Cimic : 2015 Corporate Governance Statement 2015 Corporate Governance Statement(PDF File 328.8 KB)

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2015

Corporate Governance Statement

CIMIC Group Limited

ABN 57 004 482 982

Corporate Governance Statement

As required by the ASX Listing Rules, this Statement discloses the extent to which CIMIC has followed the ASX Principles and Recommendations. Except where otherwise explained, CIMIC followed the ASX Principles and Recommendations during the period. This Statement should be read in conjunction with the material on our website (www.cimic.com.au), including the 2015 Annual Report.

This Statement is current as at 10 February 2016 and has been approved by the CIMIC Board.

BOARD AND MANAGEMENT ROLE AND RESPONSIBILITIES

The Board is responsible to shareholders for the long‐term performance of the CIMIC Group and for overseeing the implementation of appropriate corporate governance with respect to the Group's affairs.

The Board has adopted a formal Board Charter that details the Board's role, authority, responsibilities, membership and operations, and is available on our website at: www.cimic.com.au/our‐approach/corporate‐governance. The Charter sets out the matters specifically reserved for the Board and the powers delegated to its Committees and to the CEO.

The Board delegates responsibility for the day‐to‐day management of CIMIC to the CEO, but retains responsibility for the overall strategy, governance and performance of CIMIC. The CEO then delegates authority to the appropriate Senior Executives for specific activities and transactions. This authority is governed by a formal 'delegations of authority'.

APPOINTMENT, INDUCTION AND TRAINING

The Remuneration and Nomination Committee assists the Board with the selection and appointment of Directors. Before the Board appoints a new Director or puts forward a candidate for election, the Remuneration and Nomination Committee will ensure that appropriate background checks are undertaken. We provide our shareholders with all material information in our possession that is relevant to their decision on whether or not to elect or re‐elect a Director through a number of channels, including via the Notice of Meeting, the Directors' Resumés and other information contained in the 2015 Annual Report.

Upon appointment, each Director (and senior executive) receives a letter of appointment which sets out the formal terms of their appointment. Directors also receive a deed of indemnity, insurance and access.

New Directors attend formal induction sessions where they are briefed on the Company's vision and principles, strategy, financials, and governance and risk management frameworks. All Directors are provided with ongoing professional development and training programmes to enable them to develop and maintain their skills and knowledge.

BOARD SKILLS AND EXPERIENCE

Our objective is to have an appropriate mix of expertise and experience on our Board and its Committees so that the Board can effectively discharge its corporate governance and oversight responsibilities. This mix is described in the Board skills matrix below.

Expertise	Experience
Health and safety  Financial knowledge Sustainability and experience Remuneration and  Legal, governance and nominations compliance Government relations  Strategy Executive leadership  Commercial acumen Risk management	Industry Geographic Mining  Oceania Oil and gas  North America Transport  South‐East Asia Power and utilities  East Asia Social infrastructure  India Property  Middle East Construction  Central and South Development and America investment Operations and maintenance Public Private Partnerships Market  Africa

PERFORMANCE REVIEWS

The Board is committed to formally evaluating its performance, the performance of its Committees and individual Directors, as well as the governance processes supporting the Board. The Board does this through an annual assessment process.

An internal Board assessment took place in June 2015 where each Director completed a questionnaire enabling Directors to evaluate and comment upon the effectiveness and the role of the Board and Board Committees as part of the Company's ongoing corporate governance practices. The results of the questionnaire indicated that the Board is functioning effectively against most of the criteria. It was also noted that there were some opportunities identified to improve Board effectiveness.

INDEPENDENCE OF THE BOARD

The Board assesses the independence of Non‐executive Directors upon appointment and reviews the assessment annually. When appointing an Independent Director or reviewing the independence of its Directors, the Board will have regard to the definition of independent director and the factors set out in Box 2.3 of the ASX Principles and Recommendations. The Board's assessment of the independence of each current Director is set out below.

Name	Status	Appointment date
Russell Chenu	Independent	11 June 2014
Kirstin Ferguson	Independent	10 July 2014
Marcelino Fernández Verdes*	Executive Chairman	13 March 2014
Trevor Gerber	Independent	11 June 2014
Pedro López Jiménez	Non‐independent	13 March 2014
José Luis del Valle Pérez	Non‐independent	13 March 2014
David Robinson	Non‐independent	17 December 1990
Peter‐Wilhelm Sassenfeld	Non‐independent	29 November 2011

* Mr Fernández Verdes was appointed as a Non‐executive Director on 10 October 2012. He became an Executive Director on 13 March 2014 upon his appointment as CEO and subsequently became Executive Chairman on 11 June 2014.

As at the date of this statement, three of our eight Directors are independent. In addition to the Executive Chairman, four of our Directors are representatives of our majority shareholder, HOCHTIEF. Although the composition of our Board does not comply with Recommendation 2.4, we consider HOCHTIEF's representation on the Board to be fair and reasonable given its majority shareholding in the Company. We also consider that the current Board structure will allow it to act in the best interests of the Company and all shareholders.

Further information regarding our Directors, including their experience and qualifications, is set out in the Directors' Resumés section in our 2015 Annual Report.

THE EXECUTIVE CHAIRMAN

Our CEO was appointed to the position of Executive Chairman by the Board on 11 June 2014. The Executive Chairman provides leadership to the Board in relation to all Board matters and is responsible for ensuring that the Board meets its responsibilities under the Board Charter. His role is set out in more detail in the Board Charter.

Although we do not comply with Recommendation 2.5, the Company considers that, at this time in its transformation and reflective of the majority shareholding, the Board will continue to function more effectively with an Executive Chairman. The Company also considers the Executive Chairman's oversight of the management of the Company to be advantageous to the decision‐making process of the Board.

Details regarding the Executive Chairman, including his experience and qualifications, are set out in the Directors' Report in our 2015 Annual Report.

COMPANY SECRETARIES

The Board is supported by the Company Secretariat function, whose role includes supporting the Board and its Committees on governance matters, assisting the Board and its Committees with meetings and directors' duties, and acting as an interface between the board and Senior Executives. The Board and individual directors have access to members of the Company Secretariat function.

Under CIMIC's governance framework, the Company Secretary is accountable to the Board, through the Executive Chairman, on all matters regarding the proper functioning of the Board. The Board is responsible for the appointment of the Company Secretary.

During the 2015 Financial Year, Mr John Easy served as Group General Counsel and Company Secretary. Ms Vanessa Rees served as Group Company Secretary until transitioning into the newly created role of General Manager, Group Governance in August 2015. Since the end of the 2015 Financial Year, Ms Louise Griffiths was promoted to the role of Company Secretary and Mr Easy stepped down from his role as Group General Counsel and Company Secretary. Further details regarding the experience and qualifications of the individuals who held the role of Company Secretary during or since the end of the 2015 Financial Year are set out in the Directors' Report in our 2015 Annual Report.

SENIOR EXECUTIVES

CIMIC's Senior Executives are appointed by the CEO and their Key Performance Indicators (KPI) contain specific financial and non‐financial objectives. These KPIs are reviewed annually by the CEO, and in the case of Key Management Personnel, are noted by the Remuneration and Nomination Committee. The performance of the CIMIC Senior Executives against these objectives is evaluated annually. This year's performance evaluations are described in more detail in the Remuneration Report in our 2015 Annual Report.

REMUNERATION

Information regarding our remuneration framework for our Directors and Senior Executives is set out in the Remuneration Report in our 2015 Annual Report. The Remuneration Report includes a summary of our remuneration framework for Senior Executives and our policies on hedging of equity‐based remuneration.

BOARD COMMITTEES

At the date of this statement, the Board has three Committees which are the:

• Audit and Risk Committee;

• Remuneration and Nomination Committee; and

• Ethics, Compliance and Sustainability Committee (formerly the Ethics and Compliance Committee).

The membership of each Committee is provided on our website at: www.cimic.com.au/our‐approach/board‐and‐committees.

Each Committee has adopted a formal, Board‐approved Charter that details its role, authority, responsibilities, membership and operations. The Committee Charters are reviewed annually and are available on our website at: www.cimic.com.au/our‐ approach/corporate‐governance.

A Director may attend any Committee meeting unless precluded due to a potential conflict of interest. Furthermore, each Committee regularly reports to the Board on matters relevant to the Committee's role and responsibilities and the minutes of each Committee meeting are made available to each Director unless that Director is otherwise precluded due to a potential conflict of interest. Special Board Committees are formed as required to give guidance and provide oversight concerning specific matters to the Board.

Details of the number of Board and Committee meetings held during the 2015 Financial Year and attendance by Directors are set out in the Directors' Report in our 2015 Annual Report.

CORPORATE REPORTING AND RISK MANAGEMENT CEO AND CFO DECLARATION

The CEO and CFO provide an annual declaration to the Board prior to the Board's approval of the Company's full year financial results. This process was followed in respect of the 2015 full year financial results, where the CEO and CFO provided a declaration to the Board that, in their opinion, the financial records have been properly maintained and that the financial statements comply with the appropriate accounting standards and give a true and fair view of the financial position and performance of the Group, and their opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively. On this basis, the 2015 full year financial results were approved by the Board. Although we do not comply with Recommendation 4.2 by receiving a formal declaration from the CEO and CFO for the half year or quarterly results, the Board is satisfied that appropriate processes are in place to provide assurance to the Board regarding the integrity of the financial statements it releases to the market and the effectiveness of the Group's risk management systems on an ongoing basis.

EXTERNAL AUDITOR

Our external auditor, Deloitte Touche Tohmatsu, was appointed following our 2012 AGM. Deloitte is invited to all Audit and Risk Committee meetings and all Audit and Risk Committee papers are made available to Deloitte. Deloitte representatives are also available to all Audit and Risk Committee members.

Deloitte attends our AGM and a representative is available to answer questions from shareholders relevant to the audit at the AGM. Deloitte's independence declaration is contained in the Directors' Report in our 2015 Annual Report.

Deloitte is required to confirm its independence and compliance with specified independence standards. Our External Auditor Independence Charter assists the Audit and Risk Committee, the Board and our shareholders to be satisfied that Deloitte is independent at all times. The Charter also sets out the circumstances in which Deloitte can perform certain services and the procedures to be followed to obtain approval for those services where they are permitted. The External Auditor Independence Charter is available on our website at: www.cimic.com.au/our‐approach/corporate‐governance.

INTERNAL AUDIT

The Internal Audit function provides independent and objective assurance on the adequacy and effectiveness of the Group's systems for risk management, internal control and governance, along with recommendations to improve the efficiency and effectiveness of these systems and processes.

The Internal Audit function reports to the CEO under a mandate approved by the Audit and Risk Committee and has full access to all functions, records, property and personnel of the Group. The head of Internal Audit has direct access to the Chairman of the Audit and Risk Committee and provides the Committee with information relevant to assisting the Committee with discharging its roles and responsibilities.