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.
This is the corporate governance statement as at 31 December 2017. After the 2018 Annual General Meeting (AGM) held on 22 May 2018, the Representative Council was abolished and the Appointments Council was established. Many of the recommendations of the Independent Review Panel have now been implemented in the Constitutional changes passed at the 2018 AGM and in the amended By-Laws.
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 a Representative Council of members. Details of the council are set out later in this document. For directors appointed from 1 October 2017, a different process from recent years was used, the most significant changes being:
- a majority of independent members comprised the Nomination and Remuneration Committee for initial screening and interviews
- the Representative Council was comprised solely of Divisional Council members with no Board appointees as permitted under current constitutional provisions. Representative Councilors were provided additional meeting support and information to support decision-making. The President as Chair does not have a casting vote.
All directors undergo Australia and New Zealand police checks before their appointment.
The Board is responsible for the overall governance of CPA Australia. The Board has adopted a formal charter detailing its functions and responsibilities, which it reviews annually. Matters specifically reserved to the Board are set out in its charter.
While the Board has overall control and management of CPA Australia, in particular the appointment of the CEO and approval of the strategy, it 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 statutory matters, governance and management reports, which include strategic risks, strategic projects and operational items. The new Board meets without management as a part of all Board meetings.
Management of CPA Australia’s operations and the implementation of corporate strategy and policy initiatives are the responsibility of the Chief Executive Officer (CEO) and management.
In 2014, the Board approved a five-year corporate plan for 2015-2019. The Board approves an annual performance contract setting the priorities, direction and performance targets for CPA Australia within the parameters of the corporate plan. Monthly performance reports are prepared by management and the most recent report is made available to the Board at each Board meeting and Finance Committee meeting. A process to revise CPA Australia’s Corporate Plan and performance focus began in 2018 in consultation with Divisional and Branch Councils and members.
The CEO is appointed by the Board and is responsible for the management of CPA Australia in accordance with approved strategy, policies, performance contract 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 management to attend Board or committee meetings at its discretion. The CEO is not a director and is not entitled to vote.
Senior executives including the CEO, the company secretary and the chief financial officer have formal job descriptions.
The company secretary
All directors have access to the company secretary who is appointed by the Board. The company secretary 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 directors are appointed subject to the provisions of the Constitution of CPA Australia and the provisions of the Corporations Act 2001 (Cth).
The Board reviews its performance and that of each director regularly throughout the year. A peer and self-assessment review is undertaken annually.
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 value statements:
- People are at the heart of what we do
- Service is personal
- We are bold and curious
- We are passionate about success
- We always act with integrity
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.
The Constitution (Article 45) currently benchmarks Board remuneration as a percentage of the Australian Auditor-General’s annual total salary package. In February 2018, the Board announced the outcomes of independent benchmarking against comparable membership based organisations and used this work to reset its remuneration levels. Proposals to remove reference to the Auditor-General’s salary will be put to the members at the AGM on 22 May 2018.
Principle 2: Structure the board to add value
The constitution of CPA Australia details that the Board may consist of up to 12 independent non-executive directors (as defined by the CGPR), ten member directors and 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 6 of the 2017 Integrated Report.
The Board assesses annually the independence of each director. Directors 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 and a summary of related party transactions for each director is disclosed in the notes to the financial statements on page 96 of the 2017 Integrated Report. Other board membership of directors is included on pages 49 to 52.
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 recommended by the Board and to proper succession planning. The skills mix of the Board and its committees is detailed on page 48 of the 2017 Integrated Report. Further information on directors’ skills, expertise and their terms of office, are set out on pages 49 to 52 of the 2017 Integrated Report. The Board has adopted an organisation diversity and inclusion policy, a copy of which is available on our website.
Directors previously have been appointed by the Representative Council. The Representative Council is currently comprised of members selected by and representing each of the member-elected Divisional Councils. The Chair of the Representative Council meeting is the Chair of the Board. The charter (PDF) of the Representative Council is available on our website.
Under the Constitution, the Representative Council’s role is to appoint the Board. The new Board, in accordance with the McPhee review recommendations and following member consultation, is proposing constitutional changes at the upcoming AGM that will abolish the Representative Council and replace it with an Appointments Council. The key proposed change is to remove the power for the Board to appoint up to half the Representative Councilors, in addition to enshrining the Chair of the board as a non-voting member of the Appointments Council. This will place the final board appointment process in the hands of directly-elected members from each Divisional and Branch Council of the organisation.
Nomination and Remuneration Committee
The Nomination and Remuneration Committee (PDF) assists the Representative Council in selecting appropriate candidates for appointment to the Board. It reviews candidates and makes recommendations to the Representative Council.
The Nomination and Remuneration Committee regularly considers diversity issues and is consciously managing the diversity of the Board and its committees. For further information relating to diversity, refer to the people section of our 2017 Integrated Report.
The Representative Council must have due regard to, but is not bound by, the recommendations of the Nomination and Remuneration Committee. It also advises the Board and the Representative Council on succession plans for the Board. It recommends to the Board appointments for all membership committees.
In 2017, the Board of CPA Australia resolved to co-opt three independent non-director appointees to the Nomination and Remuneration Committee for the purposes of undertaking the director Appointment process.
The composition of the committee and meeting attendance is set out in the director’s report on pages 68 to 69 of the 2017 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. 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 supply 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.
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 66 to 69 of the 2017 Integrated Report. Minutes of committee meetings are provided to the Board at its next meeting.
The Board currently has five Board Committees: Nomination and Remuneration, Audit and Risk, Finance, Member Engagement and the Independent Review Implementation Committee.
Each committee has a charter describing 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.
The Board Committees have varied scheduled meeting times. Attendance at Board Committee meetings is set out on pages 68 to 69 of the 2017 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 among 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 Diversity and Inclusion Policy, and pages 43 to 45 of the 2017 Integrated 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 and Risk Committee
CPA Australia has an established Audit and Risk Committee (PDF) to verify and safeguard the integrity of the Company’s financial and non-financial reporting. The committee currently consists of four directors, with the Committee Chair nominated by the Board. The Chair of the Board shall not be the Committee Chair.
Specifically, the Audit and Risk 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, legal 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 2001.
The Audit and Risk Committee has a formal charter and its meetings and attendance are set out on page 68 of the 2017 Integrated Report.
External Auditors Deloitte Touche Tohmatsu have been CPA Australia’s external auditor since 2005. The performance of the external auditor is reviewed annually by the Board with advice from the Audit and Risk 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 19 to the financial report. The Audit and Risk 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 and Risk Committee. A representative from the External Auditor attends the AGM and is able to answer audit related questions.
The Audit and Risk 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.
The Finance 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 Finance Committee reviews the final corporate strategy. The Finance Committee has a formal charter (PDF).
Member Engagement Committee
In October 2017, the new Board established a Member Engagement Committee to assist 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 who is not the Chair of the Board. The Member Engagement Committee has a formal charter (PDF).
Independent Review Implementation Committee
In October 2017, the Board also established an Independent Review Implementation Committee (hyperlink). The 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 IRIC has a formal charter (PDF).
Principle 5: Make timely and balanced disclosure
The new Board acknowledges that the level of disclosure in recent years did not meet member expectations. It has committed to improved disclosure 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 new CEO.
The 2017 Integrated 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 and notice is also provided via the three principal communication methods.
Information about the organisation, its governance principles and the Board and various Councils and Committees are available online.
To improve the ability of members to engage with the organisation, the Board has embarked on an unprecedented member consultation program to provide information directly to and hear directly the thoughts of the membership at large with more than 30 face to face forums held across Divisions and 3 webinars.
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, firstname.lastname@example.org, 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 to being able to contact CPA Australia staff in their local office or relevant line area for operational enquiries and support.
Principle 7: Recognise and manage risk
Risk management is a key aspect of CPA Australia’s governance arrangements. CPA Australia has a risk management framework, risk policy and risk management program, which include formal processes to update the Board through the Audit and Risk Committee. This framework, policy and management program are used throughout the organisation. 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.
In addition, the Board considers strategic and major operational risks as part of its regular meeting agenda.
CPA Australia has established and implemented a system for identifying, assessing, monitoring and managing material risks throughout CPA Australia and this is independent of the external auditor. The internal audit function currently reports to the CEO but the new Board is proposing changes that will see the function report directly to the Audit and Risk Committee. The internal auditor attends all Audit and Risk Committee meetings and is directly available to advise all members of that Committee independently of management. The internal audit function assesses the appropriateness of our risk management framework and our internal controls on an annual rolling basis. Audit plans are approved by the Audit and Risk Committee.
CPA Australia’s risk management framework and risk profile, including identification and treatment of risks and mitigating controls, are reviewed regularly and were approved by the Audit and Risk Committee during 2017. Senior management continuously monitor the risk profile and report any risks to the Board via the Audit and Risk Committee.
As part of our approach to business risk and our ongoing planning, the key trends in our operating environment are regularly reviewed. This review covers our key strategic risks, taking into account our most material issues and the key environmental trends that we see impacting our ability to create value for our members and in the public interest now and into the future. Our risk assessment is a key part of our operational planning and as well as our strategic risks our assessment covers our governance, operational, financial and compliance risks.
The five 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 and Risk Committee reviews this report and ensures that all material issues are covered. The Audit and Risk Committee recommends the report to the Board for approval.
Principle 8: Remunerate fairly and responsibly
The Constitution of CPA Australia provides that the Board may approve payments to directors based on percentages of the Auditor-General’s salary. In February 2018, the Board announced the outcomes of independent benchmarking against comparable membership based organisations and used this work to reset its remuneration levels. Proposals to remove reference to the Auditor-General’s salary will be put to the members at the AGM on 22 May 2018.
Directors do not receive retirement benefits.
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.
The new Board determined greater oversight over xecutive remuneration was required. The Nomination and Remuneration Committee now considers overall management remuneration and approves remuneration for all Executive and General Manager positions. The Board’s Nomination and Remuneration Committee approves 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 annual performance contract, attainment of demanding performance targets can result in a performance bonus being approved by the Board and paid to staff who reach individual performance targets. The Finance Committee approves the amount of bonus pool available under the annual performance contract. The new corporate strategy is expected to result in a revised set of performance indicators that place member value and satisfaction at the heart of management’s focus, with member growth targets being just one indicator that is monitored to understand trends and organisational health and sustainability into the future.