The Board may, from time to time, establish appropriate Committees of Directors to assist it by focusing on specific responsibilities in greater detail than is possible for the Board as a whole, then reporting to the Board and making any necessary recommendations.
Six standing Committees assisted Telstra’s Board during fiscal 2011:
- Audit Committee;
- Nomination Committee;
- Remuneration Committee;
- Technology Committee;
- NBN (National Broadband Network) Committee; and
- NBN Due Diligence Committee.
Following each Committee meeting, the Board receives a report from that Committee on its activities.
Each Committee operates in accordance with a written Charter or document approved by the Board. The Board appoints the members and the Chairman of each Committee. With the exception of the Technology and NBN related Committees, it is a Board requirement that only independent Directors can serve on Board Committees.
The role, function, Charter, performance and membership of each Committee are reviewed each year as part of the Board’s annual evaluation process.
Audit Committee
Role and responsibilities of the Audit Committee
The Audit Committee:
- assists the Board in discharging its responsibilities by monitoring and advising on:
- financial reporting including:
- the integrity, truth and fairness of the view given by Telstra’s financial statements;
- the integrity of Telstra’s financial systems and processes; and
- the appropriateness of Telstra’s accounting policies and practices and consistency with current and emerging accounting standards;
- Telstra’s overall risk management process and the management of specific risk areas as directed by the Board (refer to the section entitled “Risk Oversight and Management” below for further information);
- the effectiveness and operation of Telstra’s Financial Reporting Compliance Framework;
- the effectiveness and operation of other material aspects of Telstra’s internal control environment;
- compliance with legal and regulatory requirements and Company policies;
- the external audit, including the external auditor’s qualifications, scope, independence and performance, and the policy regarding the performance of non-audit services by the external auditor;
- the non-audit services disclosures to be made in the annual report, including the reasons for being satisfied that the auditor’s independence was not compromised by the provision of these services;
- the objectivity and performance of the internal audit function;
- the structure and operation of Telstra’s corporate governance framework and related disclosures;
- provides a forum for communication between the Board, management and both the internal and external auditors; and
- provides a conduit to the Board for external advice on audit, risk management and compliance matters.
Composition and membership of the Audit Committee
The Audit Committee is comprised of at least three Board members, all of whom must be independent non-executive Directors. Each member is expected to:
- be financially literate (be able to read and understand financial statements) and have sufficient financial knowledge to allow them to discharge their duties and actively challenge information presented by management, internal and external auditors;
- have a reasonable knowledge of Telstra, the industries in which it operates and its risks and controls; and
- have the capacity to devote the required time and attention to prepare for, and attend, Committee meetings.
At least one member of the Audit Committee should have relevant qualifications and experience (that is, they should be a qualified accountant or other finance professional with experience of financial and accounting matters).
In addition, the Chairman of the Audit Committee must not be the Chairman of the Board and no Director may serve as a member of the Audit Committee if that Director serves on the Audit Committee of more than two other public companies, unless the Board determines such service does not impair the Director’s ability to serve on the Committee.
Meetings of the Audit Committee
Audit Committee meetings are held on a regular basis, as determined annually in advance by the Board, and scheduled to correspond with Telstra’s financial reporting cycle. Special meetings may be convened as required.
Other members of the Board can attend Audit Committee meetings and the Audit Committee may ask management, the external auditor and others to attend meetings and provide any required advice.
The Audit Committee regularly meets with the internal auditor and the external auditor in the absence of management.
Relationship with external auditor
The Audit Committee oversees the relationship with the external auditor including:
- reviewing and agreeing on the terms of engagement for the external auditor prior to the commencement of each annual audit of the financial statements;
- reviewing the external auditor’s proposed audit scope and audit approach, including materiality levels, for the current year in the light of Telstra’s circumstances and changes in regulatory and other requirements; and
- approving the provision of recurring audit (and any non-audit) services as part of the annual approval of the audit plan.
The Audit Committee provided an annual, formal, written report detailing the nature and amount of any non-audit services rendered by the external auditor during the most recent fiscal year and an explanation of how the provision of those non-audit services are compatible with auditor independence. Details of amounts paid or payable to the auditor for non-audit services provided during the year are disclosed in Note 8 to the financial statements.
Telstra shareholders appointed Ernst & Young as the Company’s external auditor at the 2007 AGM following the resignation of the Australian National Audit Office at the conclusion of T3. The Board, on recommendation of the Audit Committee, extended Ernst & Young’s tenure as external auditor to the 2010 financial year. The Audit Committee offered the external audit to tender during fiscal 2010 and, following this process, the Board (on recommendation of the Audit Committee) reappointed Ernst & Young as the Company's external auditor. Ernst & Young is appointed as the Company’s external auditor until the end of the 2013 fiscal year.
In accordance with the Corporations Act, the lead Ernst & Young partner on the audit is required to rotate at the completion of a 5 year term. This occurred on signing of the fiscal 2007 audit opinion. A rotation occurred after the fiscal 2011 half year accounts were signed as the lead partner retired from Ernst & Young. The Board undertook a process with Ernst & Young and agreed the new lead partner.
The external auditor attends the AGM and is available to answer shareholder questions about the conduct of the audit and the preparation and content of the auditor’s report.
Nomination Committee
Role and responsibilities of the Nomination Committee
The Nomination Committee monitors and advises on:
- Board composition and performance (including Board diversity);
- Director independence; and
- appointment of the CEO and CEO succession planning.
Composition and membership of the Nomination Committee
The Nomination Committee is comprised of at least three independent Directors including the Chairman of the Board. Each member is expected to:
- have a reasonable knowledge of Telstra and the industries in which it operates; and
- have the capacity to devote the required time and attention to prepare for, and attend, Committee meetings.
Meetings of the Nomination Committee
Nomination Committee meetings are held on a regular basis, as determined annually in advance by the Board. Special meetings may be convened as required.
Other members of the Board can attend Nomination Committee meetings and the Committee can invite others, including any Telstra employees, to attend all or part of its meetings as it deems necessary or appropriate. However, if a person has a material personal interest in a matter that is being considered at a meeting, they must not be present for consideration of that matter.
The Board’s policy and procedure for the selection, nomination and appointment of Directors is discussed in more detail in the sections above entitled “Board membership and size” and “Board composition”.
Remuneration Committee
Role and responsibilities of the Remuneration Committee
The Remuneration Committee monitors and advises on:
- Board remuneration;
- CEO and Company Secretary performance and remuneration;
- the performance and remuneration of the executives who report directly to the CEO and any other members of the management team the Remuneration Committee determines should be subject to its supervision;
- remuneration strategies, practices and disclosures;
- employee share and option plans;
- management succession, capability and talent development;
- diversity (at all levels of the Company below Board level); and
- occupational health and safety (excluding those aspects which the Audit Committee has responsibility for under the Audit Committee Charter, in particular in relation to compliance and risk management).
The Committee also exercises the administrative powers delegated to it by the Board under Telstra’s share option plans and, in certain circumstances, makes offers to employees under those plans.
Composition and membership of the Remuneration Committee
The Remuneration Committee is comprised of at least three Board members including the Chairman of the Board, all of whom must be independent non-executive Directors. Each member is expected to:
- be familiar with the legal and regulatory disclosure requirements in relation to remuneration;
- have adequate knowledge of executive remuneration issues, including executive retention and termination policies, and short term and long term incentive arrangements;
- have a reasonable knowledge of Telstra and the industries in which it operates; and
- have the capacity to devote the required time and attention to prepare for, and attend, Committee meetings.
Telstra’s Remuneration Committee structure complies with the Amended ASX Principles and Recommendations.
Meetings of the Remuneration Committee
Remuneration Committee meetings are held on a regular basis as determined annually in advance by the Board and scheduled to correspond with Telstra’s remuneration review and reporting cycle. Special meetings may be convened as required.
Other members of the Board can attend Remuneration Committee meetings and the Remuneration Committee may invite other people, including any Telstra employees, to attend all or part of its meetings, as it deems necessary or appropriate. However, if a person has a material personal interest in a matter that is being considered at a meeting, he/she must not be present for consideration of that matter.
Technology Committee
The Technology Committee allows the Board to review technology developments which may be relevant to Telstra’s business in greater detail than is possible at Board meetings. The Committee regularly reviews product development activities, including proposed new technology products and timelines to market. The Committee's primary purpose is educative and all Directors are encouraged to attend Committee meetings (which are scheduled to coincide with Board meetings).
NBN (National Broadband Network) Committee
The NBN Committee was established during fiscal 2009. The role of the NBN Committee was to assist the Board in discharging its responsibilities by monitoring and advising on the formulation and implementation of the Company’s strategy in relation to the Federal Government’s NBN policy initiative and the associated regulatory issues, and other matters arising from, or in connection with, the NBN. The Committee ceased operation during the second half of fiscal 2011 and was superseded by the NBN Due Diligence Committee.
