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 and where appropriate has reported against the 4th edition CPGR for the Corporate Governance Statement 2019.
This is the corporate governance statement as at 31 December 2019.
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. The Board independently and objectively assesses the organisation's decisions and oversees the performance and activities of management against a risk management framework to provide a disciplined process for effectively managing risk to enable the achievement of business objectives. The Board is responsible for a number of decisions including:
- setting and approving the organisation's strategy, direction and financial objectives;
- appointing the president and deputy-presidents;
- approving financial statements;
- appointing the CEO and evaluating the CEO's performance; and
- making and amending By-Laws.
The Board is appointed by the Appointments Council, comprising one Divisional Councillor from each Divisional Council. The Council’s role is to appoint the Board. The selection process has due regard to the required skills, knowledge, experience and other capabilities required on the Board with due regard to diversity and the mix of skills, competencies, ability to deal with new and emerging business and governance issues and attributes recommended by the Board (having regard to succession planning). Details of the Appointments Council are set out later in this Corporate Governance Statement.
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). All directors are formally appointed by the company by way of a formal letter of appointment.
The Board and each Board Committee reviews its performance regularly throughout the year. A peer and self-assessment review is undertaken annually by all directors and Board Committee members and every third year this is an independent assessment.
The Board is responsible for the overall governance of CPA Australia. The Board has adopted a formal charter (PDF) setting out its functions and responsibilities, which it reviews annually. Matters specifically reserved to the Board are set out in its Charter.
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.
Each Board meeting agenda includes the business of the meeting and:
- statutory matters;
- governance matters;
- a forward rolling agenda to assist with structure; and
- management reports, which include strategic risks, strategic projects and operational items.
During 2019, the Board maintained a strong focus on consolidating the governance changes that had been implemented during the previous year, with particular emphasis on strengthening risk management and internal controls, implementing the recommendations of the Independent Review Panel and continuing a comprehensive member engagement program. The Board has in camera sessions at each Board meeting where the Board meets without the CEO and management being present.
In 2018, the Board approved the new three-year Strategy (2019 – 2021) (Strategy). Management of CPA Australia’s operations and the implementation of CPA Australia’s Strategy, risk and compliance framework and policy initiatives are the responsibility of the CEO and management.
The Board approves annual KPIs against the Strategy 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.
Following the AGM in 2018, the Council of Presidents was established. The Council of Presidents (comprising the Presidents of each of the Divisional 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. The Council of Presidents has a formal charter (PDF) approved by the Board.
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, policies 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 CFO, the Company Secretary and members of the Executive Management Team each enter into a formal written agreement with CPA Australia which sets out their terms of appointment and 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.
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 and culture.
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.
Inclusion and Diversity
CPA Australia promotes inclusion and diversity across the organisation with regard to age, gender, ethnicity and the cultural background of its directors, Committee members, Executive Management and employees. The Board has adopted an organisation Inclusion and Diversity Policy. The Board’s diversity is included on page 75 of the Integrated Report 2019.
Further information relating to inclusion and diversity may be found in the Inclusion and Diversity Policy on the company’s website, and page 55 of the Integrated Report 2019.
Principle 2: Structure the board to be effective and 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 3 of the Integrated Report 2019.
Directors are entitled to serve a maximum of three terms consisting of three years each.
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. Board membership of directors is included on pages 76 to 79 of the Integrated Report. All Board members are requested to disclose related-party transactions on an ongoing basis. A summary of related-party transactions for each director is disclosed in the notes to the financial statements on pages 120 to 124 of the Integrated Report 2019.
As set out in Principle 1, the directors are appointed by the Appointments Council. The skills mix of the Board and its committees is outlined on pages 27 and 28 of the Integrated Report 2019. Further information on directors’ skills, expertise and their terms of office, are set out on pages 75 to 79 of the Integrated Report 2019.
The Board has a number of Committees as set out below under this Principle 2, 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) approved by the Board and its meetings and attendance are set out on page 86 of the Integrated Report 2019.
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 approved by the Board is available on the website.
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 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 the Integrated Report 2019.
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 Charter (PDF) of the Nomination Committee is approved by the Board and is available on the website.
The composition of the Nomination Committee and meeting attendance is set out in the director’s report on page 86 of the Integrated 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 and 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. Directors regularly receive current knowledge updates including from external providers.
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.
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.
The respective compositions and details of meeting attendance of the committees are set out in the Directors’ Report on pages 85 to 87 of the Integrated Report 2019. Minutes of committee meetings are provided to the Board at its next meeting.
The Board had six Board Committees in 2019: Nomination; Audit, Risk and Compliance; Finance and Policy; Member Engagement; People, Remuneration and Culture; and the Independent Review Implementation Committee. In December 2019 the Board agreed to wind up the Independent Review Implementation Committee as its work had been completed.
Each Board Committee has a Charter (approved by the Board) 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.
Principle 3: Instil a culture of acting lawfully, ethically and responsibly
Directors, members, senior executives and employees of CPA Australia are required to act lawfully, ethically and responsibly in accordance with the highest standards of honesty and integrity in such a way so as to safeguard and protect the reputation of the organisation.
The respective codes of conduct which amongst other things set out expected standards of behavior, are approved by the Board, and are given to all new directors and employees.
CPA Australia’s Strategy ensures that the stated objects as set out in its Constitution are met. The strategic goals include the protection, promotion and enhancement of the designation. One of the objectives for this goal is to strengthen internal quality assurance and risk framework to ensure integrity and transparency.
The People, Remuneration & Culture Committee of the Board also plays an important role in assisting the Board to fulfill its commitment to Principle 3 and to its statutory, corporate governance and oversight responsibilities relating to the people, remuneration and culture of CPA Australia.
CPA Australia’s Whistleblower Policy underlines CPA Australia’s intolerance of any corrupt, illegal or other undesirable conduct by its personnel including the victimisation of an individual who intends to report or has reported such conduct as a protected disclosure in accordance with the Policy. The Whistleblower Policy can be found on the website here.
Principle 4: Safeguard integrity in financial reporting
The Board has processes to verify the integrity of its corporate reports.
Audit, Risk and Compliance Committee
CPA Australia has an established Audit, Risk and Compliance Committee (PDF) to verify and safeguard the integrity of the Company’s financial and non-financial reporting. The Committee currently consists of five independent directors with a mix of accounting and business expertise and knowledge to enable it to discharge its responsibilities effectively. The Committee Chair is 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 the company’s integrated report, external and internal audit and internal control and risk management by bringing an independent review process to oversee and make recommendations to the Board in relation to external reporting. The Committee plays an important role in the verification of the integrity of the company’s corporate reports.
The Committee’s work on the verification of the integrity of the Company’s corporate reports may also include examining non-financial reporting on such matters as failure to maintain brand reputation, inability to provide a consistent and positive member experience, failure to promote continuous improvement and also to adequately manage the health and wellbeing of CPA Australia employees, loss of data and systems availability, privacy breaches, inability to maintain appropriate corporate governance frameworks and legal and regulatory action. Non-financial reporting not only leads to greater transparency but also to improved management decisions, improved stakeholder confidence, improved operations, early identification of some forms of risk and increased credibility and trust within the community.
The Audit, Risk and Compliance Committee has a formal charter approved by the Board and its meetings and attendance are set out on page 85 of the Integrated Report 2019.
The Internal Audit function has been fully outsourced to RSM Australia and reports directly to the Audit, Risk and Compliance Committee. The internal audit provider, RSM Australia, attends all Audit, Risk and 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 and Compliance Committee.
The scope of internal auditing includes the examination and evaluation of the adequacy and effectiveness of CPA Australia’s governance, risk management, and internal controls as well as the quality of performance in carrying out assigned responsibilities to achieve the organisation’s stated goals and objectives.
Receipt of financial statement
Each year before financial statements are approved, management provides a representation letter to both the Board and external auditors expressing an opinion as to whether, in accordance with the Corporations Act 2001 (Cth), the financial records have been properly maintained and whether the financial statements (and notes) for the financial year comply with both Australian and International Accounting Standards and give a true and fair view of CPA Australia’s financial position and performance and that the opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively.
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 the notes to the financial report on page 124. The Audit, Risk and Compliance Committee has developed principles for the supply of non-audit services. 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 available 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 and corporate reporting.
Finance and Policy Committee
The Finance and Policy Committee consists entirely 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 consists of five directors and is chaired by a director nominated by the Board. The Finance and Policy Committee reviews, assesses and advises the Board on the company’s financial and economic strategies pursuant to its organisational Strategy. The Finance and Policy Committee has a formal charter (PDF) approved by the Board and its meetings and attendance are set out on page 86 of the Integrated Report 2019.
People, Remuneration and Culture Committee
The People, Remuneration and Culture Committee’s responsibilities are to assist the Board in fulfilling its statutory, corporate governance and oversight responsibilities relating to the people, remuneration and culture of CPA Australia including approving and appraising the culture against the strategies and objectives to achieve a culture of acting in accordance with organisation values and lawfully, ethically and responsibly. The Committee comprises five directors and is chaired by a director nominated by the Board who is not the Chair of the Board. The People, Remuneration and Culture Committee has a Charter (PDF) approved by the Board and its meetings and attendance are set out on page 87 of the Integrated Report 2019.
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 in 2019 consisted 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 Charter approved by the Board and its meetings and attendance are set out on page 87 of the Integrated Report. On 9 December 2019 the Board agreed to wind up the Committee as its work had been completed.
A status update on the implementation of the recommendations of the Independent Review was released on 17 December 2019.
Principle 5: Make timely and balanced disclosure
CPA Australia does not have securities and accordingly does not report on share-trading activity or policies. The Board, however, has committed to improved disclosure and communication to provide greater transparency to members. Examples of recent communications include: post-board meeting Statements regarding key decisions which can be found on our website here. Members can continue to be engaged in their member organisation with respect to issues of relevance to the profession. Board Statements in 2019 concerned issues such as the governance-related final report of the Independent Review Implementation Committee, the progress of CPA Australia’s Regulatory Burden Project, details relating to the 2019 Annual General Meeting, information on the Professional Standards Scheme and the new Public Practice Pathways.
Policy Bulletins were issued on a regular basis and can be found on our website here. Bulletins covered both national and international topics including the Malaysian Service Tax on digital services and the Royal Commission implementation roadmap.
The disclosure of executive and director remuneration includes key terms for the CEO.
The Integrated Report 2019 includes detailed financial and non-financial reporting.
Principle 6: Respect the rights of security holder (members)
CPA Australia provides its members with timely access to information about its performance, governance, activities and changes in legislation that may affect the profession. Its three principal communication channels with members are the monthly publication, INTHEBLACK, the weekly e-newsletter CPA Update and the organisation’s website. Board Statements and Policy Bulletins are issued regularly.
The Notice of Annual General Meeting is provided to all members via their preferred method of communication and is also posted on the company’s website. Members are also able to view, listen to and ask questions at the AGM in real time with the assistance of live webcasting without having to be physically present.
Members may elect to receive information from, and send information to, CPA Australia electronically. This has been further facilitated by the provision of a Board email address, bo[email protected] and the divisional and branch president email addresses for members to be able to communicate directly with their local representative members, in addition to being 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, [email protected].
Information about the organisation including the Constitution, By-Laws, Charters, Integrated Reports, the Corporate Governance Statement, the Board, Councils and Committees, media statements and profiles of the directors and senior executives are available online.
The Member Engagement Committee’s role is to assist the Board in relation to matters involving engagement with all CPA Australia’s members.
The organisation’s governance structure is shown on page 3 of the Integrated Report 2019.
Principle 7: Recognise and manage risk
Risk management is a key aspect of CPA Australia’s governance arrangements. The goal of its risk management processes and structures is to maximise opportunities to achieve 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 and Compliance Committee to assist in providing objective, non–executive review and 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 and that the company’s insurance program is adequate given the insurable risks associated with its business.
CPA Australia has also adopted the three lines of defence approach to risk management accountability - namely front-line management, risk management and compliance as well as internal audit to ensure that the risk of fraud and corruption are minimised.
CPA Australia has a Board approved risk appetite statement that articulates the amount of risk we are prepared to accept or avoid in pursuit of our strategy and the approach taken to meet its risk appetite. The risk appetite statement enables the Board and management of CPA Australia to be aligned on risk management and to identify, assess and treat risks related to the achievement of objectives whilst remaining within the Board’s approved appetite for these risks. This includes:
- Making decisions that reflect the taking of appropriate risk for appropriate reward, leveraging the right controls;
- Provide timely monitoring and reporting on risks to all stakeholders;
- Create a sound risk culture that is embedded throughout the organisation;
- Continually improve and mature the management of risk; and
- Satisfy corporate governance and regulatory requirements at all times.
Throughout 2019, CPA Australia has continued to further enhance and consolidate its risk management strategy and practices including:
- Implementation of the risk management framework approved in 2018;
- Set up of an automated risk and compliance system to be implemented in 2020;
- Improved alignment of business continuity to strategic objectives; and
- Board oversight of risk management activities via quarterly reporting to the Audit, Risk and Compliance Committee and an annual workshop for the formal assessment of existing, new and emerging risks.
The table on pages 29 and 30 of the Integrated Report 2019 shows the key enterprise risks most relevant to strategy in order of priority. Priority order has been determined by consideration of the likelihood of the risk occurring and the consequences of that risk on our ability to create value for the organisation and its members.
As set out in Principle 4, the Internal Audit function has been fully outsourced to RSM Australia and reports directly to the Audit, Risk and Compliance Committee.
The six Committees of the Board in 2019 shared responsibility for decision-making on economic, environmental and social impacts and risks. These risks are disclosed through the 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
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$932,599.17, as at 1 October 2019, and will be indexed to CPI annually. If the number of directors appointed under the Constitution is ten, then the Pooled Amount is A$1,010,267.17, as at 1 October 2019, and will be indexed to CPI annually.
In 2019, not all of the pool was used. Director fees for each director are set out on pages 122 and 123 of the Integrated Report 2019. Directors fees are inclusive of superannuation payments.
Director Ric De Santi performed his CPA Australia director duties on a pro bono basis effective 16 November 2018.
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 retirement benefits.
The Board independently and objectively assesses the organisation’s decisions and oversees the performance and activities of management under the approved strategy.
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 2019 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 includes a set of performance indicators that place member value and satisfaction at the heart of management’s focus.
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 senior executives; and the remuneration framework and associated policies for all staff (including incentive methodology and annual movements in salary scales) as well as the appointment and the terms of engagement for the CEO. The Board approves the appointment of the CEO and the terms of appointment.