statement sets out the extent to which the Company has complied with the ASX Corporate Governance Principles and Recommendations (3rd Edition) (the ASX Recommendations) during the financial year ended 30 June 2016. The Board of Directors considers that the Group's corporate governance practices comply with the ASX Recommendations, except where otherwise explained below.
PRINCIPLE 1: Lay solid foundations for management and oversight
Roles and Responsibilities of Board and Management
The Directors are responsible to the shareholders for the performance of the Group in both the short and the longer term. Their focus is to enhance the interests of shareholders and other key stakeholders and to ensure the Company is properly managed.
A summary of matters reserved for the Board is as follows:
- setting strategic objectives and providing input into and final approval of the Group's overall strategic direction and strategic plans for each of the Group's major business units;
- monitoring financial performance including approving business plans, the annual operating and capital expenditure budgets and financial statements and published reports;
- establishing, monitoring and evaluating the effectiveness of internal controls, risk management and compliance systems;
- appointing and reviewing the performance of the CEO and, jointly with the CEO, the executive leadership team;
- approving and monitoring major capital expenditure, capital management, acquisitions, divestments and identified business drivers;
- ensuring that any significant risks are identified, assessed, appropriately managed and monitored; and
- establishing environmental, social and occupational health and safety policies.
A copy of the Statement of Matters Reserved for the Board, which includes the full list of matters reserved for the Board, is available on the Company's corporate website www.billabongbiz.com.
The Board has delegated the day-to-day management of the business of the Group to management through the CEO subject to the Group’s Delegation of Authority. The Delegation of Authority document is reviewed on a periodic basis
Appointment and Election of Directors
Prior to appointing a person, or putting forward to shareholders a candidate for election, as a Director, the Company will undertake appropriate checks of that person.
Non-Executive Directors have open-ended contracts and tenure is subject to the individual performance of the Director and rotational requirements for re-election by shareholders. The Company's Constitution specifies that all Non-Executive 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. The Company will provide shareholders with a range of information about any person recommended for election or re-election as a Director, including the matters set out in the ASX Recommendations and any other information considered relevant for shareholders to make an informed decision.
The Company's Policy and Procedures for Selection, Appointment and Re-Election of Non-Executive Directors is available on the Company's corporate website.
Terms of Appointment of Directors and Senior Executives
New Directors are provided with a letter of appointment, which the Director is required to acknowledge and counter-sign, setting out the Company's expectations including involvement with committee work, their responsibilities, remuneration, including superannuation and expenses, and the requirement to disclose their interests and any matters which affect the Director's independence. Directors have the right, in connection with their duties and responsibilities, to seek independent professional advice at the Company's expense. Prior approval of the Chair is required, but this will not be unreasonably withheld. The advice obtained must be made available to all Board members in due course, where appropriate.
It is the Company's practice to have a written agreement in place with each member of its executive leadership team, which sets out the term of that executive's appointment.
The Company Secretary is accountable directly to the Board, through the Chair, on all matters to do with the proper functioning of the Board.
Workplace Equity and Diversity Policy
The Company values diversity and recognises the benefits of a diverse workforce. The Workplace Equity and Diversity Policy requires the Board to set measurable objectives for achieving gender diversity and to assess annually both the objectives and the entity's progress in achieving them. A copy of the Company's Workplace Equity and Diversity Policy can be found on the Company's corporate website. The policy is available in English, French, Japanese, Portuguese, Spanish, Bahasa Indonesian, Traditional and Simplified Chinese to ensure it is accessible to all staff.
The Company’s Workplace Equity and Diversity Policy is available on the Company’s corporate website.
As at 30 June 2016, the percentage of female employees across the organisation remained at just over 50%.
In 2013-14 the Board established three-year objectives in relation to gender diversity. Progress towards these objectives is reviewed by the Board annually, with the most recent review conducted in May 2016, with the year-end percentages being confirmed in August 2016. The Company's Workplace Equity and Diversity Policy was also reviewed by the Board in May 2016.
As per the table below, the first objective was met, with the percentage of women on the Board as of 30 June 2016 being 20%. It was determined that the objective of having at least 17% of women on the Board should remain in place for 2016-17.
The percentage of women in senior executive positions remained at 31% and therefore the second objective – 35% of women in senior executive positions – was not met in 2015-16. It was determined that this objective should also remain in place for 2016-17. Senior executive positions, which to date have included the CEO and the next two levels of management, will from the 2016-17 financial year be assessed with reference to the type of job rather than just the reporting level to provide a more accurate analysis.
The final objective, an annual review of gender pay equity, was undertaken in May 2016. The Board intends to review gender pay equity on an annual basis and supports management's efforts to achieve the goal of gender pay equity for like positions.
Progress against objectives
Actual –% of women
30 June 2015
Actual –% of women
30 June 2016
Women on the Board - 17%
Women in Senior Executive positions - 35%
Annual review of gender pay equity
Board Performance Review
During the year the Chair undertook a review of Board, Committee and Director performance (including the performance of Chairs of the Board and its Committees) through one-on-one discussions with all Directors, the Chief Financial Officer and the Company Secretary.
Executive Performance Review
The Board sets, on an annual basis, financial and non-financial performance hurdles for the CEO and senior executives and performance is assessed against these hurdles. In accordance with this process a performance assessment for senior executives was completed in August 2015 in respect of the 2014-15 financial year. A performance assessment in respect of the 2015-16 financial year commenced in August 2016 and will be completed in the coming months.
PRINCIPLE 2: Structure the board to add value
The names, skills and experience of the Directors in office during the financial year ended 30 June 2016, and the period of office of each Director, are set out in the Directors’ Report from pages 11-13.
The Board is comprised both Executive and Non-Executive Directors, with a majority of
The Board seeks to ensure that:
- its membership represents an appropriate balance between Directors with experience and knowledge of the Group and Directors with an external perspective; and
- the size of the Board is conducive to effective discussion and decision-making.
The Board held 20 Board meetings during the year. The number of meetings of the Company's Board of Directors and of each Board Committee held during the year ended 30 June 2016, and the number of meetings attended by each Director, is disclosed in the Directors' Report on page 14. During the 2015-16 financial year three Board meetings were held at the Company's USA office in Irvine, California, including a tour of the Billabong, RVCA and Element head offices.
The Board has established a number of Committees to assist in the execution of its duties and to allow detailed consideration of complex issues. The Committees of the Board as at 30 June 2016 were the Nominations, HR & Remuneration, Class Action and Audit & Risk Committees. Following settlement of the Class Action proceedings in July 2016 the Class Action Committee was dissolved. Each Committee is comprised entirely of Non-Executive Directors. Each of the Nominations, HR & Remuneration and Audit & Risk Committee has its own written charter setting out its role and responsibilities, composition, structure, membership requirements and the manner in which the Committee is to operate. These charters are reviewed on an annual basis and are available on the Company's corporate website. All matters determined by Committees are submitted to the full Board as recommendations for Board decisions.
Ian Pollard (Chair)
Sally Pitkin (Member until 15 August 2016)
Matthew Wilson (Member until 7 September 2015)
Throughout the 2015-16 financial year, the Nominations Committee has comprised at least three members, all of whom were Non-Executive Directors and the majority of whom were independent Directors. At all times during the financial year the Chair of the Committee has been an independent Non-Executive Director.
The Company's Nominations Committee Charter is available on the Company's corporate website.
The Nominations Committee met twice during the year. Details of Directors' attendance at Committee meetings are set out in the Directors' Report on page 14. The Committee may extend an invitation to any person to attend all or part of any meeting of the Committee that it considers appropriate.
The main functions of the Committee are to:
- assess periodically the skill set required to discharge competently the Board's duties, having regard to the strategic direction of the Group, and assess the skills, experience, independence and knowledge currently represented on the Board;
- regularly review and make recommendations to the Board regarding the structure, size and composition (including the balance of skills, independence, knowledge, expertise and diversity of gender, age, experience and relationships) of the Board and keep under review the leadership needs of the Board;
- prepare a description of the role and capabilities required for a particular appointment;
- identify suitable candidates (executive and non-executive) to fill Board vacancies, taking into account the skills, experience and diversity required on the Board, and the attributes required of Directors;
- undertake appropriate checks before appointing new Directors or putting candidates for election or re-election to shareholders;
- ensure that, on appointment, all Directors receive an induction and a formal letter of appointment, setting out the time commitment and responsibility envisaged in the appointment including any responsibilities with respect to Board Committees;
- provide appropriate training and development opportunities for Directors;
- identify the existing Directors who are due for re-election by rotation at the Company's Annual General Meeting, in accordance with the Constitution;
- give full consideration to appropriate succession planning for the Board, satisfying itself that processes and plans are in place in relation to the Board;
- review disclosures, including ASX filings and announcements for the election of a Director, statements in the Annual Report detailing the Committee's activities and the process used for appointments;
- make publicly available the Committee's Charter, explaining its role and the authority delegated to it by the Board
- review the Committee's Charter and its own performance annually; and
- establish a process for the review of the performance of individual Directors and the Board as a whole, in particular prior to the endorsement of retiring Directors seeking re-election.
The Nominations Committee reports to, and makes recommendations to, the full Board in relation to each of its functions.
Board Skills Matrix
The Board seeks to have an appropriate mix of skills, experience, expertise and diversity to enable it to discharge its responsibilities and add value to the Company.
As at 25 August 2016 the Directors collectively contribute the following key skills and experience:
Number of the 5 Directors with that skill
Financial Skills and Literacy
Publicly Listed Company Governance
|Culture/Human Capital ||
| WHS ||
| NED Experience ||
| CEO/CFO Experience ||
| Executive Experience ||
| North America ||
| Europe ||1|
| Asia ||
| Australia ||
| Consumer Goods ||
| Retail ||
| Wholesale/Branding ||
| eCommerce/Technology ||
| Supply Chain/Logistics ||
| Turnaround/Structural Change ||
The Board is seeking to appoint a new independent Non-Executive Director following the resignation of Sally Pitkin as Director of the Company on 15 August 2016. In view of the Board vacancy and the above Skills Matrix, ECommerce/Technology is one of the skills the Company will prioritise in the search for a new Board appointment given the transformation of the Company’s business, involving a multi-year project of capital expenditure and change of business practices. In the interim, any need for additional independent perspective on the Company’s projects and progress can also be sourced externally.
The Constitution provides that the Company is not to have more than 10, nor fewer than three, directors.
Independence of Directors
An assessment of Non-Executive Directors’ independence is carried out annually or at any other time where the circumstances of a Director change such as to warrant reconsideration.
When determining independence, a director must be a Non-Executive Director, and consideration is given to whether the Non-Executive Director:
- is a substantial shareholder of the Company or an officer of, or otherwise associated directly with, a substantial shareholder of the Company;
- is employed, or has previously been employed in an executive capacity by the Company, and there has not been a period of at least three years between ceasing such employment and serving on the Board;
- is, or within the last three years has been, a partner, director or senior employee of a provider of material professional services to the Company or another Group member;
- is, or in the last three years has been, in a material business relationship (e. g. as a supplier or customer) with the Company or other Group member, or an officer of, or otherwise associated with, someone with such a relationship;
- has a material contractual relationship with the Company or another Group member, other than as a Director;
- has close family ties with any person who falls within any of the categories described above; or
- has been a director of the entity for such a period that his or her independence may have been compromised.
Materiality for these purposes is determined on both quantitative and qualitative bases.
The Board assesses independence each year. To enable this process, the Directors must provide all information that may be relevant to the assessment. As at 30 June 2016 there was one Executive Director and five Non-Executive Directors.
In respect of the five Non-Executive Directors:
- Gordon Merchant is a substantial shareholder of the Company and a long-serving director, so accordingly he is not considered to be independent of the Company based on the ASX Recommendations. Mr Merchant is a founder of the Group and the Board considers that it is in the best interests of all shareholders to have a Director with Mr Merchant’s industry and business expertise and Company history as a member of the Board.
- Jason Mozingo is a Senior Managing Director at Centerbridge and was appointed as a Director on 4 November 2013. Centerbridge is a long term financier to the Company and is a substantial shareholder. Accordingly, Mr Mozingo is not considered to be independent of the Company based on the ASX Recommendations.
- Matthew Wilson is a Managing Director at Oaktree and was appointed as a Director on 4 November 2013 and ceased as a director on 7 September 2015. Oaktree is a long term financier to the Company and is a substantial shareholder. Accordingly, Mr Wilson is not considered to have been an independent of the Company based on the ASX Recommendations during his tenure.
- The remaining three Non-Executive Directors on the Board during the financial year ended 30 June 2016 (Howard Mowlem, Sally Pitkin and Ian Pollard) have no relationships adversely affecting independence and so were deemed independent under the principles set out above.
Therefore, for the first few months of the 2015-16 financial year three of the seven Directors on the Board were independent and from 7 September 2015 until 30 June 2016 half of the Directors on the Board were classified as independent.
The Board considers that the current composition of the Board and its Committees is appropriate because:
- the Chair of the Board is independent and is not the same person as the CEO;
- all Board committees are chaired by an independent Director and throughout the financial year ended 30 June 2016 there has been a majority of independent Directors on all Board committees;
- the Nominations, HR & Remuneration and Audit & Risk Committees, for the duration of the financial year, have comprised a majority of independent Directors; and
- robust procedures are in place to manage any actual or potential conflicts of interest that may arise. These include procedures to ensure that directors are not present and do not vote on matters where that would be prohibited by the Corporations Act 2001.
The Independence of Directors Policy is available on the Company's corporate website.
Director Induction and Training
All new Directors will receive an induction appropriate to their experience to enable new Directors to actively participate in decision-making as soon as possible, including familiarisation with the Company’s strategic, financial, operational and risk management issues. New Directors are also provided with all relevant policies including the Company’s Securities Trading Policy, a copy of the Company’s Constitution, organisational chart and details of indemnity and insurance arrangements.
The Nominations Committee is responsible for providing appropriate training and development opportunities for Directors.