As we have done in previous years, our annual Report to Shareholders 2001-02 will discuss our corporate governance practices in detail, in line with Guidance Note 9 attached to the ASX listing rules. The Report will also take account of the recommendations issued by the Corporate Governance Council after its inaugural meeting on 15 August 2002.
ASX recognises a dual obligation to observe high standards of ethical behaviour. ASX is both a listed company responsible to our shareholders, and a market operator responsible, as a condition of our licence issued under the Corporations Act, for ensuring the integrity of the market. We believe our success in one role is inextricably linked to our success in the other - since a failure to provide markets of integrity would not only breach our licence obligations but also damage the interests of our shareholders.
Accordingly ASX conducts a diverse range of supervisory activities designed to enhance the integrity, reliability and efficiency of market activity. This supervisory activity, including the co-regulatory operation of the Continuous Disclosure regime, will also be discussed in our Report to Shareholders. As a further layer of accountability and transparency, this supervisory role is scrutinised by ASX Supervisory Review Pty Limited.
For ASX as a company, the following points summarise our major corporate governance practices:
- The Board consists of eight non-executive directors and only one executive director being the Managing Director. The role of the Chairman is strictly separated from that of the Managing Director..2
- The majority of the Board are independent in that they have no relationship with management or the corporate entity that would interfere with the exercise of independent judgement, and that they are free from any interest and any business or other relationship which could materially interfere with a director's ability to act in the best interests of the company.
- As currently constituted, the Board has detailed knowledge of the financial services industry, including international experience in the sector and experience in business development, risk management, auditing and strategic planning. It also has skills in the regulatory, legislative and government framework.
- Directors, as part of induction, are furnished with detailed guidelines covering policies and conduct including ethical standards. They receive regular updates on all current issues impacting on the conduct of the company's business.
- The Board annually reviews its own performance and the Chairman reviews the performance of each director individually. This initiative is aimed at further enhancing board performance.
- The Board provides for time at each meeting for discussion without management present. It also meets with the external auditors at least twice a year including a period without management present.
- The Audit Committee consists only of non-executive directors. It operates under a comprehensive charter which is published on our website. The Chairman of the Audit Committee is separate from the Chairman of the Board.
- The external auditors are appointed by the Board on the recommendation of the Audit Committee subject to shareholder approval. Audit partner rotation occurs at least every seven years and last occurred in 2001. External auditors meet, without management, the Chairman of the Audit Committee on four occasions each year and the Chairman of the Board, twice a year.
- Restrictions are placed on non-audit work performed by auditors and expenditure requires the approval of the Chairman of the Audit Committee.
- Board fees are set within a limit approved by shareholders and on the basis of independent reports prepared by external remuneration consultants.
- There are no share option plans granted to directors or management.
- Management participates in an Executive Share Plan approved by shareholders with pre-determined performance hurdles aimed at enhancing shareholder value.
- Trading in ASX shares is excluded during non-trading periods which is a minimum of four weeks before the release of ASX's annual, half yearly and quarterly financial results. Further, no director or employee may deal in ASX shares if at any time he or she is in possession of unpublished information that, if generally available, might affect the price of ASX shares..3
- ASX has a particular responsibility to lead by example in complying with the Continuous Disclosure regime. Strict procedures are in place to ensure ASX staff understand their continuous disclosure obligations.
- Under a Memorandum of Understanding agreed with ASIC, ASX's compliance, as a listed company, with listing rules including continuous disclosure provisions is supervised by ASIC.
- The Managing Director and the Chief Financial Officer provide written representation that they are not aware of any material information or circumstance which has not been addressed in the external audit of the company's affairs.
- To ensure that ASX is fully accountable and transparent in its supervision of the market, an arms-length Board has been established to scrutinise and publicly report on ASX conduct of its obligations as market operator. Directors of ASX Supervisory Review can only be appointed or removed after consultation with ASIC and with advice to the Treasurer.
- ASX has required all companies to report annually on their corporate governance practices since 1994. This year it established a Council of Corporate Governance to further enhance and refine best practice guidelines for all companies. The Council consists of representative organisations covering participants in the wider corporate community.
- Because of the special position ASX occupies as market supervisor, the Managing Director has elected not to trade in shares of any Australian listed security other than ASX. ASX is separately supervised by ASIC and the Managing Director can only deal in ASX shares with the approval of the Board.
