Western Power’s governance obligations are principally contained within the Electricity Corporations Act (Act). While Western Power is not listed on the Australian Securities Exchange (ASX), it seeks to apply the ASX Corporate Governance Principles and Recommendations released by the ASX Corporate Governance Council (third edition) (ASX Principles) to its operations to the extent that they are applicable and not inconsistent with the requirements of the Act and other applicable laws.
Appointment of directors
Appointment of directors is governed by the Act. Directors are appointed by the Governor of Western Australia (Governor) on nomination of the Minister. The Minister consults the Board before making director nominations.
In preparing to consult with the Minister, the Board undertakes appropriate checks in relation to matters such as any relevant qualifications and experience and, to ensure the candidate would classify as independent reviews details of other current directorships and potential conflicting interests.
The Act provides that the Board must comprise not less than four and not more than eight directors. There are currently six independent non-executive directors on Western Power’s Board.
The Board considers that all of the non-executive directors collectively bring the requisite range of skills, knowledge and experience necessary to direct Western Power. The P&PC assists the Board Chair to review the size and composition of the Board and the mix of existing and desired competencies across members with the objective that Board
composition and director competencies are properly aligned with Western Power's prevailing strategic direction.
In assessing the composition of the Board, regard is had to the following criteria:
The Board Chair is responsible for the overall leadership of the Board. The Chair ensures the efficient conduct of the Board’s function and for the promotion of open, cordial and cooperative relations between directors and between the Board and management. The Board Chair’s responsibilities are set out in more detail in the Board charter.
The Board charter requires the Board to have regard to the independence of candidates when consulting with the Minister on director appointments.
The Board charter outlines the criteria to be considered in assessing independence, which are based on the premise that a director must be independent of management and free of any business or other relationship that could materially interfere, or could reasonably be perceived to interfere, with the exercise of the director’s unfettered and independent judgment.
The test of whether a business or other customer or supplier relationship is material is based on the nature of the relevant relationship and on the circumstances of the individual director. Materiality is considered from the perspective of Western Power, the persons or organisations with which the director has an association and from the perspective of the director. The Board considers that a customer or supplier is material where the amount
receivable or payable, respectively, by Western Power in any 12 month period exceeds $1.5 million. This threshold is not conclusive and the Board will examine both the qualitative andquantitative nature of a director’s relationship with any particular customer or supplier when assessing director independence.
The Board has considered the independence of each director currently in office and has determined that all are free of business or other relationships that could materially interfere, or could reasonably be perceived to interfere, with the exercise of the director’s unfettered and independent judgment. Accordingly, all directors of Western Power are considered to be independent, non-executive directors. For information about each director, see the director profiles.
Conflicts of interest
Directors must keep the Board advised on an ongoing basis of any personal or other interest that could potentially conflict with Western Power’s interests. Board members must comply with Western Power’s conflicts of interest standard and are provided with guidelines outlining the duties and obligations of directors and executive officers on their appointment.
Furthermore, the agenda for all Board and committee meetings includes a standing item for declarations of material personal or other interests to be made.
A director with an actual or potential conflict of interest in relation to a matter being dealt with at a Board meeting must not vote on or be present at the meeting while the matter is considered, unless the Board by resolution decides that the interest should not disqualify the director.
Board succession planning
The P&PC assists the Board with succession planning.
Where a non-executive director position becomes vacant, the P&PC and Board Chair:
Criteria considered by the P&PC when evaluating prospective candidates are contained in the Board composition and skills evaluation matrix.
Terms of appointment, induction training and continuing education
Under the Act, a director is appointed for a period of up to three years and is eligible for reappointment. Periods of appointment will be structured to ensure that approximately one third of directors retire each calendar year. The Governor may remove a director from office at any time.
All current non-executive directors have been provided with information recommended by the ASX Principles (including remuneration, duties, rights and responsibilities, the Board’s expectations regarding involvement with committee work and the requirement to disclose the person’s interests and other matters which may affect their independence). Similar information is provided to members of the senior executive team.
The General Counsel oversees establishment and implementation of an effective induction process for new directors and reviews that process regularly. The induction process includes discussions with the CEO and other senior managers and the provision of information on key corporate and Board policies and strategic plans.
Western Power’s directors’ governance handbook is distributed to new directors and is used as part of the induction process. The handbook provides a detailed summary of the corporate governance framework and documents applicable to the Board of Western Power.The corporate governance framework comprises various terms of reference and codes that have been prepared in accordance with statutory requirements, corporate governance standards and best practice guidelines that are considered relevant to Western Power.
All directors are encouraged to undertake personal professional development to maintain the skills required to discharge their duties.
The P&PC assists the Board in establishing remuneration policies and reviewing their effectiveness. The remuneration of non-executive directors is determined by the Minister.
Western Power has a remuneration policy in relation to director remuneration. Details of the remuneration policy, together with details of the remuneration paid to Western Power’s directors are set out in the remuneration section of the directors’ report included in Western
Power’s Annual Report.
There are no schemes for retirement benefits, other than superannuation, provided for any non-executive director.
The role of Company Secretary is carried out by Western Power’s General Counsel. The General Counsel’s qualifications and experience are set out in Western Power’s Annual Report. The appointment and removal of the General Counsel requires Board endorsement.
The General Counsel is accountable directly to the Board, through the Board Chair, on all matters to do with the governance of the Board. The General Counsel is responsible for ensuring that Board procedures are complied with and that governance matters are addressed. All directors have access to the General Counsel’s advice and services.
The Board meets at least nine times per calendar year to address strategic issues of Western Power’s operations. Further special meetings of the Board are arranged on an as needs basis.
Details of the number of Board meetings during the financial year and directors’ attendance at these meetings are available in Western Power’s Annual Report. Proceedings at Board meetings are governed by the Act and corporate governance framework.
Code of conduct and public interest disclosure policy
The Board has approved:
1. a code of conduct that applies to directors, officers and all employees of Western Power
2. a conflict of interest standard
3. a compliance standard and framework
4. a public interest disclosure standard.
Collectively, the code of conduct and respective policies:
Diversity at Western Power
Western Power recognises that a diverse workforce, reflective of the wider community it serves and represents, is better able to understand and meet its strategic objectives and the needs of its customers.
By employing a workforce reflective of the wider community, Western Power is able to draw on varying perspectives in order to assist in the achievement of these goals. Western Power values diversity in its workforce and in support of this has established an equity and diversity standard.
The commitment to diversity in its workforce remains a strong focus for Western Power. The strategies aimed at achieving its diversity targets (including gender) are actively managed through an equity and diversity standard. This standard is endorsed in accordance with the Equal Opportunity Act and supports Western Power in the achievement of its corporate objectives through the attraction, retention and engagement of a wide variety of individuals with varying skills, experiences and perspectives.
Progess has been made towards maintaining and increasing Western Power’s representation targets during 2016:
The role of the Finance & Risk Committee (F&RC) is to assist the Board to discharge its responsibilities in relation to Western Power’s financial and treasury management, application of accounting policies, financial reporting and, risk management and compliance systems. The committee also oversees internal audits (by the Internal Audit area) and the external audit (by the Auditor General) of the corporation.
Risk assurance and internal audit programs are integral components of Western Power’s governance process. A full time Internal Audit Manager, supported by internal and external resources, provides independent and objective risk assurance and audit services designed to add value and improve Western Power’s operations and legislative and regulatory compliance.
The committee’s terms of reference specify that the F&RC must be comprised of a minimum of three members, all of whom must be non-executive directors. The terms of reference also specify that the F&RC will be chaired by an independent director, who is not also the Board Chair.
Western Power’s Chief Executive Officer, Chief Financial Officer, General Counsel, Internal Audit Manager and representatives of the Office of the Auditor General, attend committee meetings by invitation.
The number of committee meetings held during the financial year and members’ attendance at those meetings are available in Western Power’s Annual Report.
Western Power is not a listed company and is not subject to the obligations contained within the ASX Listing Rules.
The Act imposes requirements on Western Power to report to the Minister on a range of matters. The F&RC monitors Western Power’s systems and processes to achieve compliance with these reporting requirements.
The Board has approved a compliance standard and framework which is designed to ensure that all Western Power employees are aware of relevant legislative obligations, including those relating to disclosure and reporting. The compliance standard and framework:
As Western Power is a Western Australian State Government owned corporation it does not issue or have any issued shares. The Minister has various rights set out in the Act such as Board nominations, approvals for certain transactions and access to information about the corporation.
The Board is Western Power’s governing body and responsible to the Minister for its performance. The Minister and the Board may consult on any aspect of Western Power’s operations.
The Act also imposes the following reporting obligations on Western Power:
Western Power has a framework to manage its strategic, operational, regulatory and reporting risks. The corporate risk management standard and framework:
Executive Managers and Heads of Function are responsible for identifying risks and implementing strategies to mitigate them. The F&RC oversees the risk management standard and framework and reviews the effectiveness of key mitigation strategies.
The Board (via the F&RC) receives a quarterly risk report which notifies directors of any issues of concern and requires an annual assurance from the CEO and the CFO that effective risk management processes in relation to material business risks are in place.
Financial risk issues are managed in line with the Treasury Policy that requires regular reporting to the F&RC on treasury related activities.
Risk reviews are conducted at least annually to ensure emerging risks, such as those arising from changes in market structure and design, organisational restructures and operational issues are identified and addressed.
The Risk Management Framework also involves the Board reviewing all major strategies and acquisitions for their impact on the risks facing Western Power and ensuring that appropriate mitigation actions are implemented or insurance cover is in place. Management makes recommendations to the Board on the appropriate level of insurance cover for Western Power.
A discussion of Western Power’s material exposure to economic, environmental and social sustainability risk is contained in the directors’ report included in Western Power’s Annual Report.
The remuneration section contained within Western Power’s annual financial report sets out details of Western Power’s policies and practices for remunerating directors, senior management and employees.
People & Performance Committee
The role of the P&PC is to assist the Board to discharge its responsibilities in relation to Western Power’s governance practices. Specifically, the P&PC reviews Board composition, oversees the succession planning and nomination for directors and CEO and assists the Board in establishing remuneration and human resources policies including the performance review framework.
The P&PC’s terms of reference specify that the committee must be comprised of a minimum of three members, all of whom must be non-executive directors. The terms of reference also specify that the P&PC will be chaired by an independent director, who is not also the Board Chair.
The members of the P&PC are Ms D Goldsworthy, Mr C Beckett and Ms V Krause.
The CEO, Executive Manager Business and Customer Service, Head of Human Resources and General Counsel attend committee meetings by invitation.
Details of the number of committee meetings held during the financial year, and members’ attendances at these those meetings, are available in Western Power’s Annual Report.