Sydney Water Annual Report Corporate governance

Transcription

1 Corporate governance 134

2 Corporate governance Sydney Water Board operations and governance Corporate governance framework The Board of Directors (Board) sits at the top of Sydney Water s corporate governance framework the Board sets the overall policy, strategy and direction of Sydney Water. The Board is accountable to the New South Wales Government through a Portfolio Minister and two Shareholder Ministers. The Board currently has nine members including the Chairman and the Managing Director. The Managing Director is the sole executive member of the Board and is responsible for Sydney Water s daily management in accordance with the Board s requirements and delegations from the Board. In turn, the Managing Director has authority to delegate certain powers and functions to other positions within Sydney Water. The Board is composed of individuals with separate expertise in business management, protection of the environment, public health, regulatory function, law and engineering. Sydney Water periodically advertises publicly for nominations for selection to the Board. The Chairman and Directors are appointed by the Shareholder Ministers. Under the Sydney Water Constitution, Directors are appointed for a fixed term, which is set out in an Instrument of Appointment. The term of appointment must not exceed five years. At the end of a Director s term of appointment, they are eligible for immediate reappointment. Directors duties and Code of Conduct The minimum standard for Directors duties is codified in Schedule 10 of the State Owned Corporations Act In addition, the Board has adopted its own Code of Conduct which is republished annually in a Director s Handbook. Board Charter The Board has developed and adopted a Board Charter. The Charter conforms to Guidelines for Boards of Government Businesses, issued by NSW Treasury. The Charter: outlines the roles, powers and specific responsibilities of the Board details key stakeholders such as customers, staff, the Shareholder Ministers, the Portfolio Minister, regulators and the community; and the Board s responsibilities towards each outlines Board operations such as the conduct of meetings, committees and assessment of Board performance, including appropriate procedures to resolve and record concerns by individual Directors articulates the strategic character of the Board s business, and clarifies the Board s role in approving high-level policies and strategies. The Board Charter is published on Sydney Water s website. The Chairman has stewardship of the Board, and presides over Board meetings. The Board selects the Managing Director, who is appointed on the Board s recommendation. The Managing Director s accountabilities to the Board are defined and regulated through three key instruments: an Instrument of Conferral of Powers and Authority, an Employment Agreement and a Performance Agreement. The Board reviews the Managing Director s performance at least every year. 135

3 Board meetings The Board meets at least monthly, except for January. A schedule of meeting dates is settled annually, in advance. Additional meetings may be called as Directors think fit. Meetings are conducted in accordance with Sydney Water s Constitution. Indemnity and insurance Under the State Owned Corporations Act 1989 and Sydney Water s Constitution, Sydney Water may indemnify its Directors only with the approval of its Shareholder Ministers. All Directors have received this approval, and have been given a Deed of Indemnity. Indemnity does not extend to circumstances where the liability arises out of conduct involving lack of good faith. Sydney Water has a policy of insurance for Directors and Officers Liability. The policy underpins and augments the Deed of Indemnity. Insurance does not extend to deliberate acts of fraud or dishonesty. Board committees Under Sydney Water s Constitution, Directors may delegate any of their powers to committees, which consist of at least one Director. functions Audit and Risk monitor reports from the internal and external auditors and management s responses to those reports evaluate the performance of the internal and external auditors appraise the programs and plans formulated by internal and external auditors and monitor progress against those programs and plans monitor the corporate risk management strategies, framework and processes for identifying and managing current and emerging risks monitor the Corporate Compliance Program monitor the financial reporting of Sydney Water (and its subsidiaries) to ensure accuracy and integrity in such reporting monitor systems and processes designed to prevent fraud, and fulfil any other function that the full Board refers The Board has six regular committees: Audit and Risk Environment Finance Public Health and Research People and Remuneration Regulatory and Reform. Each regular committee has a charter that the Board approves. Board charters are reviewed periodically and were last reviewed in February The purpose, objectives and functions of each committee are set out in their charters. Special purpose committees can be established as required. For example, a special purpose committee may be established to consider a particular major project or other initiative. 136

4 Corporate governance Environment oversee Sydney Water s environmental planning and management review Sydney Water s environmental performance monitor Sydney Water s environmental regulatory compliance monitor emerging issues related to the environment Finance review Sydney Water s capital structure review Sydney Water s annual budget and longer-term plans, and monitor performance against these at both an operational and a corporate level review Sydney Water s operating expenditure and capital expenditure performance against budget, debt management, cash position and dividend policy review Sydney Water s internal treasury function review Sydney Water s quarterly reports to its shareholders Public Health and Research review, analyse and monitor public health matters related to drinking water, wastewater, treated wastewater reuse and waste product management oversee incident management of public health issues related to Sydney Water s operations oversee Sydney Water s research and development strategy monitor emerging issues related to public health and research and development People and Remuneration monitor performance of occupational health and safety determine broad policy for the remuneration of Sydney Water s senior executives defined as: the Managing Director members of the Sydney Water Executive senior managers. assist the full Board to develop the Managing Director s annual goals and objectives, and review annually the performance of the Managing Director against these goals and objectives approve the individual remuneration packages, including any incentives or bonuses for the Managing Director, the Sydney Water Executive and those senior managers who report directly to the Managing Director review, together with the Managing Director, the performance of the Sydney Water Executive approve any termination provisions in any contract of employment for Sydney Water s senior executives, as defined above 137

5 review and discuss with the Managing Director and report to the Board plans for development and corporate succession plans for the Managing Director and other members of the Executive review the appointment of positions reporting directly to the Managing Director monitor the adequacy and effectiveness of Sydney Water s people management activities monitor Sydney Water s development of staff capability monitor Sydney Water s key behaviours; oversee compliance management in relation to people issues make recommendations to management Regulatory and Reform review Sydney Water s input and approach to water industry reform review compliance with water industry regulation including the Operating Licence monitor progress with the development of a regime for third parties to access Sydney Water s water and wastewater infrastructure Table 52 Attendance at Board and committee meetings Director Board of Directors Audit and Risk Environment Finance Public Health and Research Regulatory and Reform People and Remuneration T. Parry (C) 10 (11) - - 5* (5) 2 (3) (C) 3* (3) (C) 1 (1) K. Schott 11 (11) 6 (6) 3 (3) 5* (5) 3 (3) 3* (3) 1 (1) J. Brown 10 (11) (C) 6 (6) * (3) - J. Fletcher 11 (11) 6 (6) - (C) 5* (5) B. Gilligan 11 (11) - (C) 3 (3) - - 3* (3) - R. Kelly 11 (11) 6 (6) 3 (3) 5* (5) (1) K. McKenzie 7 (11) 4 (6) B. Pentecost 11 (11) - 3 (3) - 3 (3) - 1 (1) G. Stewart 9 (11) (C) 3 (3) - - Notes: (C) Chairman of the Board and/or committee. *There was a joint meeting of the Regulatory and Reform and the Finance held on 16 February Attendance at this meeting is reflected by an * and detailed separately for the Directors within the individual meetings. 138

6 Corporate governance Legal changes Independent Commission Against Corruption (ICAC) The NSW Independent Commission Against Corruption (ICAC) produced a report in March 2011 into the conduct of a number of persons while they were Sydney Water staff. The report made a number of findings and 18 recommendations about the conduct of those staff, following a public inquiry that took place between 6 and 29 September Sydney Water has implemented most of ICAC s recommendations, and the balance will be implemented by December Supreme Court action Sydney Water began legal action in the Supreme Court of NSW seeking orders and recovery of certain monies regarding a contract allegedly signed by an employee on behalf of Sydney Water without authority. The hearing of this matter began in August 2011 and is due to conclude early in the new financial year. Land and Environment Court action Sydney Water began two sets of proceedings in the Land and Environment Court of NSW against a neighbour of land that it owns in Waterloo. The case is about the contamination of that land caused by the polluting neighbour. Sydney Water seeks redress for the losses associated with the contamination. In addition, Sydney Water was a respondent alongside the NSW Office of Environment and Heritage (OEH) to a Class 1 appeal that the polluting neighbour brought against the OEH. The appeal concerned the terms of a management order that the OEH imposed on the polluter under the provisions of the Contaminated Land Management Act 1997 (NSW). Insurance and risk management Risk overview and impacts Sydney Water has a corporate-wide risk management framework, which covers all financial and non-financial risks. The framework is integrated with the planning and business case processes and focuses on risks that have a material impact on Sydney Water achieving its strategic, corporate and operational goals. Each division applies the corporate-wide risk management framework when completing risk assessments at strategic, divisional and operational levels. Strategic risks are identified as part of the corporate planning process and have the potential to materially impact the achievement of corporate goals. Strategic risks are higher order risks, tend to be long-term in nature and affect the future direction of Sydney Water. Divisional risks are identified as part of the divisional planning process and have the potential to materially impact the achievement of divisional goals. Divisional risks are lower order risks, tend to be short-term in nature and focus on the business and operating environment. Operational risks include safety and environmental risks, and usually relate to sites, assets and processes identified in: day-to-day business operations capital investment planning managing projects and contracts. Federal Magistrates Court In June 2011, a decision of the Federal Magistrates Court found that Sydney Water and one of its employees had breached the Racial Discrimination Act 1975 (Comm) and ordered both to pay an amount to the applicant at the lower end of the scale for damages. 139

7 Strategic risks The top five key strategic risks that can affect the financial performance of Sydney Water are set out in the table below. The table also shows mitigating strategies to manage the risk. Table 53 Mitigating strategies to manage risk Key risk Financial impact Mitigation strategies Climate change impacts on Capital Participate in whole of government research and development Sydney Water s planning and Operating costs programs to address climate change. operations. Developed climate change strategy and action plan to address climate change risks to infrastructure and operations. Significant water quality Capital Emergency response plans and procedures are in place. incident leading to public Operating costs Using a quality management system to track and monitor water health deterioration or quality incidents. unsuitable aesthetic Installed temporary powder activated carbon-dosing systems customer impacts. at Orchard Hills and Warragamba water filtration plants. Completed a catchment to tap risk assessment to identify taste and odour compounds and algal toxins risks. Established protocols with Sydney Catchment Authority Significant accident with loss of life. Failure to deliver accurate and integrated information to support decision-making. IT security breach leading to disclosure of confidential information or unauthorised modification of an IT system. People Capital Operating costs Capital Operating costs Fixed assets Capital Operating costs and NSW Health. Implemented workplace safety-culture change program, including safety leadership and mentoring, focus on line-management accountabilities, including training and key performance indicators (KPIs) in contracts and performance agreements. Rigorously monitoring Occupational Health and Safety performance. Improved reporting of key risk projects and incidents. Conduct analysis of incidents. Continue to improve data accuracy. Implemented a risk-based management audit process. Validate and verify data and reports. Implemented data improvement initiatives. Using password, network perimeter security, virus, training and communication controls. Developed long-term strategy for IT security. Using ISO governance framework. Implementing long-term security improvements. Insurance Sydney Water retains a comprehensive insurance program that forms part of its risk management strategy. Insurance coverage is reviewed each year. Cover is arranged for various exposures to Sydney Water that could affect its existing assets as well as those under construction, risks associated with its operations and insurable legal liabilities. Sydney Water transfers these exposures to the NSW Treasury Managed Fund as well as various Australian and overseas insurers. Sydney Water seeks advice from its appointed insurance broker to help us place and maintain insurance. We also seek advice concerning insurance for major projects. 140