Principle 2: Structure the Board to Add Value
Composition of the Board
The Board shall comprise of Directors with a range of qualifications, expertise and experience. The selection of the Board members shall always be for the purpose of their ability to add value to the Company.
For the purpose of efficient working, the preferred number of Directors in office at any one time is between 3 and 10.
To ensure that the Board is well equipped to discharge its responsibilities it has established guidelines for the nomination and selection of directors and for the operation of the Board. Any proposed new Director is nominated by the Nomination and Remuneration Committee and approved by the Board prior to being appointed. The appointment is until the next General Meeting of shareholders at which time the shareholders are required to approve the appointment.
The Council's Recommendation 2.1 requires a majority of the Board to be independent Directors. In addition, Recommendation 2.2 requires the Chairperson to be independent.
The Board consists of a Non Executive Chairman, an Executive Directors (who is also the Chief Executive Officer) and currently two Independent Non Executive Directors.
The Board believes that its main role is to add value for all shareholders and that this is best served by having a balanced Board. The Executive Directors have a substantial investment in the Company, are dedicated to the Company, and have expertise in the Company's business. The Non Executive Directors provide an external perspective to review and challenge the performance of management. The integrity and nature of the Board members is considered more important than having a majority of Independent Directors to ensure that management act in the best interests of the Company.
The Board prefers to have Mr Rothwell as Non Executive Chairman because:
- he has been Chairman since he founded the company in 1988.
- he is the largest shareholder, has a thorough knowledge of the Company's operations and has demonstrated leadership and entrepreneurial skills.
- he continues to exhibit dedication and drive for improving the company.
Directors of Austal Limited are considered to be independent when they are independent of management and free from any business or other relationship that could materially interfere with - or could reasonably be perceived to materially interfere with - the exercise of their unfettered and independent judgement.
In the context of Director independence, "materiality" is considered from both the Company's and individual Director's perspective. The determination of materiality requires consideration of both quantitative and qualitative elements. An item or factor is presumed to be material (unless there is qualitative evidence to the contrary) if its value is equal to, or greater than, $250,000 in aggregate in any one year. Qualitative factors considered include whether a relationship is strategically important, the competitive landscape, the nature of the relationship and the contractual or other arrangements governing it and other factors which point to the actual ability of the Director to have an influence in shaping the direction of loyalty to the Company.
In accordance with the definition of independence, and the materiality thresholds set, the following Directors are considered to be independent:
Jim McDowell - Non Executive Director
There are procedures in place, agreed by the Board to enable Directors in furtherance of their duties, to seek independent professional advice at the Company's expense.
Specific guidelines apply for acceptance of outside directorships by Executive and Non Executive Directors.
Nomination and Remuneration Committee
The Nomination and Remuneration Committee must comprise at least two independent Directors. The Committee ensures that the Board operates within its guidelines, reviews the remuneration of all Directors and makes recommendations to the Board, and selects candidates for the position of Director, when necessary.