Board of Directors
- Role of the board and responsibilities
- Board membership, size and composition
- Selection and role of Chairman
- Director independence
- Conflicts of interest
- Nominations and appointment of new directors
- Diversity within the board
- Letters of appointment
- Director induction and education
- Board performance review
- CEO performance review
- Executive performance review
- Retirement and re-election of directors
- Board access to information and advice
- Directors' shareholding
- Indemnities and insurance
- Meetings of the Board and conduct of meetings
- Attendance at board and committee meetings
- Company Secretary
The board of directors is elected by shareholders to govern Telecom in the interests of shareholders and to protect and enhance the value of the assets of Telecom. The board is the overall and final body responsible for all decision-making within the company. In carrying out its role, the board works to enhance the value of Telecom in the interests of Telecom and its shareholders. The Board Charter (PDF 121KB) describes the board's role and responsibilities and regulates internal board procedure. The board has also delegated a number of its responsibilities to board committees. The role of each committee is described below. To enhance efficiency, the board has delegated to the CEO and subsidiary company boards the day-to-day leadership and management of the Company. The CEO has, in some cases, formally delegated certain authorities to his direct reports and has established a formal delegated authority framework for those direct reports to sub-delegate certain authorities within set limits.
As at 30 June 2012, the board comprised seven directors: being a non-executive chairman, an executive director (the CEO) and six non-executive directors. On 13 August 2012 the new CEO, Simon Moutter, joined the board as an executive director and the board now comprises eight directors. The board has a broad range of experience and skills appropriate to meet its objectives. Areas of expertise and experience include telecommunications, finance, legal, brand, marketing, accounting, governance and international business. For details of individual directors see About Telecom/Board of Directors.
The chairman is elected by the board from the non-executive directors. The board supports the separation of the role of chairman and CEO. The chairman's role is to manage and provide leadership to the board and to facilitate the board's interface with the CEO. The current chairman, Mark Verbiest, who was appointed on 1 December 2011, upon the Demerger taking effect, is a non-executive director and, as required by the board charter, is independent on the basis outlined below.
The board is committed to having a majority of directors who are judged by the board to be independent of judgement and character and free of material relationships with Telecom and/or other entities and people who might influence, or could be perceived by others to influence, such judgement.
In setting the criteria for determining independence, the board considered the requirements under the NZSX Listing Rules, the NYSE listing standards, and the guidance provided in the ASX Corporate Governance Council's Principles and Recommendations. Independence standards consistent with the requirements of these jurisdictions have been adopted by Telecom and are contained in the board charter. Telecom's board charter requires a majority of directors to be independent. As a result of the delisting of Telecom's ADSs from the NYSE, the board may re-assess the criteria it uses to determine director independence in FY13.
While the board has not set financial materiality thresholds for determining independence, it considers all relationships on a case-by-case basis, and, as a general policy, considers a threshold of 5% to be relevant in determining materiality. When determining independence, relationships are considered from the perspective of both Telecom and the customer or supplier.
At its 23 August 2012 board meeting the board resolved, based on information provided by directors regarding their interests, that each non-executive director on the board at the balance date and at the date of the meeting was independent, with the exception of Mr Roberts. Mr Roberts was found to be not independent as a result of a technical analysis of his role as CEO of Saatchi & Saatchi Worldwide. While the board are of the view that there is in fact no actual conflict of interest, it recognises that there may be a perception that such a relationship could influence Mr Roberts' decisions in relation to Telecom's advertising spend with Saatchi & Saatchi New Zealand (in accordance with the board charter test). Despite this determination, the board is of the opinion that Mr Roberts does not in fact exercise influence in relation to the engagement of Saatchi & Saatchi New Zealand as an advertising supplier to Telecom (as decisions relating to advertising spend are made by management, not the board) and that in all other respects the board regards Mr Roberts as independent. The board also resolved that the executive director, Mr Moutter, was not independent by virtue of the fact that he is the CEO and therefore part of the management team.
The board will review any determination it makes on a director's independence on becoming aware of any information that indicates the director may have a relevant material relationship. For this purpose, directors are required to ensure that they immediately advise of any new or changed relationships so the board can consider and determine the materiality of the relationship.
The board is conscious of its obligations to ensure that directors avoid conflicts of interest (both real and perceived) between their duty to Telecom and their own interests. The board charter outlines the board's policy on conflicts of interest. Where conflicts of interest do exist at law then the director must disclose their interest and excuse themselves from any relevant board discussions. Such a director is not permitted to receive any board papers in respect of those interests, and in accordance with the relevant stock exchange listing rules, may not exercise his or her right to vote in respect of such matters.
The procedures for the appointment and removal of directors are ultimately governed by the company's constitution (PDF 237KB). The board may appoint directors to fill casual vacancies that occur or to add persons to the board up to the maximum number (currently 12) prescribed by the constitution. Recommendations for nominations of new directors are generally made by the Nominations and Corporate Governance Committee and considered by the board as a whole. External consultants are used to access a wide base of potential candidates and to review the suitability of candidates for appointment. When recommending a candidate to act as director, the Nominations and Corporate Governance Committee takes into account such factors as it deems appropriate, including the background experience, professional skills and personal qualities of the candidate, whether their skills and experience will augment the existing board and their availability to commit themselves to the role. If the board appoints a new director during the year, that person will stand for election by shareholders at the next annual meeting. Shareholders are provided with relevant information on the candidates standing for election in the notice of meeting.
The board recognises that building diversity across Telecom will deliver enhanced business performance - this includes building diversity of thought within the board of directors. Diverse backgrounds, gender, age, experience and perspectives are critical to building a high-performing business, better able to solve problems and implement new ideas. The current board has depth and breadth of experience both in New Zealand and overseas as well as the diversity of age, gender and perspectives necessary to govern Telecom as it addresses opportunities and challenges following the Demerger.
All directors have signed formal letters of appointment setting out the arrangements of their appointment, including their duties, terms, conditions and term of appointment, expectations of the role and remuneration. The terms of appointment may be amended with the agreement of the board.
The board introduces new directors to management and the business through specifically tailored induction programmes, depending on their needs. The programme may include one-on-one meetings with management and visits to key company sites.
All directors are regularly updated on relevant industry and company issues. This may include visits to Telecom operations, and briefings from key executives and industry experts. From time to time the board may also undertake educational trips to receive briefings from companies in relevant industries. There is an ongoing programme of presentations to the board by all business units. The board expects all directors to undertake continuous education so that they may appropriately and effectively perform their duties.
Board evaluations are undertaken annually to seek director and executive feedback on a range of matters relating to board performance, including its role and composition, and engagement with management, shareholders and stakeholders. The collective results of the evaluation are then reported to the board by the chairman and discussed with directors. As the majority of the board was newly appointed in December 2011, no such board evaluation took place in FY12. It is the role of the chairman to regularly address various issues with directors, including individual performance. The board also undertakes regular discussion on governance and performance issues, and annually reviews its own performance as a whole against the board charter and each committee against its charter.
The Human Resources and Compensation Committee reviews the performance of the CEO. The formal annual review process is usually conducted in August in respect of the immediately preceding financial year. This evaluation carried out is undertaken using criteria set by the committee, and approved by the board that include the performance of the business, the accomplishment of strategic and operational objectives, and other non-quantitative objectives agreed at the beginning of each year. The committee recommends a performance outcome to the board for approval. The committee periodically reviews the CEO's key performance objectives to ensure they are an appropriate measure of the CEO's performance. For further details of the employment arrangements relating to the CEO, see CEO remuneration.
The CEO reports to the Human Resources and Compensation Committee at least annually on management succession planning and management development.
Leadership Team performance review
The CEO is responsible for regularly reviewing the performance of his direct reports against their key performance objectives. The formal annual review process is generally conducted in August in respect of the immediately preceding financial year. This evaluation is undertaken using criteria set annually by the CEO that include the performance of the business, the accomplishment of strategic and operational objectives and other non-quantitative objectives agreed at the beginning of each financial year. The Human Resources and Compensation Committee reviews and approves the CEO's remuneration recommendations for his direct reports, including the payment level of their annual short-term incentives and any other variation of the terms and conditions of employments. For further details of the employment arrangements relating to Leadership Team remuneration see Executive remuneration.
Telecom directors have no fixed term of office, but are subject to the retirement provisions contained in the constitution, company policies and relevant stock exchange listing rules. Under the NZSX Listing Rules, at least one third (or the number nearest to one third) of the directors are required to retire from office at the annual meeting each year but shall be eligible for re-election at that meeting. The executive director (the CEO in Telecom's case) is exempted from the requirement to stand for re-election, but the executive director is counted in determining the number of directors that must retire. Under the ASX Listing Rules, a director must not hold office without re-election past the third annual meeting following the director's appointment or three years, whichever is the longer. The retiring directors at any annual meeting will be those who have been longest in office since they were last elected. Telecom's notice of meeting details those director(s) standing for re-election at Telecom's next annual meeting.
Telecom's Group General Counsel & Group Company Secretary is responsible for supporting the effectiveness of the board by ensuring that policies and procedures are followed and for co-ordinating the completion and dispatch of the board agenda and papers.
All directors have access to senior management, including the group general counsel and the company secretary, to discuss issues or obtain information on specific areas or items to be considered at the board meeting or other areas they consider appropriate.
The board, board committees and each director have the right, subject to the approval of the chairman, to seek independent professional advice at Telecom's expense to assist them in carrying out their responsibilities. Further, the board and board committees have the authority to secure the attendance of outsiders with relevant experience and expertise at board meetings.
As a matter of board policy non-executive directors are encouraged to hold Telecom shares. View the table of Directors' shareholdings included in the Disclosures/Interests Disclosures section of the Annual Report.
Directors are required to comply with Telecom's Insider Trading Policy (PDF 140KB) and Rules, when undertaking any trading in Telecom shares.
As permitted by the constitution, deeds of indemnity have been given to directors for potential liabilities and costs they may incur for acts or omissions in their capacity as directors. In addition, deeds of indemnity have been given to certain senior staff for potential liabilities and costs they may incur for acts or omissions in their capacity as employees of Telecom, directors of Telecom subsidiaries or directors of non-Telecom companies in which Telecom holds interests.
Telecom holds directors and officers liability insurance to cover risks normally covered by such policies arising out of acts or omissions of directors and employees in their capacity as such. Insurance is not provided for dishonest, fraudulent, malicious or wilful acts or omissions. It is standard insurance industry practice not to disclose the name of the insurer, the limit of liability purchased or the premium paid.
The board has eight scheduled meetings each year. In addition, it meets whenever necessary between the scheduled meetings, to discuss key strategic issues or urgent business.
The chairman and the CEO establish meeting agendas to ensure adequate coverage of key issues during the year. The directors generally receive materials for board meetings seven days in advance of the meeting, except in the case of special meetings for which the time period may be shorter due to the urgency of the matter to be considered.
Executives and other senior employees regularly attend board meetings and are also available to be contacted by directors between meetings. The board and its committees also meet regularly in executive session, presided over by the chairman, without the CEO or other management present. Such sessions, in particular, deal with management performance and remuneration issues, board performance evaluation issues, and discussions with the general manager group risk and audit and external auditors to promote a robust independent audit process.
Attendance at board and committee meetings
The full board held seven formal meetings and four special meetings during the year ended 30 June 2012. Director attendance at board meetings held during the previous financial year is available in the Governance/Board Committees page of the Annual Report.
The Company Secretary, who is appointed by the board as a whole, is accountable to the board, through the Chairperson, on all governance matters. The Company Secretary plays a significant role in monitoring compliance with board policy and procedures, and timely completion and despatch of board agenda and briefing material. All directors have access to the Company Secretary.
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