The Group's corporate governance framework plays a key role in supporting our business operations and provides clear guidance on how authority is exercised within the Group.
Good corporate governance is a fundamental part of our culture and our business practices. Our corporate governance framework provides for effective decision making about the affairs of the Group.
You can read about the key aspects of our corporate governance framework and practices for the 2012 year in the Corporate Governance Statement (pdf), and our compliance with the ASX Corporate Governance Principles and Recommendations in the 2012 Checklist (pdf).
Key documents and policies which form part of our corporate governance framework and highlight the Group's significant commitment to corporate governance are set out below.
The Group's internal management is governed by the Company's constitution.
Principal Board Charter
The Group is governed by the Board of Directors. Information on the authority, responsibilities, membership and operation of the Board is set out in the Board Charter.
Independence of Directors
Directors are expected to bring independent views and judgement to Board deliberations. An independent Director must be independent of management and able to exercise unfettered and independent judgement, free of any business or other relationship that could materially interfere with the exercise of the director's ability to act in the best interests of the Group.
In assessing whether a director is independent, the Board has regard to the standards it has adopted that reflect the independence requirements of applicable laws, rules and regulations, including the ASX Corporate Governance Principles and Recommendations.
To assist the Board in determining independence, each non-executive Director is required to make an annual disclosure of all relevant information to the Board. Any assessment of independence for a non-executive Director who does not meet the independence standards adopted by the Board will be specifically disclosed to the market.
The non-executive Directors meet informally from time to time, without management present, to ensure that the non-executive Directors maintain independence of thought and judgement.
The Directors the Board considered to be independent are identified in the Report of the Directors in our Annual Financial Report along with their period in office.
For more information on the Independence Standards (part of the Board Charter) that are considered when assessing Director independence, see the 'Independent Director' Standards (pdf).
The Board may from time to time establish committees as it considers necessary or appropriate to assist the Board in carrying out its responsibilities.
Our current Board committees and their respective charters which include information on the composition, responsibilities and administration of each committee are set out below:
- Principal Board Risk Committee Charter (pdf)
- Principal Board Audit Committee Charter (pdf)
- Remuneration Committee Charter (pdf)
- Nomination Committee Charter (pdf)
Current memberships of the Board committees
|Name||Risk Committee||Audit Committee||Nomination
|Mr MJ Chaney AO||Chairman from September 2005
Member from December 2004
|Mr CA Clyne||-||-||-||-|
|Mrs PA Cross||Member from December 2005||Member from December 2005||Member and Chairman from August 2008|
|Mr DT Gilbert AM||Member from September 2004||Member from December 2006|
|Dr K R Henry AC||Member from November 2011||Member from November 2011|
|Mr MA Joiner||-||-||-||-|
|Mr PJ Rizzo||Chairman from July 2006
Member from September 2004
|Member from September 2004||Member from September 2004|
|Ms JS Segal AM||Member from December 2005||Member from March 2010||Member from October 2004|
|Mr JG Thorn||Chairman from March 2004
Member from October 2003
|Member from October 2003|
|Mr GA Tomlinson||Member from September 2003||Member from August 2009|
|Mr JA Waller||Member from February 2009||Member from February 2009||Member from February 2009|
|Mr A Yuen||Member from March 2010||Member from March 2010||Member from March 2010|
Code of Conduct
The Group has adopted a disclosure policy that is designed to ensure that:
- we disclose activities to shareholders and the market in a full and timely manner and comply with our legal and regulatory obligations;
- all stakeholders have an equal opportunity to receive and obtain externally available information issued by the Group.
We will immediately notify the market (by announcing to the stock exchanges on which our securities are listed) of any information related to our businesses which a reasonable person would expect to have a material effect on the price or value of our securities.
In certain circumstances, the applicable listing rules permit the Group not to disclose such material information.
Our policy provides that, in general, the Group will not respond to market speculation or rumours unless required to do so by law or the Australian Securities Exchange.
The Company Secretary is responsible for communicating with the relevant stock exchanges on which the securities of the Group are listed. All such releases, including relevant external briefing and presentation materials, will be made available on our website.
In appropriate circumstances, we may request a trading halt from the Australian Securities Exchange to prevent trading in the Group's securities by an inefficient and uninformed market.
For more information see the Group Disclosure & External Communication Policy (pdf).
The Group aims to be open and transparent with all our stakeholders, including our shareholders, and to make all communications easy to access and in plain English.
Information is communicated to shareholders regularly through a range of forums, publications and online. These include:
- the Annual General Meeting;
- notices and explanatory memoranda of Annual General Meetings;
- the Annual Financial Report (for those shareholders who have requested a copy);
- the Annual Review (for those shareholders who have requested a copy);
- regular trading updates and market/investor briefings;
- letters from the Chairman to inform shareholders of key matters of interest; and
- the Group's website, providing access to announcements, media releases, financial reports, previous years' financial results and investor presentations.
The Notice of Annual General Meeting (AGM) provides details of the location, time and date of the AGM, the business to be considered by shareholders and details about each candidate standing for election or re-election as a Director. For those shareholders unable to attend the AGM, a webcast is available on our Shareholder Centre. Our external auditors attend this meeting and are available to answer shareholder questions about the conduct of the audit and preparation and content of the auditor's report.
The Group recognises that a diverse and inclusive workforce is not only good for our employees, it is also good for our business. It helps the Group attract and retain talented people, create more innovative solutions, and be more flexible and responsive to our customers' and shareholders' needs. Across the Group, there is increasing momentum on diversity with a particular focus on gender and age, as well as greater work and career flexibility.
Gender diversity and inclusion continues to be a key priority for the Group. We are committed to building strong female representation at all levels within the Group, including executive management.
In line with our commitment to diversity, the Group has established a Diversity and Inclusion Policy (pdf).
Measurable objectives and progress
The measurable objectives for achieving gender diversity which have been set by the Board in accordance with the Group Diversity & Inclusion Policy, and our progress towards achieving them, are set out in the table below.
- Increase the number of women in executive management (the top three layers of the organisation1), from 23% to 33% by 2015.
- Increase the proportion of women on Group subsidiary boards from 14% to 30% by 2015.
- Increase the number of female non-executive Directors on the Board of Directors of the Group, as vacancies and circumstances allow, with the aim of achieving a representation of at least 30%.
- Strengthen the talent pipeline by targeting a 50/50 gender balance in the Australian graduate program intake and an even representation of women and men on NAB's core Australian talent development programs from 2011 onwards.
- As at 30 September 2011, 28% of the Group's executive management were women, compared with our starting position of 23% in the 2010 financial year.2
- We have actively encouraged women to join Group subsidiary boards during the year. Of the total number of subsidiary Directors, the proportion of women has increased from 14% in October 2010 to 20% as at 30 September 2011.
- The proportion of female non-executive Directors on the Board as at 30 September 2011 was 20%.
- Graduate program (Australia): As at 30 September 2011, 44% of the graduates who have accepted positions in NAB's 2012 graduate program are women, compared with 40% for the 2011 program.
- Core talent development programs (Australia): For the 2011 financial year, 47% of the Australian talent development program participants, on an aggregated basis across NAB's core talent development programs (Elevate, Ignite and Accelerate), were women, up from 40% in the 2010 financial year.
- Executive management positions (also known as senior executive positions) are those held by Group Executive Committee members, Group Executive Committee members' direct reports, and their direct reports. Note: Support roles reporting into these roles (for example, Executive Manager and Executive Assistant) are not included in the data.
- As at June 2010.
Proportion of women employees and Board members
- Proportion of women employees in the whole organisation.
- Proportion of women in senior executive positions (executive management positions) within the Group.
- Proportion of women on the Board of the Company.
- As at 30 September 2011, 57% of the Group's employees were women.
- As at 30 September 2011, 28% of the senior executive positions within the Group were held by women.
- As at 30 September 2011, 16% of the Company's Board of Directors (including executive Directors) were women.
- The Company is committed to ensuring that the composition of its Board continues to be appropriate. The Board Charter clearly states that it should comprise Directors with a broad range of skills, experience, and diversity.
Diversity activities and initiatives
Some of the Group's activities and initiatives relating to diversity during the year were as follows:
- Diversity Forum: established in 2010, the Diversity Forum continued to work to align the Group's diversity strategy with business objectives. The forum is co-chaired by the Group CEO and the Executive Director, Finance, and has senior business representatives as members.
- Unconscious bias: addressing unconscious bias that may influence decision-making in situations such as recruitment through NAB's 'Consciously Addressing Unconscious Bias' program, which has been rolled out in Australia during the 2011 year.
- Women in executive management positions:
- requiring that a mix of men and women be short-listed for executive management roles in Australia and that men and women make hiring decisions on interview panels together, where possible; and
- through a range of programs in Australia including 'Realise' which encourages women to prepare themselves for the transition to senior management and 'Board Ready' which supports women by coaching and educating them in the skills necessary for subsidiary board positions and community partner directorships.
- Gender pay equity: following NAB's first gender pay equity audit in 2007, NAB is conducting a second audit in partnership with the Financial Sector Union.
- Women's networks: continuing to develop women's networking opportunities across the Group through 'Connecting Women' in Australia, the BNZ Women's Network in New Zealand and the Women's Networking Group and 'Pearls Program' in the United Kingdom.
- Flexible working: continuing to encourage flexible working arrangements such as compressed working weeks, salary averaging and flexible leave.
- Mature age employees: establishing the MyFuture program in Australia, to support mature age employees and their managers to make informed decisions and to plan for the future, and re-launching the Long Service Awards scheme in the United Kingdom.
The Board has retained authority for the highest level of oversight of corporate responsibility governance across the Group. The Board monitors corporate responsibility strategy, policy and performance on a regular basis. Management accountability rests with our Group CEO and senior executives across the Group. Each business is responsible for meeting the Group's corporate responsibility commitments and for achieving its own, and any agreed Group targets in corporate responsibility related areas.
Senior management is accountable for delivery of our corporate responsibility strategy, including the periodic review of our CR framework and policies. Regional executive committees or designated senior executive subcommittees are responsible for monitoring implementation of corporate responsibility strategy and initiatives.
Key components of corporate responsibility performance are monitored by our Group Risk Management Committee. On matters related to climate change and environment, we also have a specific Group Climate Change and Environment Committee.
In Australia, we have an independent Community Advisory Committee (CAC) chaired by Tim Costello, CEO, World Vision Australia. The CAC ensures stakeholders can challenge, scrutinise and provide advice on our community, environmental and supply chain initiatives and programs.
The Customer Council, made up of senior executives, examines customer complaints in-depth and assists in determining how we work to address common customer concerns at their source.
In addition, we have an Indigenous Advisory Group and Schools First Board to provide direction and guidance to our relevant programs and activity.
More information is available in the attached policies or by visiting the Corporate Responsibility section of the website .
Risk exists in all aspects of our business and the environment in which we operate. The Group's collective risk management capability and competency supports successful implementation of our strategic priorities. It also enables the development of a sustainable and resilient business that is appropriately responsive to its ever-changing environment.
Risk Governance and Oversight
The National Australia Bank Group maintains a strong risk governance and oversight framework that originates at Board level and cascades down the organisation through the Group Chief Executive Officer (Group CEO) and his formal delegations of authority.
The Principal Board and its Risk Committee are ultimately responsible for the Group's risk management framework and ensuring appropriate review and oversight of the Group's risk profile within the context of the Principal Board's determined risk appetite.
Further details of the Group's Corporate Governance Framework are disclosed in the Corporate Governance section of the Director's Report.
Executive Risk Governance
At an executive level, risk and its effective management is overseen by the Group CEO through the Group Risk Return Management Committee (GRRMC) which leads management in respect of risk matters relating to culture, integrated risk governance processes and risk strategy and performance. The GRRMC is supported by specialist subcommittees which perform detailed oversight of credit risk, balance sheet risks, and regulatory and economic capital risks.
Risk Management Framework
Risk is identified and managed as part of a Group-wide Risk Management Framework that starts with the Board approved Strategy, Risk Appetite, Capital, Funding and Operational Plans. Risk Appetite is translated and cascaded to our businesses qualitatively (through our risk postures, policies, standards and operating procedures) and quantitatively (through our risk limits, settings and decisioning authorities).
Key aspects of our Group-wide Risk Management Framework include:
- Risk appetite (including limits, settings and decisioning authorities);
- Risk policies and standards;
- Risk assessments;
- Risk modelling and measurement (including for stress testing and scenario analysis);
- Risk monitoring and reporting;
- Risk event management; and
- Risk governance.
Compliance with our Risk Management Framework is non-negotiable and when we make mistakes, we reflect on our experience, share our learnings and hold ourselves accountable through the application of balanced performance scorecards and a risk adjusted performance and rewards framework.
While every employee of our organisation is responsible for managing risk as part of their balanced performance scorecard, our operating model differentiates accountabilities using a ‘three lines of defence' approach as follows:
- First Line: Management (who owns the risks)
- Second Line: Risk (who provide insight, oversight and appetite)
- Third Line: Internal Audit (who provide independent assurance).
The Group identifies key categories of material risk that it is exposed to (referred to as the Group Risk Inventory or GRI). Currently the GRI is comprised of the following risk categories:
- Credit Risks;
- Operational Risks;
- Regulatory and Compliance Risks;
- Market and Non Traded Mark Risks;
- Strategic Positioning and Strategic Execution Risks;
- Defined Benefit Pension Risks; and
- Life Insurance Risks.
The systems and processes to identify, assess, measure, monitor, mitigate and report against these risks on a consistent basis are documented in our internal Risk Management Systems Descriptions.
Support of political parties
Group representatives will often attend political party conferences and political functions. Such attendance must be for strictly commercial reasons and is dependent on the price charged not being in excess of the commercial value (in terms of access) of that function.
The Principal Board is the sole body authorised to approve any other support of political parties on behalf of the Group or its subsidiaries.
How are donations disclosed?
In Australia the Group makes an annual third party disclosure return, lodged with the Australian Electoral Commission (AEC). This return is made publicly available on the AEC website - www.aec.gov.au. Given that we are banker to many political parties the amount of their facilities owing to the bank is often disclosed, even though the transactions are commercial in nature.
In New Zealand, political donations are administered by the Electoral Commission. Under the Electoral Act 1993 the secretary of each registered party must provide the Electoral Commission with an accurate audited return showing the names and addresses of every person or body of persons who made one or more donations to the party during the previous calendar year totalling more than $1,000. Returns are available on the Electoral Commission website - www.elections.org.nz.
In the United Kingdom, disclosure of political donations is regulated through the registration and financial regulatory requirements of the Political Parties, Elections and Referendums Act 2000 (PPERA) - www.electoralcommission.gov.uk. Under the provisions of this Act, donor companies need to state the level of political donations made in the relevant financial year in the annual report.
In line with the various regulatory requirements in the jurisdictions that the Group operates all information on political donations is included in our Annual Report.
The Board is responsible for the Group's general performance and reward strategy. In particular, the Board approves:
- remuneration policy and Total Reward packages for the Group CEO and direct reports; and
- remuneration arrangements for non-executive Directors (as detailed in the Remuneration report).
The Board has established a Remuneration Committee (the Committee) to assist it in managing remuneration across the Group.
Committee decisions are made as far as practicable to align remuneration with shareholder returns, in accordance with regional regulatory requirements and global regulatory trends. The Committee has established remuneration frameworks in place at a Group level to assist with remuneration decisions.
The Committee takes specialist remuneration advice from external advisers, as appropriate. Where the Committee engages independent experts, their advice is provided directly to the Committee, independent of management.
The Board reviews and evaluates its own 'Board performance' with the guidance of the Nomination Committee. The process involves consideration of all of the Board's key areas of responsibility and involves a '360 degree feedback' process, including feedback from the Directors and senior executives on the performance of the Board.
More information on Group's remuneration is available in: