Corporate Governance

Sydney Ports Corporation Board

Good corporate governance creates and sustains an ethical and legal environment which recognises the interests of all stakeholders in a Corporation. The Board of Sydney Ports is responsible for overall corporate governance of the Corporation and has adopted corporate governance practices and procedures that are appropriate to manage Sydney Ports in the best interests of the Shareholding Ministers and other stakeholders.

The Board is determined to adopt the NSW Treasury Guidelines for Boards of Government Businesses (Guidelines) and this corporate governance section outlines the extent to which Sydney Ports has already applied the recommendations, and is reviewing its governance practices to make further improvements.

The role of the Board

The Board is responsible for overseeing the business and commercial affairs of the Corporation including:

• approving the strategy;
• approving the business and financial objectives;
• monitoring business and financial performance;
• reviewing performance and remuneration of executive management;
• reviewing the risk management and internal control framework;
• recommending to the Portfolio Minister the appointment and removal of the Chief Executive Officer; and
• reviewing any reporting to Shareholding Ministers.

The CEO is responsible for the day to day management of the operation of the SOC in accordance with the general policies and specific directions of the Board. It is the responsibility of the Board to oversee the activities of management in carrying out these delegated duties.

The Board's role and responsibilities to each key stakeholder are set out in the Sydney Ports Board Charter.

You can access the full board charter here.

Code of Conduct

Sydney Ports has an established Code of Conduct to guide compliance with legal and other obligations to key stakeholders. The Code applies to Directors, employees, consultants, contractors and all other people when they represent the Corporation and addresses:

• Responsibilities to key stakeholders;
• Acceptance of gifts and benefits;
• Conflicts of interest and misuse of position;
• Reporting of potential breaches; and
• Monitoring of the Code.

You can access the Code of Conduct here.

To assist the Board in discharging its functions and to allow a more detailed analysis of the specialised areas of finance, risk, audit and remuneration, the following committees have been established:

• Audit and Risk Committee; and
• Remuneration Committee.

Audit and Risk Committee

The Chair of the Audit and Risk Committee is Michael Braham. Michael is an independent Non-executive Director, who is not the Chair of the Board. Other members of the Committee are Paul Binsted and Rene van der Loos who are each independent, Non-executive Directors. Each of the members of the Committee is financially literate and has knowledge of the business. Michael Braham has qualifications and experience in accounting. The Board considers the mix of skills and experience on the Audit Committee appropriate to meet the responsibilities of its Charter.

The Committee is responsible for oversight and review of:

• financial control and reporting;
• risk management;
• debt structure and debt instruments;
• accounting policies
• the evaluation of all major capital expenditure proposals;
• business ethics, policies and practices;
• internal controls;
• compliance with taxation and other applicable laws and regulations;
• integrity and performance of the internal audit function, including appointing the Internal Auditor;
• external auditor's audits, management letter and management's responses; and
• corporate governance.

Link to Audit and Risk Committee Charter.

Remuneration Committee

The Chair of the Remuneration Committee is Rene van der Loos. Rene is an independent Non-executive Director, who is not the Chair of the Board. Other members of the Committee are Paul Binsted and Trevor Robertson, who are each independent, Non-executive Directors.

The Remuneration Committee is responsible for:

• recommending to the Board and monitoring appropriate remuneration policies and practices;
• reviewing the remuneration and performance recognition arrangements of the Chief Executive and senior executives and recommending any changes to the Board;
• reviewing decisions made by the Statutory and Other Offices Remuneration Tribunal and other private and public sector benchmarks; and
• monitoring remuneration practices across the industry which may impact on the retention of the Corporation's executives.

During the year the Remuneration Committee reviewed executive salaries and performance arrangements.

Link to Remuneration Committee Charter.

Risk Management

The Board is responsible for risk oversight, establishing an internal control system designed to identify, assess, monitor and manage business and financial risk. The Board has delegated responsibility for reviewing risk management on a regular basis to the Audit and Risk Committee but remains ultimately responsible for ensuring a sound system of risk oversight and management and internal control.

The Corporation has identified potential risks and management reports to the Board, via the Audit and Risk Committee, regularly regarding:

Board Composition

Under the State Owned Corporations Act (NSW) 1989 Sydney Ports Board is required to have a minimum of 3 Directors and a maximum of 7 Directors. One of these Directors is required to be a staff Director, elected by the staff of Sydney Ports. Directors are appointed by the Governor, on the recommendation of the Voting Shareholders.

The Voting Shareholders appoint the Chair, who is currently Paul Binsted. Paul is an Independent Director and his role is clearly separated from the role of the CEO, Grant Gilfillan. Paul is currently on the boards of two other organisations, neither of which are government boards. The Chair is responsible for leading the Board and facilitating its effective functioning.

Chief Executive Officer (CEO)

The CEO, Grant Gilfillan, was appointed during the year. As set out in the State Owned Corporations Act (NSW) 1989, the CEO was appointed by the Governor on the recommendation of the Portfolio Minister, following a recommendation from the Board. The Board's recommendation of Grant Gilfillan came after an extensive recruitment process.

Board Independence

All Directors are expected to exercise independent judgment when making Board decisions. It is the approach and attitude of each Non-executive Director which is critical to determining independence and this must be considered in relation to each Director while taking into account all other relevant factors, which will include an assessment against the independence recommendations in the Guidelines which cover whether the Director:

• Is employed, or has been employed in a senior management position by the business, and there has not been a period of at least three years between ceasing that employment and serving on the Board;
• Has within the last three years been a principal of a material professional adviser or consultant to the business, or an employee materially associated with the service provided;
• Is a material* supplier or customer of the business, or an officer of or otherwise associated directly or indirectly with a material supplier or customer; or
• Has a material* contractual relationship with the business other than as a Director of the business.

* Material means greater than 5% of the Corporation's gross revenues.

Michael Sullivan is the staff elected Director, and due to his employment by Sydney Ports is not considered independent. All other Directors are considered independent.

Independent professional advice

Each Director has the right of access to all Corporation information and employees. Further, the Board and each individual Director, subject to informing the Chair, has the right to seek independent professional advice from a suitably qualified advisor, at the Corporation's expense, to assist them to carry out their responsibilities. Where appropriate, a copy of this advice is to be made available to all other members of the Board.

Conflicts of interest

The Corporation maintains a conflicts register which registers any interests of Directors which may potentially conflict with their duties as a Director of Sydney Ports, including, other board positions. Directors are required to update this register on an ongoing basis as circumstances change.

In relation to specific Board decisions, the Board complies with Clause 2, Schedule 10 of the State Owned Corporations Act (NSW) 1989. A Director cannot take part in discussions or vote on a matter in which that Director has a material personal interest, unless the Board resolves that the interest does not disqualify the Director. There have been no related-party transactions between the Corporation and any Director during the year.

Other board memberships

The Guidelines recommend that Directors should not hold directorships of more than there Government boards. None of Sydney Port's Directors have exceeded this limit. Directors inform the Chair prior to accepting any new appointments.

Board meetings and their Conduct

The Board generally meets on a monthly basis and it meets more regularly as circumstances require.

The Secretary & General Counsel is responsible for ensuring the Board receives papers in advance of meetings and taking minutes of the meetings. The Board is responsible for the Secretary & General Counsel's appointment and removal. The Secretary & General Counsel is currently Barbara Filipowski.

Director Appointment and Education

When appointed, Directors are provided with a letter of appointment from the Voting Shareholders specifying their term of appointment and remuneration. In addition, Sydney Ports provides new Directors with a pack of information to assist them in understanding the Corporation's business and the requirements of the role. Information provided includes:

• Previous Board minutes;
• Copies of relevant legislation;
• Code of Conduct;
• Most recent annual report;
• Board profiles and contact details;
• Board and Committee charters; and
• Statement of Corporate Intent and Corporate Plan.

The remuneration for Directors of Sydney Ports is determined by the Voting Shareholders.

In addition, new Directors are provided with access to an induction program which includes a series of meetings with the Chair, CEO and key executives to gain an understanding of the Corporation's:

• strategy, objectives and business;
• industry in which Sydney Ports operate;
• corporate governance practices;
• current financial and business performance;
• key executives;
• remuneration strategy; and
• risk management framework.

All other Directors are encouraged to continue their education. This is facilitated by regular workshops and site visits on Sydney Ports' operations and briefings on key issues. A program of continuing education workshops is currently being developed for 2008/09. In addition, the Corporation funds Directors' membership of the Australia Institute of Company Directors and attendance at specific courses or conferences if appropriate.

Board Performance

The Board believes it is important to evaluate its own performance and that of each Director on a regular basis. The Board is currently developing a process to undertake a formal Board assessment process during 2008/09. It is then intended to carry out a performance evaluation process on a periodic basis.