CPA Australia Ltd (CPA Australia) is committed to best practice and has adopted the Corporate Governance Principles and Recommendations (CGPR). This approach has been adopted notwithstanding the fact that CPA Australia is an unlisted public company limited by guarantee and as such is not required to report against the CGPR. CPA Australia uses the CGPR as a guide to best practice and has implemented these principles as far as they are relevant to it as a membership-based organisation.

CPA Australia reports against the CGPR in this corporate governance statement as part of its commitment to preserving membership confidence.

In the preparation of this Statement, CPA Australia has considered the 4th edition CPGR following its release in February 2019. Management will review and where appropriate report against the 4th edition CPGR for the Corporate Governance Statement 2019.

This is the corporate governance statement as at 31 December 2018.

Principle 1: Lay solid foundations for management and oversight

Board of directors

The Board of Directors (Board) is the principal governing body of CPA Australia and has been appointed by the Appointments Council. Details of the Appointments Council are set out later in this document. For directors appointed from 1 October 2018, a different process from recent years was used, the most significant changes being:

  • abolishing the Representative Council and replacing it with the Appointments Council
  • focusing the powers of the Appointments Council solely on the appointment of Directors
  • ensuring that the representation on the Appointments Council included one representative from each geographical location that has a Division or Branch Council
  • removing additional representatives from larger Divisions, on the basis that the Appointments Council exists to create a connection between members from different geographies and the mechanism to appoint the Board, rather than a body that reflects the membership’s composition
  • removing Board appointees from the Appointments Council, with the exception of the President of the Board, who remains on the Appointments Council but is a non-voting member of the Appointments Council
  • improving the ability for the Appointments Council to convene in-camera sessions without the chair of the Appointments Council present
  • appointing a Deputy Chair of the Appointments Council to assist the chair of the Appointments Council by chairing the in-camera sessions, in particular the decision-making process within those sessions
  • restricting the tenure of Appointments Councillors to four consecutive years (excluding time served filling a casual vacancy)
  • prohibiting Appointments Councillors from simultaneously acting as Divisional Presidents or Branch Presidents so as not to overload Divisional and Branch Presidents
  • requiring, at the beginning of each year, the Appointments Council to appoint an Appointments Councillor to have a casting vote in the event of a tied vote
  • prescribing an election procedure that does not allow the use of proxies when voting for Directors. The Appointments Councillor cannot appoint anyone to cast a vote for them if they are not present at the meeting.

All directors undergo Australia, New Zealand and country of origin police checks before their appointment.

All directors are appointed subject to the provisions of the Constitution of CPA Australia and the provisions of the Corporations Act 2001 (Cth).

The Board and each Board Committee review its performance regularly throughout the year. A peer and self-assessment review is undertaken annually by all Directors and Board Committee members.

The Board is responsible for the overall governance of CPA Australia. The Board has adopted a formal charter (PDF) detailing its functions and responsibilities, which it reviews annually. Matters specifically reserved to the Board are set out in its charter.

The Board has overall control and management of CPA Australia, in particular the approval of the strategy and the appointment and remuneration of the Chief Executive Officer (CEO) and the Company Secretary as well as the remuneration for the Chief Financial Officer, and other senior executives reporting directly to the CEO. The Board has delegated a range of its powers, duties and responsibilities to its committees, management, divisions and disciplinary tribunals. The Board reviews each delegation at least annually.

Following the AGM in 2018, the Council of Presidents was established. The Council of Presidents (comprising the Presidents of each of the Divisional and Branch Councils) advises the Board on strategic issues and opportunities, drawing on the views of the members. The responsibility of the Council of Presidents includes two-way engagement with Divisional and Branch Councils and the Board.

Each Board meeting agenda includes statutory matters, governance and management reports, which include strategic risks, strategic projects and operational items. The Board has in camera sessions at each Board meeting where the Board meets without the CEO and management being present.

Management of CPA Australia’s operations and the implementation of CPA Australia’s Strategy (Strategy) and policy initiatives are the responsibility of the CEO and management.

In 2018, the Board approved the new three-year Strategy (2019 – 2021). The Board approves annual KPIs with priorities, direction and performance targets for CPA Australia within the parameters of the Strategy. Monthly performance reports are prepared by management and the most recent report is made available to the Finance and Policy Committee meetings and at each Board meeting.

CEO

The CEO is appointed by the Board and is responsible for the management of CPA Australia in accordance with the approved Strategy, policies, and delegated authority framework. The CEO is responsible for ensuring that the Board is provided with the relevant strategic options, policy and financial issues on which to deliberate, and with the necessary administrative support to enable the Board to work effectively.

The Board may invite the CEO and management to attend Board or committee meetings at its discretion. The CEO is not a director and is not entitled to vote.

The CEO, the company secretary and members of the Executive Management Team have formal job descriptions.

The company secretary

All directors have access to the company secretary who is appointed by the Board. The company secretary reports to the CEO and is accountable to the Board, through the Chair, on governance matters.

Performance management

All senior executives have written agreements with CPA Australia that set out the terms of their appointment.

All staff and management including the senior executives of CPA Australia are subject to annual performance planning and reviews. They are assessed against achievement of their job specifications and goals, contribution towards specific business and strategic objectives and adherence to CPA Australia’s values.

The Board has ultimate approval of remuneration changes that have been assessed, advised and benchmarked by management, and approves remuneration of the CEO and direct reports.

Along with all staff, all executives of CPA Australia including the CEO have an at-risk component of their remuneration that is tied to both their own performance and that of the organisation.

Principle 2: Structure the board to add value

The Constitution of CPA Australia provides that the Board may consist of at least 10 independent non-executive directors (as defined by the CGPR) but must have at least two external directors (who are neither members nor employees). The Chair and Deputy Chairs of CPA Australia must be members. A diagram of the governance structure in place at year end is available on page 7 of the 2018 Integrated Annual Report.

The Board assesses annually the independence of each director. Directors make a declaration of independence annually and must disclose to CPA Australia, any matter which may affect their independence as soon as they become aware of it. All Board members are requested to disclose related party transactions on an ongoing basis. Board membership of directors is included on pages 62 to 65.

Directors are selected on the basis of their skills, behaviours, experience and other relevant capabilities with due regard to diversity and the mix of skills, competencies and attributes recommended by the Board (having regard to succession planning). The skills mix of the Board and its committees is detailed on page 61 of the 2018 Integrated Annual Report. Further information on directors’ skills, expertise and their terms of office, are set out on pages 62 to 65 of the 2018 Integrated Annual Report. The Board has adopted an organisation Inclusion and Diversity policy, a copy of which is available on our website. The Board’s diversity is included on page 60.

The Board has a number of Committees including the Nomination Committee and the Member Engagement Committee. The Nomination Committee assists the Board in determining the skills required on the Board and the criteria for appointment to the Board.

Member Engagement Committee

The Member Engagement Committee assists the Board in the discharge of its responsibilities for effectively reviewing strategy and monitoring progress of the manner in which CPA Australia engages with its members. The Member Engagement Committee consists of five directors. It is chaired by a director nominated by the Board. The Member Engagement Committee has a formal charter (PDF) and its meetings and attendance are set out on page 80 of the 2018 Integrated Annual Report.

Appointments Council

The Appointments Council appoints the Board applying the election procedure set out in the By-Laws and is assisted in its role by the Nomination Committee. The charter (PDF) of the Appointments Council is available on our website.

Nomination Committee

The Nomination Committee assists the Board in determining the skills required on the Board and the criteria for appointment to the Board. The Nomination Committee assists the Appointments Council in selecting appropriate candidates for appointment to the Board by reviewing candidates and making recommendations to the Appointments Council. The formal charter (PDF) of the Nomination Committee is available on our website.

The Nomination Committee considers diversity issues and is conscious of diversity when making recommendations to the Appointments Council for appointments to the Board. For further information relating to diversity, refer to the people section of our 2018 Integrated Annual Report.

The Appointments Council must have due regard to, but is not bound by, the recommendations of the Nomination Committee. The Nomination Committee also advises the Board and the Appointments Council on succession plans for the Board. The Nomination Committee is comprised of two members of the Board, two members of the Appointments Council and two independent non-director appointees.

The composition of the committee and meeting attendance is set out in the director’s report on page 79 of the 2018 Integrated Annual Report. The same pages set out directors’ attendances at Board and other Board committee meetings.

Director induction and education

New directors receive information outlining their duties and responsibilities. New directors attend a formal induction meeting with senior executives including the CEO. Directors also undertake the management/staff compliance training program to ensure a high-level understanding of the organisation’s key legal and compliance obligations.

Access to information

Senior executives provide the Board with information to allow it to make decisions on an informed basis and attend meetings at the request of the Chair.

Information required by Principle 2

Directors are entitled to serve a maximum of three terms consisting of three years each. Reappointment should be a rigorous process. In particular, a third term should only be granted where the candidate has strongly performed, and weight should be given to the overall composition of the Board with emphasis on balancing the need for continuity with the need for continual refreshment of talent and thinking.

Directors are entitled to obtain reimbursement of the reasonable costs of any independent advice obtained in respect of their office. If a director wishes to obtain independent external advice, then they must notify the Board before seeking that advice and obtain the prior approval of the Chair, whose approval shall not be unreasonably withheld.

Board Committees

The respective compositions and details of meeting attendance of the committees are set out in the Directors’ Report on pages 79 to 80 of the 2018 Integrated Annual Report. Minutes of committee meetings are provided to the Board at its next meeting.

The Board currently has five Board Committees: Nomination; Audit, Risk and Compliance; Finance and Policy; Member Engagement; and the Independent Review Implementation Committee. In October 2018 the Board agreed to establish a further Board Committee, the People, Remuneration and Culture Committee, which will commence on 1 January 2019.

Each committee has a charter outlining its role and composition. The charters are reviewed annually to ensure that the role and responsibilities of each committee are consistent with CPA Australia’s strategic and operational objectives. Committees may co-opt members who, whilst they are not directors, bring particular experience to the committees.

Attendance at Board Committee meetings is set out on pages 79 to 80 of the 2018 Integrated Report.

Principle 3: Promote ethical and responsible decision making

Directors, members and employees of CPA Australia are required to act in accordance with the highest standards of honesty and integrity.

The respective codes of conduct, which amongst other things set out expected standards of behaviour, are approved by the Board, and are given to all new directors, volunteer members and employees.

CPA Australia promotes diversity across the organisation with regards to age, gender, ethnicity and the cultural background of its directors, committee members and employees. For further information relating to diversity, refer to the Organisational Inclusion and Diversity Policy, and page 58 of the 2018 Integrated Annual Report.

CPA Australia is a member-based public company limited by guarantee and does not have securities and accordingly does not report on share trading policies.

Principle 4: Safeguard integrity in financial reporting

Audit, Risk and Compliance Committee

CPA Australia has established a number of committees including the Audit, Risk and Compliance Committee to verify and safeguard the integrity of the Company’s financial and non-financial reporting. The committee consists of five directors, with the Committee Chair nominated by the Board. The Chair of the Board shall not be the Committee Chair.

Specifically, the Audit, Risk and Compliance Committee assists the Board to discharge its responsibilities for external reporting including assurance over our integrated report, external and internal audit and internal control and risk management. There is a mix of accounting, and business professionals currently serving on the committee.

Each year before financial statements are approved, management provide a representation letter to both the Board and external auditors expressing an opinion as to whether the financial reports give a true and fair view in accordance with the Australian Accounting Standards and the Corporations Act.

The Audit, Risk and Compliance Committee has a formal charter (PDF) and its meetings and attendance are set out on page 79 of the 2018 Integrated Annual Report.

External Auditors KPMG were appointed as CPA Australia’s external auditor in 2018. The performance of the external auditor is reviewed annually by the Board with advice from the Audit, Risk and Compliance Committee.

An analysis of fees paid to the external auditor, including a breakdown of any non-audit fees paid or received by the auditor, is provided in note 20 to the financial report. The Audit, Risk and Compliance Committee has developed principles for the supply of non-audit services which have been endorsed by the Board. The external auditors provide an annual declaration of their independence to the Audit, Risk and Compliance Committee. A representative from the External Auditor attends the AGM and is able to answer audit related questions.

The Audit, Risk and Compliance Committee undertakes a review of the terms of engagement of the external auditor and the rotation of external audit engagement partners, before deciding to re-appoint the existing audit firm or seek tenders on the open market.

Apart from the Audit, Risk and Compliance Committee the following committees assist in the integrity of financial reporting.

Finance and Policy Committee

The Finance and Policy Committee consists of directors and assists the Board to discharge its responsibility to manage the business planning, budgeting processes and general financial management of CPA Australia. The committee currently consists of five directors, it is chaired by a director nominated by the Board. The Finance and Policy Committee reviews the final Strategy. The Finance and Policy Committee has a formal charter (PDF) and its meetings and attendance are set out on page 79 of the 2018 Integrated Annual Report.

People, Remuneration and Culture Committee

In October 2018 the Board approved the establishment of a People, Remuneration and Culture Committee. The Committee’s responsibilities will be to assist the Board in fulfilling its statutory, corporate governance and oversight responsibilities relating to the people and culture of CPA Australia. The People, Remuneration and Culture Committee will comprise five Directors. It will be chaired by a director nominated by the Board who is not the Chair of the Board. The People, Remuneration and Culture Committee has a formal charter (PDF).

Independent Review Implementation Committee

The Independent Review Implementation Committee’s responsibilities are to provide the Board with advice and guidance in relation to the implementation of the relevant findings and recommendations of the Independent Review. The Independent Review Implementation Committee consists of six members, being the Chair of the Board, the two Deputy Presidents and three Divisional Presidents (or Past Presidents). It is chaired by the Chair of the Board. The Independent Review Implementation Committee has a formal charter (PDF) and its meetings and attendance are set out on page 80 of the 2018 Integrated Annual Report.

A status update (PDF) on the implementation of the recommendations of the Independent Review was released on 13 December 2018.

Principle 5: Make timely and balanced disclosure

The Board has committed to improved disclosure and communication to provide greater transparency to members. Examples of recent communications include: post-board meeting communiques regarding key decisions; disclosure of executive and director remuneration including key terms for the CEO.

The 2018 Integrated Annual Report includes detailed financial and non-financial reporting.

Principle 6: Respect the rights of shareholders (members)

CPA Australia provides its members with timely access to information about its activities and changes in legislation that may affect the profession. Its three principal communication channels with members are our monthly publication, INTHEBLACK, our weekly enewsletter CPA Update and our website.

The Notice of Annual General Meeting is provided to all members via their preferred method of communication.

Members may elect to receive information from, and send information to, CPA Australia electronically with recent enhancements to the website, including promotion of a board email address, boardofdirectors@cpaaustralia.com.au, and re-creation of divisional and branch president email addresses for members to be able to communicate directly with their local representative members. In addition, members are able to contact CPA Australia staff in their local office or relevant line area for operational enquiries and support. Members can also contact the Appointments Council at a dedicated email address, appointments.council@cpaaustralia.com.au.

Information about the organisation, its governance principles and the Board and various Councils and Committees is available online.

Principle 7: Recognise and manage risk

Risk management is a key aspect of CPA Australia’s governance arrangements. The goal of our risk management processes and structures is to maximise opportunities to achieve our objectives and goals without exposing the organisation to unnecessary risk.

The Board has overall responsibility for the oversight of risk management including determining the risk appetite for CPA Australia, and the approval of the risk management framework and related policies.

The Board has established the Audit, Risk & Compliance Committee to assist in providing objective, non – executive oversight of the approved risk management framework and related policies, to ensure risks are being actively managed within risk appetite and compliance obligations are met.

CPA Australia has adopted the three lines of defence approach to risk management accountability.

CPA Australia’s risk management framework and related policies are reviewed regularly and were approved by the Audit, Risk & Compliance Committee and the Board during 2018. Additionally, the Board, via the Audit, Risk & Compliance Committee, considers major strategic, operational compliance and financial risks as part of its regular meeting agenda.

The Internal Audit function has been fully outsourced to RSM Australia and reports directly to the Audit, Risk & Compliance Committee. The internal audit provider, RSM Australia, attends all Audit, Risk & Compliance Committee meetings and is directly available to advise all members of that Committee independently of management. Audit plans are approved by the Audit, Risk & Compliance Committee.

The six committees of the Board share responsibility for decision making on economic, environmental and social impacts and risks. These risks are disclosed through our Annual Integrated Report. The Audit, Risk and Compliance Committee reviews this report and ensures that all material issues are covered. The Audit, Risk and Compliance Committee recommends the report to the Board for approval.

Principle 8: Remunerate fairly and responsibly

Directors

The Constitution (Article 45) provides that total Director remuneration cannot exceed a “pooled amount”. In accordance with Article 45, where the number of Directors is nine or less, the pooled amount is A$916,965.89, as at 1 October 2018, and will be indexed to CPI annually. If the number of Directors appointed under the Constitution is ten, then the pooled amount is A$993,379.71, as at 1 October 2018, and will be indexed to CPI annually.

In 2018, not all of the pool was used. Director fees for each Director are set out on pages 112 and 113 of the 2018 Integrated Annual Report. Directors fees are inclusive of superannuation payments.

The pooled amount can only otherwise be increased by Members passing an ordinary resolution at a general meeting of the Company.

Within this pooled amount, Directors will collectively determine the remuneration to be paid to each individual Director, having regard to their duties and responsibilities. The amount of remuneration paid to, and divided amongst, the Directors may be less than or equal to the Pooled Amount. If the Directors do not reach an agreement, the pooled amount will be divided equally amongst all of the Directors.

Directors do not receive any retirement benefits other than superannuation referred to above.

Management

The Board has the responsibility to approve the terms of the CEO’s appointment.

The CEO has personal performance indicators and is eligible for a bonus payment subject to the approval of the Board after its evaluation of the performance of the CEO. This evaluation involves an assessment of a range of factors including the overall performance of CPA Australia and the achievement of predetermined goals.

In 2018 the Board considered overall management remuneration and approved remuneration for all Executive and General Manager positions. The Board approved the salary bands for management and any increases, based on external advice from qualified specialists and with a view to safeguarding member value. Under the terms of CPA Australia’s incentive scheme, attainment of demanding KPIs can result in an incentive bonus being approved by the Board and paid to staff who reach individual performance targets. CPA Australia’s 2019-2021 Strategy introduced a set of performance indicators that place member value and satisfaction at the heart of management’s focus.

In future, the People, Remuneration and Culture Committee will review and make recommendations to the Board relating to: the appointment, terms of engagement, and ongoing remuneration reviews for the CEO and senior executives; and the remuneration framework and associated policies for all staff (including incentive methodology and annual movements in salary scales).