- Role of the board and responsibilities
- Board membership, size and composition
Role of the board and responsibility
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 46KB) 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 Chief Executive Officer (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.
Board membership, size and composition
As at 30 June 2009, the board is comprised of seven directors: being a non-executive Chairman, an executive director (the CEO) and five non-executive directors. The board has a broad range of experience and skills appropriate to meet it objectives. Areas of expertise and experience include telecommunications, financial, legal, brand, marketing and international business. For details of individual directors see About Telecom/Board of Directors.
Selection and role of Chairman
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, Wayne Boyd, is a non-executive director and, as required by the board charter, is independent on the basis outlined below. Mr Boyd is also a member of each board committee.
Director independence
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 and the NYSE listing rules, and the guidance provided in the ASX Corporate Governance Council's Corporate Governance Principles Recommendations. Independence standards consistent with the requirements of these jurisdictions have been adopted by Telecom and are contained in Telecom's board charter. Telecom's board charter requires a majority of directors to be independent.
While the board has not set 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 August 2009 board meeting the board resolved, based on information provided by directors regarding their interests, that each non-executive director on the board at that time, with the exception of Mr Roberts, was independent. Mr Roberts was found to be not independent due to the fact that his sister had been a Telecom executive within the past three years.
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.
Conflicts of interest
The board is conscious of its obligations to ensure that directors avoid conflicts of interest (both real and apparent) 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 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.
Nominations and appointment of new directors
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 additional persons to the board to the maximum number (currently 12) prescribed by the constitution. Recommendations for nominations of new directors are 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 candidates 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.
Letters of appointment
All directors have signed formal letters of appointment setting out the arrangements of their appointment, including their duties, terms and conditions and term of appointment, expectations of the role and remuneration. The terms of appointment may be amended with the agreement of the board.
Retirement and re-election of directors
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. The Constitution (PDF 237KB) provides for the retirement of directors at age 70. In addition, under the NZSX Listing Rules, one third (or the nearest number to one third) of directors is required to retire from office at the annual meeting each year, but shall be eligible for re-election at that meeting. The managing director (the CEO in Telecom's case) is exempted from the requirement to stand for re-election, however, the managing 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 annual meeting.
Director induction and education
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, 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 access to information and advice
Telecom's Group General Counsel and Group Company Secretary are 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 Group Company Secretary, to discuss issues or obtain information on specific areas in relation to items to be considered at the board meeting or other areas as they consider appropriate.
The board, the 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 to carry 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.
Directors' shareholding
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 on page 133 of the Annual Report (PDF 2.7MB).
Directors are required to comply with Telecom's Insider Trading Policy (PDF 88KB) and Rules, when undertaking any trading in Telecom shares.
Indemnities and insurance
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.
The Directors and Officers liability insurance covers 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.
Meetings of the Board and conduct of meetings
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 meet regularly in executive session, 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 Group Risk and Audit Manager and external auditors to promote a robust independent audit process.
Attendance at board and committee meetings
The full Board holds a minimum of 8 formal meetings during each year. Director attendance at board meetings held during the previous financial year is available in the Governance at Telecom page of the Annual Report (PDF 2.7MB).
Board performance review
In March 2009, a comprehensive board evaluation survey was undertaken 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 were reported to the board by the chairman. The chairman of the board regularly addresses 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.
CEO performance review
The Human Resources and Compensation Committee regularly 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 is undertaken using criteria set by the committee 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 is responsible for the evaluation of the CEO against his key performance objectives and recommends a performance outcome to the board for approval. The committee periodically reviews these CEO's key performance objectives to ensure that 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.
Company Secretary
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.
Executive 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 conducted in August each year in respect of the immediately preceding financial year, with the last review conducted in August 2009. This evaluation is undertaken using criteria set annually by the CEO that includes 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 incentive and any other variation of the terms and conditions of employments. For further details relating to executive remuneration see Telecom employee remuneration.
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