Corporate governance

The Group's internal management is governed by the Company's constitution (PDF, 237KB).

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 (PDF, 59KB).

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, 49KB).

The Board may from time to time establish committees as it considers necessary or appropriate to assist the Board in carrying out its responsibilities.

Board committees and their respective charters which include information on the composition, responsibilities and administration of each committee are set out below:

• Board Risk Committee Charter (PDF, 62KB)
• Board Audit Committee Charter (PDF, 89KB)
• Board Remuneration Committee Charter (PDF, 74KB)
• Board Nomination & Governance Committee Charter (PDF, 54KB)
  

As required, the Board also creates sub-committees to assist the Board in the oversight of specific areas that may require more detailed attention such as the capital and funding committee.

• Code of Conduct
• Code of conduct- NZ (PDF, 6MB)
• Code of conduct- UK (PDF, 371KB)
• Group Securities Trading Policy (PDF, 200KB)

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, 158KB).

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
• 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 AGM page. 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.

Our AGM page also includes responses to questions taken on notice at the AGM.

NAB is committed to creating and maintaining an inclusive culture and diverse workforce that is representative of our customers and the communities in which we operate, where individual differences are highly valued and respected.

Our Diversity and Inclusion Strategy for 2017 - 2020 is aligned with our business strategy to ensure the changing needs and expectations of customers and shareholders are acknowledged. The strategic imperatives of the strategy are gender equality, life stage and LGBTI inclusion, with our two key enablers being leadership and flexibility.

The Executive Leadership Team has direct accountability for execution of this strategy, and continues to focus on promoting the right values to support a workforce in which employees feel empowered and encouraged to perform at their very best. NAB’s Board receives regular updates on diversity and inclusion from our senior executives.

Gender diversity continues to be a key priority for the NAB Group and we remain committed to building strong female representation at all levels, including executive management. NAB has complied with its reporting requirements under the Workplace Gender Equality Act 2012 (Cth) for the period from 1 April 2016 to 31 March 2017 (PDF, 386KB).

In December 2016, NAB achieved the 2016 Workplace Gender Equality Agency Employer of Choice for Gender Equality citation. We are proud to achieve this recognition as a demonstration of our continued drive and commitment to achieving gender equality.

NAB is committed to meeting our regulatory requirements with respect to diversity and inclusion, and makes the following disclosures in relation to the ASX Corporate Governance Principles and Recommendations relating to diversity for 2016:

Diversity and Inclusion Policy (Recommendation 1.5a and 1.5b)

The Group Diversity and Inclusion Policy (PDF, 84KB) has been updated

Measurable objectives and progress (Recommendation 1.5c)

Our measurable objectives for achieving gender diversity – which have been set by the Board in accordance with the Group Diversity and Inclusion Policy – and our progress towards achieving them, are set out below:

¹ Data has been calculated based on the total permanent population as at 30 September. It includes all employees of NAB Group, plus employees that have since transferred from NAB Wealth to MLC Limited as part of the sale of 80% of NAB Wealth’s life insurance business.

² The target is to increase the number of female non-executive directors on the NAB Board as vacancies and circumstances allow, with the aim of achieving representation of at least 30% by 2017.

³ Executive Management positions (also known as senior executive positions) are those held by Executive Leadership Team members, Executive Leadership Team members’ direct reports and their direct reports. Support roles reporting in to these roles (for example, Executive Manager and Executive Assistant) are not included in the data. As at 30 September 2016, the proportion of females reporting directly to the Group CEO on the Group Executive Leadership Team was 33%.

⁴ The Australian Talent population includes all employees who were identified against evidence based criteria as high potential employees. In previous years we reported female participation in talent on a different basis, being the number of employees participating in our core Australian Talent programs.

⁵ As at 30 September 2016, 43% of the graduates who have accepted positions in NAB’s 2017 Australian graduate program are women.

⁶ The decrease year-on-year is due to the divestment of CYBG.

The Group’s gender diversity initiatives and awards during the 2016 financial year include:

• Male Champions of Change: the Group Chief Executive Officer, Andrew Thorburn is a member of the Victorian coalition of the Male Champions of Change strategy. This group consists of Victorian based leaders of global, national and iconic local organisations who have committed to step up beside women to advance gender equality in their organisations and the community.

• Panel Pledge: our senior leaders have pledged that, whenever NAB is invited to be involved in or sponsor a panel or conference, we will inquire about the organiser’s efforts to ensure women are represented.

• Talent Acquisition: NAB strives to ensure that a mix of men and women are short-listed for all management roles, and that hiring decisions are made by interview panels comprised of both men and women where possible.

• Realise and Senior Realise program: NAB offers a range of learning and development programs in Australia and New Zealand including the ‘Realise’ and ‘Senior Realise’ programs, which aim to further equip female employees with the skills, knowledge and tools to transition into senior and executive management roles. To support regional Australian employees and offshore employees in Asia, London and New York, NAB also offers virtual Realise and Senior Realise programs. For the fourth year running, a tailored program has been extended to not-for-profit and business customers with limited access to development programs.

• NAB Board Ready program: women in management positions are actively encouraged to join NAB subsidiary boards via the NAB Board Ready program, which is designed to educate and prepare women in senior positions to become directors of NAB Group companies. The program focuses on building competence and confidence by providing the training and development needed for women to successfully pursue positions on NAB subsidiary boards as well as external not-for-profit boards. Catalyst, a global organisation that supports the advancement of women, has recognised NAB for this program.

In addition, the Group’s broader diversity and inclusion initiatives during the 2016 financial year include:

• Australian Workplace Equality Index Awards (AWEI): the AWEI provides a national benchmark on LGBTI workplace inclusion which is designed to gauge the overall impact of inclusion initiatives on organisational culture. In 2016, NAB placed 7th Australia-wide.

• Accessibility Action Plan (AAP) 2015 – 2016: the AAP outlines NAB’s commitment to improving accessibility for our employees, customers and the community and focuses on providing long term, sustainable results.

• Champions for Change (CFC): BNZ CEO Anthony Healy is a founding co-chair of CFC, launched in New Zealand in November 2015. This initiative brings together a group of New Zealand CEOs and Chairs from across the public and private sectors who are committed to raising the value of diversity and inclusion within their organisations and implement strategies to actively promote the concept amongst peers.

• Diversity Council Australia – Future Flex: NAB reinforced its commitment to flexible working by co-sponsoring the Diversity Council Australia’s Future Flex research project. The research project aims to provide organisations with practical tools to mainstream flexibility within their organisations.

• Ethnic Business Awards 2016: these awards continue to celebrate diversity and multiculturalism in the Australian business community. NAB is proud to be the founding partner of the Ethnic Business Awards and a major sponsor again in 2016.

• Reconciliation Action Plan: since our first RAP was released in 2008, the Group has worked hard to lift its Indigenous engagement through a long term partnership approach. The 2015-17 RAP celebrated seven years of achievements in employment, financial inclusion, business partnerships and lifting cultural understanding – establishing three years of targets through to 2017. NAB employs more than 200 Indigenous Australians and since 2008 we have provided more than 25,000 Indigenous Australians with access to over $20 million in safe, affordable microfinance products and services in partnership with Good Shepherd Microfinance. NAB is a strong supporter of Indigenous business, backing Indigenous customers and including Indigenous suppliers in our supply chain. NAB’s most recent RAP has continued to be awarded elite ‘Elevate’ status, recognising the transparent and accountable approach to disclosure.

Our approach to corporate responsibility

The Group’s approach to corporate responsibility (CR) aims to make a positive and sustainable impact on the lives of our customers, people, communities, and on the environment in which we operate. We believe that by leveraging our skills, resources and expertise as a bank with more than 35,000 employees, we can create positive societal change, deliver value to our business and realise our vision to become the most respected bank in Australia and New Zealand.

NAB is taking action on the issues that matter to our customers and community, and where we’re best placed to make a difference:

• Financial inclusion and resilience – helping the 3 million Australians currently excluded from mainstream banking to access fair and affordable financial services. We’re also focused on supporting our people and customers in building their financial resilience – the ability to bounce back from financial shocks which can happen to anyone.
• Social cohesion – creating stronger more connected communities by addressing the big issues facing society such as gender equality and domestic violence, supporting indigenous success and exploring our role in achieving housing affordability for all.
• Environmental wellbeing – recognising a healthy environment is essential to a healthy economy, we are addressing key risks and opportunities facing our business, customers and community through a focus on natural value and clean energy finance.

CR is embedded across the Group by:

• Engaging with stakeholders to inform the Group of current and emerging material issues, challenging the Group to develop mutually beneficial solutions and helping to define strategic direction.
• Executing on a CR strategy that sets clear objectives, establishes appropriate policies, procedures and activities and includes measuring and reporting on progress.
• Integrating CR management and reporting into governance structures and internal communications to ensure that CR is understood by the Board, Executive Leadership Team and employees.
• Focussing on three key areas in which the Group is well placed to create a positive impact.

Engagement with stakeholders is key to the Group’s success. The Executive Leadership Team remains committed to maintaining dialogue with stakeholders to help understand their expectations, identify emerging issues and opportunities, assist with risk management, and improve Group performance.

The NAB Advisory Council on Corporate Responsibility, co-chaired by Melinda Cilento and the Group Chief Executive Officer, comprises a range of experienced internal and external advisors and plays an important role in supporting NAB with strategic advice and feedback on Group CR strategy, activities and stakeholder engagement.

Corporate responsibility performance
Further information on the Group’s CR approach and performance is provided in the 2016 Annual Review, the 2016 Dig Deeper and on the Group’s website at www.nabgroup.com. External assurance is provided over the CR data contained in the 2016 Annual Review and 2016 Dig Deeper.

You can also view the below policies:

• Group Corporate Responsibility policy (PDF, 339KB)
• Group Procurement policy (PDF, 977KB)
• Group Environmental Management Policy (PDF, 152KB)
• Group Environmental Reporting and Offset Management Policy (PDF, 129KB)
  
• Global union engagement agreement (PDF, 624KB)
• Health and Safety Policy - Australia (PDF, 323KB)

Risk exists in every aspect of our business and the environment in which we operate. We manage risk as part of a Group-wide Risk Management Framework (RMF), which is the totality of systems, structures, policies, processes and people that manage all material internal and external sources of identified material risks facing the Group.

The RMF supports a proactive approach to risk management across the Group through:

• Identifying, analysing and understanding each of the material risks at all levels of the Group.
• Employing appropriate strategies, policies, effective operating controls and other mitigants.
• Applying appropriate balance to understanding our historical risk performance with our potential risk performance.
  
• Providing reliable and meaningful risk information (i.e. reporting) to decision-makers.
• Ensuring adequate oversight of the risk profile and effective operation of the RMF.

The Group's approach to risk management is based on a Three Lines of Defence model, which provides the foundation for effective risk management. The overarching principle of this model is that risk management capability must be embedded within the business to be effective. Accountabilities for risk management activities across each line of defence is articulated in our Risk Management Accountability Model.

The Group undertakes an annual strategic planning process to establish the strategic objectives and risk appetite. Risk appetite is operationalised through several mechanisms including decision authorities, risk limits and settings, and policy.

We also have a set of Environmental, Social and Governance (ESG) Risk Principles (PDF, 433KB), which provide an overarching framework for integrating ESG risk considerations into the RMF.

Compliance with our RMF is non-negotiable.

Our RMF is described in detail in our Risk Management Strategy (RMS), which is provided annually to the Australian Prudential Regulation Authority to meet our prudential requirements.

Our material risk categories, which are detailed in our RMS, are:

Risk Governance

Our risk governance and oversight starts at Board level. The Board determines the most appropriate corporate governance practices for the Group and is supported by a number of committees. The Board Risk Committee (BRC) supports the framework for risk management across the Group by:

• overseeing the risk profile and risk management of the Group within the context of the Board determined risk appetite;
• making recommendations to the Board concerning the Group’s risk appetite, risk management strategy, and particular risks or risk management practices;
• reviewing management’s plans for mitigation of material risks faced by the Group;
• overseeing the implementation and review of the risk management framework and internal compliance and control systems throughout the Group;
• promoting awareness of a risk-based culture and the achievement of a balance between risk and return for risks accepted.

At an executive level, risk is overseen by the Group Chief Executive Officer through the Group Risk Return Management Committee (GRRMC) and its supporting sub-committees, which leads management in respect of risk matters relating to culture, integrated governance processes, risk strategy and performance.

Additionally, each first line division has a Risk Management Committee (RMC), chaired by the relevant Group Executive, to support them in executing their risk management accountabilities. Second line risk specialists are embedded in the organisational structure (for example, as members of divisional RMC's and Executive management committees) to assist in the application of a risk and compliance lens to executive decision making.

Support of political parties

NAB recognises that it has an important role to play in the Australian political process and in the development and promotion of policy.

The Board believes that NAB can best fulfil its commitment to a balanced approach to stakeholders through continuing to support the community directly, rather than through political donations.

From May 2016, NAB ceased making political donations at the Commonwealth, State and Local Government level.

How are previous donations disclosed?

Australia: the Group made annual third party disclosure returns that were lodged with the Australian Electoral Commission (AEC). Following the change to our political donations policy in May 2016, our final disclosure occurred in the 2015-16 financial year. Previous NAB annual disclosures are publicly available on the AEC website.

You can also view the below:

• Group Political Donations Policy (PDF, 93KB)

The Board is responsible for the Group's remuneration policy and strategy. In particular, the Board:

• Approves remuneration policy and remuneration arrangements for the Group CEO and direct reports;
• Reviews and monitors the performance of the Group CEO and senior management; and
• Approves remuneration arrangements for non-executive Directors.

The Board has established a Remuneration Committee to assist it in governing remuneration across the Group. Committee decisions are made as far as practicable to align remuneration policy and strategy to support NAB’s business strategy, align with shareholder interests, meet the expectations and requirements of regulators, and enhance corporate and individual performance.

More information on the Group's performance and remuneration frameworks is available in:

• Policy Statement on NAB’s 2016 Executive Long-Term Incentive Allocation (PDF, 65KB)
  
• Remuneration Report in the Report of the Directors in the Annual Financial Report (PDF, 981KB)
• Financial Services Companies Peer Groups (PDF, 6KB)
• Top 50 Companies Peer Groups (PDF, 7KB)

We're committed to protecting the bank and our customers by meeting our legal and regulatory requirements in the areas of financial crime. This includes anti-money-laundering and counter-terrorism financing (AML/CTF), anti-fraud, anti-bribery and corruption, and sanctions and embargoes.

Good corporate governance is a fundamental part of our culture and business practices in the prevention of financial crime. Our corporate governance framework along with effective risk management is a key capability of a successful financial services provider in the prevention of financial crime. Find out more about our approach to the management of financial crime.

External commitments and activities in financial crime prevention include:

• reflecting in our policies and procedures Australia’s adoption of the FATF Recommendations (International Standards on Combating Money Laundering and the Financing of Terrorism and Proliferation)
• adoption and commitment to the Wolfsberg Group AML Principles and Questionnaire (PDF, 365KB) also available from Bankers Almanac
• maintaining and making publicly available NAB’s Patriot Act Certification (PDF, 407KB) regarding correspondent accounts for Foreign Banks. The Patriot Act Certificate is available to any financial institution that requires a Patriot Act Certificate from the NAB Group. This certification covers all branches listed in this file (PDF, 40KB).
• compliance with international AML/CTF rules and regulations
• adhering to relevant international Sanctions & Embargoes legislative requirements including relevant watch lists issued by certain competent authorities
• compliance with local and international anti-bribery and corruption rules and regulations
• compliance with the Foreign Account Tax Compliance Act (FATCA) (PDF, 11KB).

We're a signatory to the UN Global Compact (UNGC) which includes a commitment to work against corruption in all its forms, including extortion and bribery. See our latest UNGC Communication on Progress.

The Financial Claims Scheme (FCS) is an initiative by the Australian Government to provide protection and quick access to your deposits in financial institutions in the unlikely event that one fails.

How the Financial Claims Scheme works

Under the FCS, certain deposits are protected up to a limit of $250,000 for each account holder at any bank, building society, credit union or other authorised deposit-taking institution that’s incorporated in Australia and authorised by the Australian Prudential Regulation Authority (APRA).

The FCS can only come into effect if it’s activated by the Australian Government when an institution fails. Once activated, the FCS will be administered by APRA who would aim to pay the majority of customers their protected deposits within seven calendar days.

Application of the FCS limit

The FCS limit of $250,000 applies to the total of an account holder's deposits under the one banking license.

This means, all deposits held by an account holder with a single banking institution, including accounts with parts of the business operating under a different trading name, count towards the limit. For example, deposits you have with NAB, nabtrade and Ubank would count towards the $250,000 limit.

NAB businesses covered by the Scheme

The FCS applies to NAB, nabtrade and UBank.

Deposits covered by the Scheme

The FCS applies to a wide range of deposits held with NAB, including:

• savings accounts
• call accounts
• term deposits
• current accounts
• cheque accounts
• debit card accounts
• transaction accounts
• personal basic account
• cash management accounts
• farm management deposits
• pensioner deeming accounts
• mortgage offset accounts, either 100 per cent or partial offset, that are separate deposit accounts
• trustee accounts
• retirement Savings Accounts
• first home saver accounts that are deposit accounts

Further information on the FCS

If you’d like to know more about the FCS there’s information available on the FCS website.

Our core behaviours encourage our people to speak up and have open, honest conversations. Our Code of Conduct, compliance standards, and policies guide our day-to-day decisions, actions and behaviours and govern our business.

Our Group Whistleblower Policy (doc 100KB) is applicable to all employees (including all directors, officers, employees, former employees, contractors, subcontractors and agents of the Group) and subsidiaries across our operations. The Policy complements the normal communication channels that exist for raising concerns between people leaders and employees without fear of reprisal. All employees (and former employees) have access to the independently managed KPMG FairCall Service.

The Group Whistleblower Policy and Program are part of the Group Corporate Governance and Risk Framework. Overall governance of the Group Whistleblower Program is undertaken by the Board Audit Committee via Internal Audit. Day-to-day operation of the Group Whistleblower Program (Program) is managed by Internal Audit.

The Group Whistleblower Committee is chaired by our Chief Audit Officer and meets bi-monthly. The Whistleblower Committee is comprised of representatives from across the business, including Group Governance and Legal, People & Culture (Human Resources), Group Risk and Internal Audit.

The Whistleblower Committee is responsible for oversight of the Whistleblower Program, ensuring appropriate measures are taken to address allegations received by the program, providing a forum for the resolution of matters and ensuring that there is effective and regular reporting to Board Audit Committee.