Principle 1: Lay solid foundations for management and oversight
1.1 Functions of the Board and management
1.1.1 Role of the Board and management
The Board has approved a formal Board Charter which details the Board's role, powers, duties and functions.
A copy of the Board Charter is available on the below link.
Photon Group Board Charter >
In general, the Board is responsible for, and has the authority to determine, all matters relating to the policies, practices, management and operations of the consolidated entity. It is required to do all things that may be necessary to be done in order to carry out the objectives of the consolidated entity.
Without intending to limit this general role of the Board, the principal functions and responsibilities of the Board include the following.
- Leadership of the Company: overseeing the consolidated entity and establishing codes that reflect the values of the Company and guide the conduct of the Board, management and employees.
- Strategy Formulation: working with senior management to set and review the overall strategy and goals for the Company and ensuring that there are policies in place to govern the operation of the Company.
- Overseeing Planning Activities: overseeing the development of the consolidated entity's strategic plan and approving that plan as well as the annual and long term budgets.
- Shareholder Liaison: ensuring effective communications with shareholders through an appropriate communications policy and promoting participation at general meetings of the Company.
- Monitoring, Compliance and Risk Management: overseeing the Company's management of material business risks, compliance, control and accountability systems and monitoring and directing the financial and operational performance of the Company.
- Company Finances: approving expenses in excess of those approved in the annual budget and approving and monitoring acquisitions, divestitures and financial and other reporting.
- Human Resources: appointing, and, where appropriate, removing the Chief Executive Officer (CEO) and executives as well as reviewing the performance of the CEO and monitoring the performance of senior executives in their implementation of the Company's strategy.
- Ensuring the Health, Safety and Well-Being of Employees: in conjunction with the senior management team, developing, overseeing and reviewing the effectiveness of the Company's occupational health and safety systems to ensure the well-being of all employees.
- Delegation of Authority: other than as specifically reserved to the Board in the Board Charter, responsibility for the management of Photon's business activities is delegated to the CEO who is accountable to the Board. The Board has also delegated specific authorities to various Board Committees.
1.1.2 Conflicts of interest
Directors must:
- disclose to the Board actual or potential conflicts of interest that may or might reasonably be thought to exist between the interests of the Director and the interests of any other parties in carrying out the activities of the consolidated entity; and
- if requested by the Board, within seven days or such further period as may be permitted, take such necessary and reasonable steps to remove any conflict of interest.
If a Director cannot or is unwilling to remove a conflict of interest then the Director must, as per the Corporations Act, absent himself or herself from the room when discussion and/or voting occurs on matters about which the conflict relates.
1.1.3 Related party transactions
Related party transactions include any financial transaction between a Director and the consolidated entity and will be reported in writing to each Board meeting. Unless there is an exemption under the Corporations Act from the requirement to obtain shareholder approval for the related party transaction, the Board cannot approve the transaction.
1.2 Evaluation of Senior Executives
1.2.1 Induction of senior executives
New executives undertake an induction program upon joining Photon, including comprehensive briefings on the Company's businesses, and its policies and procedures. The program includes meetings with people in key internal and external roles in order to start developing the relationships necessary to meet the requirements of their role.
As discussed in Principle 8, key performance indicators are agreed with each executive to ensure goals and performance measures are fully understood and disclosed.
1.2.2 Performance evaluation of senior executives
The performance evaluation of key executives is undertaken by the Board, in conjunction with the CEO on both a formal regular and informal ongoing basis.
Photon's performance management framework requires the setting for all senior executives key performance indicators (including financial and non-financial measures). Each senior executive's performance is reviewed, at least annually, against the relevant performance indicators.
The process for evaluating the performance of senior executives and the remuneration policy for senior executives is further discussed in the Remuneration Report.
Principle 2: Structure the Board to add value
2.1 Independent directors
The Constitution of the Company provides the number of directors must not be less than 3 and not more than 13. The names of the directors of the Company in office at the date of this report are set out on the Board of Directors page of this website. There are currently 5 directors each of whose skills, experience and expertise is described on the Board of Directors page of this website. There are 2 executive directors (Time Hughes and Matthew Bailey) and 3 non-executive directors (Brian Bickmore, Susan McIntosh and Paul Gregory).
Only two members of the Board, Brian Bickmore and Paul Gregory, are independent according to the definition in the ASX Guidelines. Matthew Bailey and Tim Hughes are not considered independent because they are executive directors. Susan McIntosh is not considered independent because she is an officer of the RG Capital group of companies, which have a substantial holding in Photon. This means that the Board does not currently meet the ASX Corporate Governance Council's recommendation that a majority of the Board should be independent. The Board, however, believes that its current composition has the required skills and independence of thought and judgement to ensure that decisions are made by the Board in the best interests of the Company. Further, to facilitate all directors bringing an independent judgement to bear on all Board decisions, each Director has the right to seek independent professional advice at the Company's expense, up to specified limits, to assist them to carry out their responsibilities
The Board regularly assesses whether each non-executive director is independent, based on criteria specified in the Board Charter (which is consistent with the criteria set out in recommended action 2.1 of the ASX Guidelines).
2.2 Independent Chair
The Chair of Photon, Tim Hughes, is an executive director and not an independent director. Notwithstanding the ASX Recommendation that the Chairman should be an independent director, the Directors believe that the Chair can and does bring independent thought and judgement in his capacity as Chair. In addition, the Board believes that Mr Hughes is an appropriate person to be Chair due to his extensive knowledge of the activities of the Company and its business and the industry sector in which the Company operates.
2.3 Role of the Chair and CEO
The roles of Chair and CEO are not exercised by the same individual and the division of responsibilities between the Chair and the CEO have been agreed by the Board.
2.4 Establishment of Nomination Committee
The Board has determined that due to the relative size of Photon it is not necessary or appropriate for a Nomination Committee to be established at this time. The Board will continue to revisit this question on an ongoing basis as the Company continues to grow. In addition, a number of the responsibilities identified by the ASX Guidelines as being within the ambit of a Nomination Committee have been delegated to the Remuneration Committee.
2.5 Performance evaluation of the Board, committees and directors
2.5.1 Induction and education
New Directors undergo an induction process in which they are given a full briefing on the consolidated entity. This includes meetings with key executives, tours of the premises, an induction package and presentations. Information conveyed to new Directors include:
- formal policies on Director appointments as well as conduct and contribution expectations;
- details of all relevant legal requirements;
- a copy of the Board Charter;
- Guidelines on how the Board processes function;
- details of past, recent and likely future developments relating to the Board including anticipated regulatory changes;
- background information on and contact information for key people in the organisation including an outline of their roles and capabilities;
- an analysis of the consolidated entity;
- a synopsis of the current strategic direction of the Company including a copy of the current strategic plan and annual budget; and
- a copy of the Constitution of the Company.
2.5.2 Performance review
The Chair is responsible, in the first instance, for monitoring the contribution of individual Directors and providing guidance on any areas of improvement.
The Board undertakes an annual self assessment of both its collective performance and that of individual directors and seeks specific feedback from the senior management team on particular aspects of its performance. The Remuneration Committee establishes procedures and oversees this annual performance assessment program. The results and any action plans flowing from this annual assessment are documented, together with specific performance goals that are agreed for the coming year.
In addition, each Board Committee undertakes an annual self assessment on the performance of the committee and achievement of committee objectives. The performance of the CEO is reviewed annually by the Remuneration Committee and the Board. The performance of the CEO is reviewed annually against set performance goals and competencies.
2.6 Retirement and re-election
As required under Photon’s Constitution and the ASX Listing Rules, and excluding any managing director or director newly appointed during the relevant year, at each Annual General Meeting one-third of the Directors must retire from office. Retiring directors are eligible for re-election by shareholders.
No Director (other than the Managing Director) may hold office for more than three years without standing for re-election and any Director appointed by the Board since the previous Annual General Meeting must stand for election by no later than the next Annual General Meeting.
2.7 Appointment of new directors
When a vacancy exists for a Board position, through whatever cause, or where the Board considers that it would benefit from the services of a new member with particular skills, the Board will consider candidates having regard to:
- what may be appropriate for the Company;
- the skills, expertise and experience of the candidates;
- the desirability of those skills, expertise and experience when combined with those of the existing Directors; and
- the perceived compatibility of the candidates with the Company and with the existing Directors.
Potential candidates to be appointed as Directors will be considered by the Board. The Board will appoint the most suitable candidates who (assuming that they consent to act as Directors) continue in office only until the next annual general meeting and are then eligible for election.
The terms and conditions of the appointment of all new members of the Board must be specified in a letter of appointment to be signed by the Chairman with the authority of the Board.
Principle 3: Promote ethical and responsible decision-making
3.1 Company Code of Conduct
To assist the Board in carrying out its functions, Photon has developed a Code of Conduct to guide the Directors, the CEO and other key executives in the performance of their roles. The Code of Conduct was adopted by resolution of the Board on 27 May 2004. This Code includes the following:
- Responsibilities to shareholders and the financial community generally: The Company has processes in place designed to ensure the truthful and factual presentation of the Company's financial position and prepares and maintains its accounts fairly and accurately in accordance with the generally accepted accounting and financial reporting standards.
- Responsibilities to suppliers and customers: Each employee has an obligation to use their best efforts to deal in a fair and responsible manner with each of the Company's suppliers and customers.
- Employment practices: ensure that its employees maintain the highest Standard of conduct at all time in which there is equal opportunity for all employees at all levels of the Company. The Company does not tolerate the offering or acceptance of bribes or the misuse of Company assets or resources.
- Obligations relative to fair trading and dealing: The Company aims to conduct its business fairly and to compete ethically and in accordance with relevant laws. The Company strives to deal fairly with the Company's customers, suppliers, competitors and other employees and encourages its employees to strive to do the same.
- Conflicts of interest: Employees and Directors must avoid conflicts as well as the appearance of conflicts between personal interests and the interests of the Company.
- Compliance with legislation affecting its operations: Directors, officers and senior executives of the Company and all operating entities are responsible for setting up and maintaining a system of internal controls, financial and otherwise, in order to provide reasonable assurance of effective and efficient operations, reliable financial information and reporting, and compliance with laws and regulations.
- How the Company monitors and ensures compliance with its Code: The Board, management and all employees of the Company are committed to implementing this Code of Conduct and each individual is accountable for such compliance. Disciplinary measures may be imposed for violating the Code.
A copy of the Code is available on the below link.
Photon Group Code of Conduct >
3.2 Company Securities Trading Policy
Photon has a Securities Trading Policy under which Directors, senior executives and other employees likely to be in possession of unpublished price sensitive information and their associates may not trade in the Photon's securities during the following "blackout periods" commencing:
- 31 December each year until the release by Photon of its half-yearly results to the ASX in February; and
- 30 June each year until the release by Photon of its annual results to the ASX in August.
In addition, consistent with the law, designated officers are prohibited from trading in Photon's securities while in the possession of unpublished price sensitive information concerning the consolidated entity. Unpublished price sensitive information is information regarding the consolidated entity, of which the market is not aware, that a reasonable person would expect to have a material effect on the price or value of Photon's securities.
Notice of an intention to trade must be given to the company secretary prior to trading in the Company's securities. The completion of any such trade by a Director must also be notified to the Company Secretary who in turn advises the ASX.
A copy of the Securities Trading Policy is available on the below link.
Photon Group Securities Trading Policy >
Principle 4: Safeguard integrity in financial reporting
4.1 Establishment of Audit Committee
The Audit Committee monitors and reviews the effectiveness of the consolidated entity's controls in the areas of operational and balance sheet risk, legal, compliance and financial reporting. The committee discharges these responsibilities by:
- overseeing the adequacy of the controls established by senior management to identify and manage areas of potential risk and to safeguard the assets of Photon;
- overseeing Photon's relationship with the external auditor and the external audit function generally; and
- evaluating the processes in place to ensure that accounting records are properly maintained in accordance with statutory requirements and financial information provided to investors and the Board is accurate and reliable.
The committee has also adopted a policy on the provision of non-audit services and complies with the statutory requirements regarding the rotation of external audit personnel. All non-audit services were subject to the corporate governance procedures adopted by the company and have been reviewed by the audit committee to ensure they do not impact the integrity and objectivity of the auditor. The non-audit services provided do not undermine the general principals relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor's own work, acting in a management or decision making capacity for the Company, acting as an advocate for the Company or jointly sharing risks and rewards.
Members of management and the external auditors attend meetings of the committee by invitation. The committee may also have access to financial and legal advisors, in accordance with the Board's general policy.
4.2 Structure of Audit Committee
The Audit Committee consists only of non-executive directors, including a majority of independent directors. The current members of the Audit Committee are Mr Brian Bickmore, Ms Susan McIntosh and Mr Paul Gregory. Brian Bickmore is the independent Chair of this committee. All members can read and understand financial statements and are otherwise financially literate. The details of the member's qualifications can be found on the Board of Director page on this website.
Details of the number of meetings of the Audit Committee and the names of attendees can be found in the 2008 Directors' Report. The Audit Committee meets with an external auditor at least twice a year.
4.3 Audit Committee Charter
The Audit Committee consists only of non-executive directors, including a majority of independent directors. The current members of the Audit Committee are Mr Brian Bickmore, Ms Susan McIntosh and Mr Paul Gregory. Brian Bickmore is the independent Chair of this committee. All members can read and understand financial statements and are otherwise financially literate. The details of the member's qualifications can be found on the Board of Director page on this website.
A copy of the Audit Committee Charter is available on the below link.
Photon Group Audit Committee Charter >
Principle 5: Make timely and balanced disclosure
5.1 Policy for compliance with continuous disclosure
Photon has established a Continuous Disclosure Plan to ensure compliance with the ASX Listing Rule disclosure requirements.
The Board has designated the Company Secretary as the person responsible for overseeing and coordinating disclosure of information to the ASX as well as communicating with the ASX. In accordance with the ASX Listing Rules the Company immediately notifies the ASX of information:
- concerning the Company that a reasonable person would expect to have a material effect on the price or value of the Company's securities; and
- that would, or would be likely to, influence persons who commonly invest in securities in deciding whether to acquire or dispose of the Company's securities.
A copy of the Company's Continuous Disclosure Plan is available of the below link.
Photon Group Continuous Disclosure Plan >
Principle 6: Respect the rights of shareholders
6.1 Communications strategy
To facilitate the effective exercise of the rights of shareholders the Company is committed to ensuring that all external communications with shareholders will:
- be factual;
- not omit material information; and
- be timely and expressed in a clear and concise manner.
Photon's website, contains recent announcements, presentations, analyst reports, past and current reports to shareholders, answers to frequently asked questions and a summary of key financial data. Where practicable, Photon uses the latest widely available electronic technology to communicate openly and continually with shareholders and the market in general. Announcements to the ASX and notices of meetings are promptly posted on the Company's website and retained there for at least three years.
The Company also regularly mails information to shareholders, and encourages shareholders to participate in general meetings of the consolidated entity. The Company seeks to choose a date, venue and time for the Annual General Meeting that is convenient to the greatest number of its shareholders, and takes reasonable measures to ensure the attendance of the external auditor to answer questions from shareholders about the conduct of the audit and the preparation and content of the auditor's report.
The Company also makes available a telephone number and email address for shareholders to make enquiries of the consolidated entity.
Principle 7: Recognise and manage risk
7.1 Policies on risk oversight and management
Photon recognises that identification and effective management of risk is viewed as an essential part of good corporate governance and the company’s approach to creating long term shareholder value.
Photon has therefore established and implemented the Risk Management Policy designed to identify and respond to risks in a way that creates value for Photon shareholders and to allow the Company to meet its long term growth objectives. The Risk Management Policy includes specific risk management activities in core areas of risk for the consolidated entity, including: operational, financial reporting and compliance risks.
The Risk Management Policy, adopted by the company includes:
- Process for identification of the material business risks faced by the company;
- Prioritisation of material business risks;
- Where the level of risk is greater than the risk tolerance, identification of controls to manage the risk; and
- Ongoing reporting and discussion of material business risks throughout the year.
Risk management is a key element of Photon’s strategic planning and decision making. Photon strives to balance the risks and rewards in conducting business to optimise returns, in accordance with its goals of delivering shareholder value and its commitments to stakeholders, customers and the broader community.
7.2 Risk management roles and responsibilities
Management through the CEO is responsible for designing, implementing and reporting on the adequacy of the company’s risk management and internal control system. Management reports to the Audit Committee on the company’s key risks and the extent to which it believes these risks are being managed. This is performed on an annual basis or more frequently as required by the board.
The Board is responsible for satisfying itself annually, or more frequently as required, that management has developed and implemented a sound risk management and internal control system. Detailed work on this task is delegated to the Audit Committee and reviewed by the board. The Audit Committee also oversees the adequacy of the company’s risk reporting from management.
Strategic and operational risks are reviewed at least annually by all operating divisions as part of the annual strategic planning and budgeting process. Division risk profiles are also reviewed quarterly as part of the regular reporting to the Board. The CEOs of the company’s subsidiaries and managing directors of the company’s divisions are required to report to the Board each month on operational risks. These are then reviewed by the CEO, CFO and General Counsel each month and external auditors as part of the half-yearly reporting to the market.
The General Counsel monitors the company’s compliance with its legal and regulatory obligations. Senior management meet regularly to deal with specific areas of risk such as treasury risk, exposure to interest rates and foreign exchange rates and provides reporting to the board on these areas at least annually.
The company will provide updates to any changes in its circumstances in press releases on the investor section of the company’s website.
7.3 Statement of CEO and CFO in relation to systems
The Board has received assurance from the CEO and the CFO that the declaration provided by them in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that, in their opinion, the Company’s Risk Management System is operating effectively in all material respects in relation to financial reporting risks.
The Board notes that due to its nature, internal control assurance from the CEO and CFO can only be reasonable rather than absolute. This is due to such factors as the need for judgement, the use of testing on a sample basis and because much of the evidence available is persuasive rather than conclusive and therefore is not and cannot be designed to detect all weaknesses in control procedures.
Principle 8: Remunerate fairly and responsibly
8.1 Establishment of Remuneration Committee
The Remuneration Committee was formed by resolution of the Board on 25 March 2004.
A copy of the Remuneration Committee Charter is available on the below link.
Photon Group Remuneration Committee Charter >
8.1.1 Role
The Remuneration Committee reviews and makes recommendations to the Board on remuneration packages and policies including but not limited to succession planning, recruitment and the appointment of the Chief Executive Officer, senior executives and directors themselves and overseeing succession planning, selection and appointment practices and remuneration packages for management and employees of Photon Group.
The objectives of the committee include to:
- review, assess and make recommendations to the Board on the desirable competencies of the Board;
- assess the performance of the members of the Board;
- oversee the selection and appointment practices for non-executive directors and senior management of Photon;
- develop succession plans for the Board and oversee the development of succession planning in relation to senior executives; and
- assist the Board in determining appropriate remuneration policies.
8.1.2 Composition
Mr Brian Bickmore, Mr Tim Hughes and Mr Paul Gregory are the current members of the Remuneration Committee the majority of whom are Independent Directors. Mr Brian Bickmore, the Chair of the Remuneration Committee, is an Independent Director.
Details of the number of meetings of the Remuneration Committee and the names of the attendees can be found in the 2008 Directors' Report.
8.1.3 Responsibilities
The responsibilities of the Remuneration Committee include setting policies for senior officers' remuneration, setting the terms and conditions of employment for the CEO, reviewing and making recommendations to the Board on the Company's incentive schemes and superannuation arrangements, making recommendations to the Board on any proposed changes to the Board and undertaking an annual review of the CEO's performance, including, setting with the CEO goals for the coming year and reviewing progress in achieving these goals.
8.2 Executive and Non-Executive Director remuneration
The Senior Executive Remuneration Policy was approved by resolution of the Board in September 2004 and the Non-Executive Director Remuneration Policy was approved by resolution of the Board on 25 March 2004.
8.2.1 Senior Executive Remuneration Policy
The consolidated entity is committed to remunerating its senior executives in a manner that is market-competitive and consistent with best practice as well as supporting the interests of shareholders. Consequently, under the Senior Executive Remuneration Policy the remuneration of senior executives may be comprised of the following:
- fixed salary that is determined from a review of the market and reflects core performance requirements and expectations;
- a performance bonus designed to reward actual achievement by the individual of performance objectives and for materially improved Company performance;
- participation in the option scheme with thresholds approved by shareholders; and
- statutory superannuation.
By remunerating senior executives through performance and long-term incentive plans in addition to their fixed remuneration the Company aims to align the interests of senior executives with those of shareholders and increase Company performance.
Details of the amount of remuneration, including both monetary and non-monetary components, for each of the five highest paid (Non-Director) executives during the year (discounting accumulated entitlements) is detailed in the Director's Report and Note 20 of the notes to the financial statements.
8.2.2 Non-Executive Director Remuneration Policy
The Constitution provides that the Non-Executive Directors are each entitled to be paid such remuneration from the Company as the Directors decide for their services as a Director, but the total amount provided to all Non-Executive Directors for their services must not exceed in aggregate in any financial year the amount fixed by the Company in a general meeting. This amount is currently fixed at $450,000. The remuneration of Non-Executive Directors must not include a commission on, or a percentage of, profits or operating revenue. Directors may also be reimbursed for travelling and other expenses incurred in attending to the Company's affairs. Directors may be paid such additional or special remuneration as the Directors decide is appropriate where a Director performs extra services or makes exertions for the benefit of the Company.
Non-Executive Directors are entitled to statutory superannuation, but do not otherwise receive retirement benefits.
Details of the amount of remuneration, including both monetary and non-monetary components, for each of the Directors paid during the year (discounting accumulated entitlements) is detailed in the 2008 Director's Report.
