The Board of Directors is responsible to shareholders for the performance of 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 the highest 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 (ASX Recommendations) during the financial year ended 30 June 2012. The Board of Directors considers that the Group's corporate governance practices comply with the ASX Recommendations.
PRINCIPLE 1: Lay solid foundations for management and oversight
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 are as follows:
- setting objectives, goals and strategic direction for each of the major business units;
- monitoring financial performance including approving business plans, the annual operating and capital expenditure budgets and financial statements;
- establishing, monitoring and evaluating the effectiveness of internal controls, risk management and compliance systems;
- appointing and reviewing the performance of the CEO and senior management;
- approving and monitoring major capital expenditure, capital management, acquisitions, divestments and identified business drivers;
- monitoring areas of significant business risk and ensuring arrangements are in place to manage those risks;
- ensuring conformance to environmental, social and occupational health and safety requirements; and
- reporting to shareholders on performance.
To view a full copy of the Statement of Matters Reserved for the Board, please click on the PDF file:
Beyond those matters, the Board has delegated all authority to achieve the objectives of the Company to the CEO and senior management as set out in the Group's Delegation of Authority document. The Delegation of Authority document is reviewed on an annual basis.
The Board set, on an annual basis, financial and non-financial performance hurdles for the CEO and senior executives and performance is assessed against these performance hurdles. A performance assessment for the CEO and senior executives last took place in August 2012.
Mr. Derek O'Neill ceased employment as Executive Director and Chief Executive Officer of the Company effective 12 May 2012. Ms. Launa Inman commenced employment as Managing Director and Chief Executive Officer on 14 May 2012.
The Board identified the need for a different set of executive skills and experience now that retail is a more significant part of the Billabong business. Ms. Inman's skills and depth of experience in retail, supply chain management, finance, strategic planning and brand management were identified by the Board as being important skills for the future management of the Company.
PRINCIPLE 2: Structure the board to add value
The Board is comprised of both Executive and Non-Executive Directors, with a majority of Non-Executive Directors. The Board seeks to ensure that:
- at any point in time, its membership represents an appropriate balance between Directors with experience and knowledge of the Group and Directors with an external perspective;
- the size of the Board is conducive to effective discussion and efficient decision-making.
Non-Executive Director, Ms. Margaret Jackson, retired at the Company's 2011 Annual General Meeting on 25 October 2011, and did not stand for re-election. Ms. Sally Pitkin was appointed as a Non-Executive Director on 28 February 2012 and in accordance with the Company's Constitution will retire at the 2012 Annual General Meeting, and will stand for election. As announced to the ASX on 21 June 2012, further Board renewal will occur during the year ending 30 June 2013. Mr. Kunkel retired on 16 November 2012 and Dr. Ian Pollard was appointed as Chairman on 24 October 2012. Mr. McDonald retired on 24 October 2012 and Mr. Howard Mowlem was appointed 24 October 2012. The names, skills and experience of the Directors in office at the date of this Statement, and the period of office of each Director, are set out in the Directors' Report on pages 8 to 12.
Independent Professional Advice
Directors and Board Committees have the right, in connection with their duties and responsibilities, to seek independent professional advice at the Company's expense. Prior approval of the Chairman 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.
Independence of Directors
An assessment of Non-Executive Director's 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;
- has within the last three years been a principal of a material professional advisor or a material consultant to the Company, or an employee materially associated with the service provided;
- is a material supplier or customer of the Company, or an officer of or otherwise associated directly or indirectly with a material supplier or customer; and
- has a material contractual relationship with the Company other than as a Director.
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.
Mr Gordon Merchant is a substantial shareholder of the Company and accordingly he is not considered to be independent of the Company based on the ASX Recommendations. Mr Merchant is a founder of the Billabong 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.
Ms. Colette Paull was previously employed in an executive capacity by the Company and there was not a period of three years between her ceasing employment in 1999 and joining the Board. It is the view of the Board that Ms. Paull exercises her judgement in an independent and unfettered manner bringing independent thought and experience to her role.
However having regard to all current circumstances, including the qualitative factors relevant for the determination of director independence, the Board has concluded that Ms. Paull should be classified as a non-independent Non-Executive Director in light of her direct association with Mr. Merchant, a substantial shareholder of the Company.
All other Non-Executive Directors do not have any business interest or other relationship that could materially interfere with the exercise of their independent judgement and their ability to act in the best interests of the Company.
The Chairman of the Company is an independent Non-Executive Director.
The roles of Chairman and CEO are exercised by separate individuals.
The Board held 41 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 2012, and the number of meetings attended by each Director, is disclosed in the Directors' Report on page 12.
The Board has established a number of Committees to assist in the execution of its duties and to allow detailed consideration of complex issues. Current Committees of the Board are the Nominations, Human Resource and Remuneration and Audit Committees. Each is comprised entirely of Non-Executive Directors. Each 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. All of 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.
Howard Mowlem (Chairman appointed 24 October 2012)
Ian Pollard (appointed 24 October 2012)
Ted Kunkel (Former Chairman retired 16 November 2012)
Allan McDonald (retired 24 October 2012)
The Nominations Committee consists only of Non-Executive Directors and a majority of the members of the Committee are independent. The Chairman of the Committee is a Non-Executive Director. The Nominations Committee met 15 times during the year. Details of these Directors' attendance at Committee meetings are set out in the Directors' Report on page 12.
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 currently represented on the Board;
- regularly review and make recommendations to the Board regarding the structure, size and composition of the Board (including the balance of skills, knowledge, expertise and diversity of gender, age, experience and relationships of the Board) and keep under review the leadership needs of the Company, both executive and non-executive;
- identify suitable candidates to fill Board vacancies as and when they arise and nominating candidates for the approval of the Board;
- ensure that, on appointment, all Directors receive a formal letter of appointment, setting out the time commitment and responsibility envisaged in the appointment including any responsibilities with respect to Board Committees;
- oversee appropriate Board succession planning; and
- establish a process for the review of the performance of individual Directors and the Board as a whole.
When a new Director is to be appointed, the Committee reviews the diversity objectives of the Board and the range of skills, experience and expertise required. In the current Board renewal process we have identified skills such as financial strength, public company board experience, international retail skills and specific industry skills relating to either consumer goods, retail, e-commerce, wholesale or supply chain logistics. Additionally consideration is being given to candidates with the potential to fill the roles of Board Chair and Audit Committee Chair.
The Company has engaged independent search consultants to assist with the process. The consultants will be required to provide a short list of candidates with appropriate skills and experience for Board consideration. The full Board will then appoint the most suitable candidate who must submit themselves to shareholders for election at the first Annual General Meeting following their appointment.
New Directors are provided with a letter of appointment 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. 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. A formal induction program which covers the operation of the Board and its Committees and financial, strategic, operations and risk management issues is also provided to ensure that Directors have significant knowledge about the Company and the industry within which it operates. To view a full copy of the Policy and Procedure for the Selection and Appointment of New Directors, please click on the PDF file:
New Directors are advised of the time commitment required of them in order to appropriately discharge their responsibilities as a Director of the Company. Directors are required to confirm that they have sufficient time to meet this requirement. To view a full copy of the Nominations Committee Charter, please click on the PDF file:
The Nominations Committee reports to, and makes recommendations to the full Board in relation to each of its functions.
Tenure of Office
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 Board undertakes an annual self-assessment of the performance of the Board as a whole, its Committees, the Chairman, individual Directors and governance processes that support Board work. The Board conducted such an assessment during the 2011-12 reporting period. Performance of individual Directors is assessed against a range of dimensions including the ability of the Director to consistently create shareholder value, to contribute to the development of strategies and risk identification, to provide clarity of direction to senior management, to listen to the views of fellow Directors, members of management and key third party stakeholders, as well as provide the time commitment required to ensure the discharge of duties and obligations to the Company. The Chairman meets privately with each Director to discuss individual and collective performance of Directors.