Corporate Governance Statement
2016 Corporate Governance Statement
The Board of Directors of Xref Limited (Xref or the Company) is responsible for the corporate governance of the Company, and acknowledges the importance of the Corporate Governance Principles and Recommendations set by the Australian Securities Exchange (ASX) Corporate Governance Council (ASX Principles and Recommendations). The Company follows the 3rd Edition of these ASX Principles and Recommendations, which was released in March 2014. The Board has reviewed its corporate governance documentation and practices against these ASX Principles and Recommendations, and has adopted them, as far as it can, in view of the Company’s current size and extent of the nature of its operations. The Board will continue to work towards full compliance with the recommendations in line with the growth and development of the Company in the years ahead. The Company has noted in this Corporate Governance Statement where its framework is different to the ASX Principles and Recommendations, and the reasons why this is the case. Copies of the corporate governance policies and charters adopted by the Board are available in the Xref Corporate Governance Manual located at the bottom of the Company’s website at www.xref.global.
In April 2016 Xref changed its financial year-end from 31 March to 30 June. The Company’s Corporate Governance Statement, which was approved by the Board on 22 September 2016 and reports on the period from 1 April 2015 to 30 June 2016 (i.e. the recent reporting period), is set out below.
Principle 1: Lay solid foundations for management and oversight
The Company’s Board, during the recent
reporting period, included Non-Executive Chairman
Mr Simon T O’Loughlin (appointed on 1 October 2014, ceased to be a Director on 18 August 2016), Managing Director Mr Stephen J McPhail (appointed on 28 January 2003, ceased to be a Director on 18 January 2016), Non-Executive Director Mr Simon J R Taylor (appointed on 1 October 2014, ceased to be a Director on 18 January 2016), Executive Director and Chief Executive Officer (CEO) Mr Lee-Martin J Seymour (appointed on 18 January 2016), Executive Director and Chief Technology Officer Mr Timothy D Griffiths (appointed on 18 January 2016) and Non-Executive Director
Mr Timothy L Mahony (appointed on 18 January 2016). Following the end of the reporting period, Mr Brad Rosser was appointed a Non-Executive Director and Chairman of the Board on 18 August 2016 and Mr Nigel Heap was appointed a Non-Executive Director on 18 August 2016. The Company discloses the respective roles and responsibilities of its Board and management, and those matters expressly reserved to the Board and those delegated to management below. The primary roles and responsibilities of the Company’s Board include:
approval of the annual and half-year financial reports, and quarterly report
and cash-flow statements;
establishment of the long-term goals of the Company and strategic plans to
achieve those goals;
- the review and
adoption of annual budgets for the financial performance of the Company, and
monitoring the results on a regular basis;
- ensuring that the
Company has implemented adequate internal controls together with appropriate
monitoring of compliance activities; and
- ensuring that the
Company is able to pay its debts as and when they fall due
The Company’s executive management currently comprises Messrs Seymour and Griffiths (as Executive Directors) to whom the Board delegates responsibilities as outlined contractually, and as expected for these executive positions. The primary roles and responsibilities of the Company’s management include:
- the operation and
administration of the Company, as delegated by the Board;
- implementing the
strategic objectives of the Company and operating within the risk appetite set
by the Board;
- complying with all
other aspects of the day-to-day running of the Company; and
- providing the Board
with accurate, timely and clear financial and other information to enable the
Board to perform its responsibilities.
Xref undertakes appropriate checks before appointing a person, or putting forward to security holders a candidate for election, as a Director; and provides security holders with all material information in its possession relevant to a decision on whether or not to elect or re-elect a Director. These include checks as to the person’s character, experience, education, criminal record and bankruptcy history. The skills, experience and expertise relevant to the position of Director, and period of office held by each Director, is disclosed within the Directors’ Report of the Company’s Annual Report and in the Investor Section at the bottom of the Company’s website at www.xref.global. A Director may be elected for a term of a maximum of three years. To ensure a gradual and controlled movement of Directors, the longest serving one-third of all Directors retires at each Annual General Meeting (AGM), but shall be eligible for re-election.
The Company has a written agreement with each Director and senior executive setting out the terms of their appointment. The Directors and senior executives have a clear understanding of their roles and responsibilities, and of Xref’s expectations of them, and this has been reduced to a written agreement. This agreement takes the form of a letter of appointment in the case of a Non-Executive Directors and a service contract in the case of an Executive Director or other senior executive.
Purchases or sales in the Company’s shares by Directors, employees and key consultants are to be carried out in the “window”, being the period commencing two days and ending 30 days following the date of announcement of the Company’s annual or half-yearly results, or a major announcement leading, in the opinion of the Board, to an informed market. Trading outside a trading window by Directors, employees and key consultants must only occur after consultation with the Chairman of the Board or the CEO. Directors, employees and key consultants are prohibited from buying or selling Company shares at any time if they are aware of any price-sensitive information that has not been made public. These Company rules in regards to the Company’s securities trading by, and trading windows for Directors, management, staff and significant consultants, can also be found in the Company’s Corporate Governance Manual at the bottom of the Xref website at www.xref.global and in the Securities Trading Policy, which was released to ASX on 5 February 2016.
The Company Secretary of Xref is accountable directly to the Board, through the Chairman, on all matters to do with the proper functioning of the Board, and plays an important role in supporting the effectiveness of the Board and its Committees.
The Company has a Diversity Policy, which includes requirements for the Board to set measurable objectives for achieving gender diversity and to assess annually both the objectives and Xref’s progress in achieving them. This Diversity Policy can be found in the Company’s Corporate Governance Manual at the bottom of the Xref website at www.xref.global. The Diversity Policy addresses equal opportunities in the hiring, training and career advancement of Directors, officers and employees. It outlines the process by which the Board will set measurable objectives to achieve the aims of its Diversity Policy, with particular focus on gender diversity, within the Company. The Board remains conscious of the requirement to establish reasonable objectives for achieving gender diversity. As at the end of the recent reporting period, the measurable objectives for achieving gender diversity set by the Board in accordance with the Company’s Diversity Policy and its progress towards achieving them include attempts to achieve a greater gender diversity providing that directorship positions and senior executive positions that become open from time-to-time are filled by people who offer extreme value to clients, staff and ultimately shareholders. Progress is evidenced by the increase in females employed during the last 18 months, as mentioned below. The respective proportions of men and women on the Board at the end of the recent reporting period are four men and no women, in senior executive positions are four men and no women, and across the whole organisation are 27 men and 11 women, of which four hold global management positions within the Company and two hold regional management positions. The Company defines “senior executive” for these purposes as Executive Directors, Chief Financial Officer and Company Secretary (key management personnel), further information of which can be found in the Remuneration Report section of the Annual Report on page 16.
The Company has and discloses a process for periodically evaluating the performance of the Board, its Committees and individual Directors using evaluation questionnaires. Their performance is reviewed as part of the ordinary course of meetings of the Directors, and is considered by Shareholders through the approval of Directors’ appointments at the AGM. Given the limited number of senior executives, their performance is (and will in the short term continue to be) reviewed annually by the Board as part of the ordinary course of meetings of the Directors. In relation to the recent reporting period, such performance evaluations were undertaken in this period in accordance with that process. The next evaluation process by the new Board has commenced and will be completed over the coming two Board meetings.
Principle 2: Structure the Board to add value
The Company does not have a Nomination Committee because of the small size of its Board; this function is instead carried out by the full Board of Directors. The Board believes it is able to deal efficiently and effectively with Board composition and succession issues without establishing a separate nomination committee. The Directors consider that the current structure and composition of the Board is appropriate to the size and nature of operations of the Company. The processes the Company employs to address Board succession issues, and to ensure that the Board has the appropriate balance of skills, knowledge, experience, independence and diversity to enable it to discharge its duties and responsibilities effectively include reviewing Board performance, size and capacity (with appropriately-experienced Directors). The Board regularly reviews the time required from a Non-Executive Director and whether Directors are meeting that requirement. Non-Executive Directors must inform the Chairman before accepting any new appointment as a director of another listed entity, any other material directorship or any other position with a significant time commitment attached.
Xref has and discloses a Board Skills Matrix (see Appendix A below) setting out the mix of skills and diversity that the Board currently has in its membership. The Company views this as a useful tool that can help identify any gaps in the collective skills of the Board that should be addressed as part of its professional development initiatives for Directors and in its Board succession planning.
The Board is conscious of the need for the independence of its Directors and ensures that, where a conflict of interest may arise, the relevant Director(s) leave the meeting to ensure a full and frank discussion of the matter(s) under consideration by the rest of the Board. The names of the Company’s Directors considered by the Board to be independent Directors during the recent reporting period were Messrs O’Loughlin, Taylor and Mahony. Messrs Seymour and Griffiths are Executive Directors, and therefore not independent, as was the case with former Managing Director Mr McPhail. The length of service of each of the current Directors is as follows: Messrs Seymour, Griffiths and Mahony – eight months and Messrs Rosser and Heap (both independent) – one month. The length of service of each of the former Directors, who all resigned in 2016, is as follows: Mr O’Loughlin – one year and 11 months, Mr McPhail – 13 years and Mr Taylor one year and four months.
During the recent reporting period, two of the Company’s four Directors were independent Directors and so a majority of the Board of the Company was not independent Directors, due to the size of the Company’s operations and the early stage of its development as an ASX-listed business. However, following the August 2016 changes, when two additional independent Directors were appointed and one resigned, a majority of the Board of Xref is now made up of Independent Directors. It is the view of the Directors that the Board is of an appropriate size and composition, with suitable skills and commitment, to enable it to discharge its duties effectively. The Chairman of the Board is an independent Director and, in particular, is not the same person as the CEO of the Company.
The Company has a programme for inducting new Directors and provides appropriate professional development opportunities for Directors to develop and maintain the skills and knowledge needed to perform their roles as Directors effectively. Each Director of the Company has the right to seek independent professional advice at the expense of the Company. Prior approval from the Chairman is required, but this will not be unreasonably withheld.
Principle 3: Act ethically and responsibly
The Company strives to act ethically and responsibly at all times, and has a formal Code of Conduct for its Directors, senior executives and employees, reflecting the Company’s size and the close interaction of individuals throughout the organisation. The Company’s Code of Conduct requires that Directors and management conduct themselves with the highest ethical standards. All Directors and employees are expected to act with integrity and objectivity, striving at all times to enhance the reputation and performance of the Company. The Code of Conduct, including practices necessary to maintain confidence in the Company's integrity, the practices necessary to take into account their legal obligations and the reasonable expectations of their stakeholders, and the responsibility and accountability of individuals for reporting and investigating reports of unethical practices, can be found in the Company’s Corporate Governance Manual at the bottom of the Xref website at www.xref.global.
Principle 4: Safeguard integrity in corporate reporting
The Company has an Audit Committee, which at the end of the recent reporting period had three members, Messrs Mahony (Committee Chairman), O’Loughlin and Griffiths, two of whom were Non-Executive Directors and a majority of whom are independent Directors. Xref did not comply with the recommendation during the recent reporting period that the Committee should consist of all Non-Executive Directors because it only had two Non-Executive Directors. The Audit Committee is chaired by an independent Director, who is not the Chairman of the Board. At the start of the reporting period, the Company’s Audit Committee also had three members, Messrs Taylor (Committee Chairman), McPhail and O’Loughlin, two of whom were also Non-Executive Directors and a majority of whom were also independent Directors. The Company did not comply with the recommendation that the Committee should consist of all Non-Executive Directors because it only had three Directors at the time and one of them was an Executive Director (i.e. Mr McPhail), but the Audit Committee was chaired by an independent Director, who was not the Chairman of the Board. The Board is currently in the process of appointing a replacement member of the Audit Committee for the retired Mr O’Loughlin. The current Charter of the Committee can be found in the Company’s Corporate Governance Manual at the bottom of the Xref website at www.xref.global. The Directors on this Committee have the applicable expertise and skills for the Audit Committee, and the relevant qualifications and experience of the members of the Audit Committee can be found under the Investor Centre section of the Company’s website, which is located at the bottom of the Xref website at www.xref.global, and in the Company’s Annual Report. The Audit Committee reports to the Board after each Committee meeting. In conjunction with the full Board, the Committee reviews the performance of the external Auditor (including the scope and quality of the audit). In relation to the recent reporting period, the number of times the Committee met throughout the period and the individual attendances of the members at those meetings were as follows: twice, at which all members were present, except at the first of the two meetings, at which Mr O’Loughlin was unable to attend.
The Company has formal and rigorous processes that independently verify and safeguard the integrity of its corporate reporting. The Board of Xref does, before it approves the Company’s financial statements for a financial period, receive from its CEO and CFO a declaration that, in their opinion, the financial records of the Company 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 Company, and that the opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively.
The Company ensures that its external Auditor attends its AGMs and is available at these meetings to answer any questions from security holders relevant to the audit.
Principle 5: Make timely and balanced disclosure
The Company has a written policy for complying with its continuous disclosure obligations under the ASX Listing Rules, which can be found in the Company’s Corporate Governance Manual at the bottom of the Xref website at www.xref.global. The Company complies with the Continuous Disclosure requirements of the ASX Listing Rules, and accordingly, the market is kept fully up-to-date and currently informed about all material matters that might affect trading in Xref’s securities. The Company makes timely and balanced disclosure of all matters concerning it that a reasonable person would expect to have a material effect on the price or value of its securities. Procedures have also been established for reviewing whether any price-sensitive information has been inadvertently disclosed, and if so, this information is also immediately released to the market. Xref, its Directors and staff are very aware of the ASX’s continuous disclosure requirements, and operate in an environment where strong emphasis is placed on full and appropriate disclosure to the market.
Principle 6: Respect the rights of security holders
The Company provides information about itself and its governance to investors via its website at www.xref.global, with links at the bottom of the Homepage to all relevant corporate governance information, including the Corporate Governance Manual (which contains Xref’s policies and charters), Corporate Governance Statement and Investor Centre (which includes a CEO Letter, information on Xref’s Board, team and clients, ASX announcements and share price, and contact information). The Company respects the rights of its security holders by providing them with appropriate information and facilities to allow them to exercise those rights effectively. All significant information that is disclosed to the ASX is then posted at the bottom of the Company’s website at www.xref.global under the Investor Centre section, and when analysts are briefed on aspects of the Company’s operations, the material used in the presentation is released to the ASX and posted on the Company’s website.
Xref has designed and implemented an investor relations programme to facilitate effective two-way communication with investors, which has been tailored to the individual circumstances of the Company. Having regard to its size and the nature of its business, this includes actively engaging with its security holders at the AGM, meeting with them upon request and responding to any enquiries they may make from time-to-time.
The Company discloses the policies and processes it has in place to facilitate and encourage participation at meetings of security holders, and these are as follows. Security holders can provide questions or comments ahead of these meetings. Xref views its meetings of security holders as an important forum for two-way communication between the Company and its security holders. They provide an opportunity for Xref to impart to security holders a greater understanding of its business, governance, financial performance and prospects, as well as to discuss areas of concern or interest to the Board and management. These meetings also provide an opportunity for security holders to express their views to the Company’s Board and management about any areas of concern or interest for them.
The Company gives security holders the option to receive communications from, and send communications to, the entity and its security registry electronically. On the Investor Centre section of Xref’s website there is a Share Registry link providing contact information on the Company’s Share Registry Computershare, including links to its website and email address for any shareholder queries, and these can be found at the links. The Investor Centre section of Xref’s website also enables security holders to electronically submit to the Company any enquiries they may have, request automatic updates or leave feedback.
Principle 7: Recognise and manage risk
The Company does not have a risk committee, as it is currently a relatively-small services company and does not believe that at this stage of its development there is significant need for a separate committee to oversee risk management. Instead, the processes it employs for overseeing the Company’s risk management framework include holding regular senior executive meetings to identify any potential risks to the Company and to determine steps to take, if any, to mitigate the risk. In addition, the senior executives have adopted a continuous framework review process whereby any risk management framework modifications that may be required are put as an Agenda item for the next Board meeting. The CEO is also in frequent contact with the Chairman of the Board and the Non-Executive Directors to discuss matters that arise, as the responsibility for risk management of the Company rests with the Board of Directors and senior management collectively. Risk Factors are a standing agenda item at Board meetings and are considered in the Audit Committee meetings. The Board has established a sound risk management framework, which it reviews at least annually to satisfy itself that it continues to be sound, and confirms that, in relation to the recent reporting period, such a review has taken place.
The Board believes the Company’s risk management and internal compliance and control procedures are operating efficiently and effectively in all material aspects appropriate for a company of Xref’s size and nature. The Company does not have an internal audit function, but the processes it employs for evaluating and continually improving the effectiveness of its internal control and risk management processes are: adopting an approach that integrates regular internal reviews of each division and function, combined with feedback received from external auditors and other external expert advisers, and updating frameworks where it is seen that improvements can be made that benefit the Company and its stakeholders.
The Company does not consider that it has any material exposure to economic, environmental and social sustainability risks. Xref believes that, in the long term, it has the ability to continue operating at a particular level of economic activity, in a manner that does not compromise the health of the ecosystems in which it operates and that meets accepted social norms and needs. In particular, by being a business that utilises cloud-based computer technology, as the Company scales and grows, its environmental footprint will not substantially increase. Xref is not subject to any significant environmental regulation under New Zealand or Australian Commonwealth or State law.
Principle 8: Remunerate fairly and responsibly
The Board of the Company has a Remuneration Committee. At the commencement of the reporting period, the Company’s Remuneration Committee had three members, Messrs O’Loughlin (Committee Chairman), McPhail and Taylor, a majority of whom were independent Directors, including the Committee Chairman. In January 2016 Messrs McPhail and Taylor resigned from the Committee, and Messrs Mahony and Seymour took their place on the Committee, and so, at the end of the recent reporting period, there were still three members, a majority of whom were independent Directors, and was chaired by an independent Director. The Board is currently in the process of appointing a replacement member of the Remuneration Committee for the retired Mr O’Loughlin. The current Charter of the Committee can be found in the Company’s Corporate Governance Manual at the bottom of the Xref website at www.xref.global. In relation to the recent reporting period, the Committee met once and all members were present.
The Company separately discloses its policies and practices regarding the remuneration of Non-Executive Directors, and the remuneration of Executive Directors and other senior executives in the Remuneration Report section of the Annual Report. The Company pays Director remuneration that is sufficient to attract and retain high quality Directors, and has designed its executive remuneration to attract, retain and motivate high quality senior executives, and to align their interests with the creation of value for shareholders. The Directors believe that the size of the Company makes individual salary and contractor negotiation more appropriate than formal remuneration policies. The Directors work closely with management, and have full access to all the Company’s files and records. The Remuneration Committee seeks independent external advice and market comparisons as necessary. In accordance with reporting requirements, the Company discloses the fees and other remuneration paid to all its Directors and senior management, and it clearly distinguishes the structure of Non-Executive Directors’ remuneration from that of Executive Directors and senior executives.
The Company has an equity-based remuneration scheme, being an Employee Share Option Plan, which was approved by shareholders at the Special Meeting held on 27 May 2016. The Company’s policy is that participants are not permitted to enter into transactions (whether through the use of derivatives or otherwise) that limit the economic risk of participating in this scheme. There are no schemes for retirement benefits, other than superannuation, for Non-Executive Directors.