Annual Report 2015
AA

About Telstra


Governance at Telstra

Our governance framework plays an integral role in supporting our business and helping us deliver on our strategy.

It provides the structure through which our strategy and business objectives are set, our performance is monitored, and the risks we face are managed. It includes a clear framework for decision making and accountability across our business and provides guidance on the standards of behaviour we expect of each other.

We are committed to excellence in corporate governance, transparency and accountability. This is essential for the long term performance and sustainability of our company, and to protect and enhance the interests of our shareholders and other stakeholders.

We regularly review our governance arrangements, to reflect developments in market practice, expectations and regulation as appropriate. We comply with the third edition of the ASX Corporate Governance Principles and Recommendations.

This section provides an overview of our shareholder engagement initiatives and our Board and its operating rhythm, as well as some of the other important elements of our governance framework. Our full corporate governance statement, which provides detailed information about governance at Telstra, is available on our website at www.telstra.com/governance.

 

Our governance framework

Our Governance Framework includes:

  • open, clear and timely communications with our shareholders
  • a skilled, experienced, diverse and independent Board, with a Board Committee structure suited to our needs
  • clear delegation, decision making and accountability frameworks
  • robust systems of risk management and assurance
  • Telstra Values, Code of Conduct and policy framework which define the standards of behaviour we expect of each other as we deliver on our purpose and achieve our strategy.

 

Engaging with our shareholders

We value a direct, two-way dialogue with our shareholders and investors about our company. We believe it is important not only to provide relevant information as quickly and efficiently as possible (recognising the importance of meeting our continuous disclosure and other legal obligations to the market), but also to listen to and understand their perspectives and respond to their feedback.

We have a number of initiatives in place to promote effective communication with our shareholders and investors, and to encourage participation at our shareholder meetings. During FY15 these included:

  • Retail shareholder information briefings – as we have done in recent years, before our 2014 Annual General Meeting (AGM) we held four retail shareholder information briefings with the CEO and/or CFO. Briefings were held in Sydney, Melbourne, Perth and Adelaide and attended by about 1,000 retail shareholders. We intend to hold similar briefings again this year ahead of our 2015 AGM
  • Encouraging questions in advance of our AGM – we encouraged shareholders to provide us with their questions ahead of our 2014 AGM, consistent with our approach in previous years, and we received more than 1,300 questions and comments. This helped us understand shareholder issues and concerns and enabled us to address the key areas of shareholder feedback
  • Investor briefings – we held various briefings for investors during the year, including our April 2015 Investor day on growth through network and product differentiation, which provided investors with insights into our mobiles business, our networks, security and innovation
  • Electronic communications – we continued to encourage shareholders to provide us with their email addresses so we could communicate with them electronically. We utilised electronic communications to inform shareholders about events and matters relevant to our company, such as the appointment of our new CEO, our strategy to improve customer advocacy and our April 2015 investor event
  • Webcasting important company events we webcast important events such as our financial results briefings, our AGM and other investor events discussing the performance and strategy of our business.

Following shareholder feedback and consistent with our capital management framework, in February 2015 we also announced the reactivation of our Dividend Reinvestment Plan for our shareholders.

 

The Board

The Board actively seeks to ensure it has an appropriate mix of diversity (including gender diversity), skills, experience and expertise to enable it to discharge its responsibilities effectively and to be well equipped to help our company navigate the range of opportunities and challenges we face.

Composition

As at the date of this report, we have 11 Directors on the Board, comprising 10 non-executive Directors and the CEO. With the exception of the CEO, all our Directors are non-executive Directors and have been determined by the Board to be independent. Details of the Directors can be found in the Board of Directors section of this report.

The Board has identified the set of skills, experience and expertise it currently has and is looking to achieve in its membership, reflecting areas particularly relevant to the three pillars of our strategy (improve customer advocacy, drive value from the core and build new growth businesses), as well as other areas of general relevance to the composition of our Board. The Board reviews this on a regular basis and it helps the Board identify areas of focus and to maintain an appropriate and diverse mix in its membership.

During FY15, one new non-executive Director, Peter Hearl, was appointed to the Board. The Board considered it would benefit from additional experience in the area of building customer advocacy. Mr Hearl brings considerable experience from industries including consumer goods and energy, and in building customer advocacy for brands. He was appointed to the Board in August 2014 and was elected by shareholders at our 2014 AGM.

Directors also welcomed Andrew Penn to the Board as Managing Director on 1 May 2015, when he became our CEO following David Thodey’s retirement as CEO and as a Director on 30 April 2015.

For FY15, the Board’s measurable objective about Board diversity was that there would be at least three women on the Board, representing a female gender representation among non-executive Directors of at least 30 per cent. As at 30 June 2015, there were three female Directors on the Board (including the Chairman of the Board and Chairman of the Audit & Risk Committee), representing a female gender representation among non-executive Directors of 30 per cent.

For FY16, the Board has maintained its diversity objective, with an additional aspiration to achieve 40 per cent female representation among non-executive Directors by 2020.

The Board has three standing Committees – the Audit & Risk Committee, the Remuneration Committee and the Nomination Committee. Together they play a significant role by focusing in more detail on specific areas of our operations and governance framework, which assists in strengthening the Board’s oversight of Telstra.

Board operating rhythm

The Board has an established Board cycle, which provides a high level overview of items to be considered over a 12 month period. Its key purpose is to link the Board program with strategic and operational priorities and to ensure the Board devotes appropriate time to consideration of the various dimensions of our business across the cycle. The items covered across the cycle include matters ranging from implementation of our strategy, performance against our corporate plan, the status of our material business risks and matters requiring Board approval, to matters relating to our people, culture and governance framework. The Board cycle is reviewed on an ongoing basis to ensure it reflects the current needs of the Board and the business.

Some of the activities and areas of focus of the Board during FY15 included:

  • in depth consideration of our strategy over the short, medium and longer term
  • a Board visit to our overseas operations in Hong Kong and the Philippines in April 2015. The Directors met with our people, customers and stakeholders and it provided the Board with valuable insight into our operations in Asia, as well as aspects of our customer service initiatives and new growth businesses
  • selecting and appointing our new CEO, Andrew Penn, and overseeing his smooth transition into the role.

 

Managing our risks

Understanding and managing our risks is part of how we work. It helps us meet our business objectives and our legal and regulatory obligations, and to make better decisions and act ethically in the best interests of Telstra Group and our shareholders.

We have a risk management framework in place that provides the foundations and organisational arrangements for how we manage risks across the Group. The framework aligns with ISO 31000:2009, the International Standard for risk management, and consists of a set of components for designing, implementing, monitoring, reviewing and continually improving risk management at Telstra. The objective is for our risk management framework to be embedded within our governance, strategic decision-making, business activities, operations and culture.
 
Managing our risks

 

The framework is designed, implemented and reviewed via our three lines of defence accountability model, which comprises the following:

  • First Line – business stakeholders and operational management who are responsible for identifying, assessing and managing their risks
  • Second Line – the Chief Risk Office, and risk management teams in the business units, who are responsible for risk and compliance frameworks, oversight and monitoring
  • Third Line – our Group Internal Audit function, who are responsible for providing independent assurance on governance, risk management and internal control processes.

One of the core components of our framework is the risk management process which provides the business with a process for assessing our risks. Through this risk management process, we identify, monitor and report on risks to the achievement of our plans and objectives. The risk management process is inclusive of all types of risks from internal and external sources, including strategic, operational, financial, regulatory, and sustainability risks.

A summary of our material business risks (including any material exposure to economic, environmental and social sustainability risks), their key drivers and our plans to manage them is provided in the Strategy and Performance section of this report. Our material business risks, which are strategic in nature and can have a material impact on the achievement of our strategic growth objectives and future financial prospects, are monitored for changes in their exposure and are reported to the Board during the course of the financial year, along with their related controls and treatment plans. Our principal risk exposures, which are operational in nature, are monitored and reported to our Management Risk Committee and the Audit & Risk Committee.

Also core to our framework are the activities we undertake to monitor and review its design and implementation. We conduct reviews and self-assessments of our framework across the enterprise, and report the results to our Management Risk Committee and the Audit & Risk Committee. We use the results of those reviews, as well as recommendations from Group Internal Audit, our third line of defence, to identify and implement opportunities for improving our framework. In respect of FY15, the Audit & Risk Committee has reviewed Telstra’s risk management framework and satisfied itself that it continues to be sound.

 

Acting ethically and responsibly

 

Acting ethically and responsibly

 

Our purpose is to create a brilliant connected future for everyone. Our Telstra Values, together with our Telstra Group Code of Conduct and policy framework, define the standards of behaviour that we expect of each other as we deliver on our purpose and achieve our strategy.

Our Telstra Values

Show you care Better together Trust each other to deliver Make the complex simple Find your courage

Our values express what we stand for and are core to our business. As a values-led organisation, our values shape our people’s decisions and actions. They guide how we work together. We align everything we do with them.

Our Code of Conduct and Policy Framework

Our Code of Conduct and policy framework underpin our Telstra Values. Together they set out, in more detail, the standards of behaviour we expect of our people. They define our commitment to good corporate governance, responsible business practice, our customers, our workforce, the communities in which we operate and the environment. They also provide the structure through which we maintain compliance with our legal obligations.

Our governance framework includes elements that address the following key areas. These are central to how we promote good governance, and ethical and responsible behaviour:

Our people and our community
  • Health and safety – recognising our commitment to the health, safety and wellbeing of our staff, contractors and community. In addition to highlighting the importance of caring about health and safety, it sets out our commitment to providing a safe and healthy workplace and our expectations of our staff, contractors and suppliers.
  • Diversity – setting out our strategy and principles in relation to diversity. This provides the framework for the establishment of our diversity measurable objectives, and monitoring and reporting on diversity matters across Telstra.
  • Discrimination and bullying – aiming to ensure that we have a workplace free of all forms of unlawful discrimination, harassment, bullying and victimisation.
  • Sustainability – seeking to manage our business to produce an overall positive impact for our customers, employees, shareholders, the wider community and other stakeholders, while minimising our environmental impacts.
Our customers
  • Privacy – setting out our commitment to the protection of our customers’ personal information. This outlines how we protect customer personal information, how and why we collect it, how we may use and disclose it, how we keep it secure and accurate, and how customers may access their personal information.
Good corporate governance and responsible business practice
  • Anti-bribery and anti-corruption aiming to ensure we comply with all applicable anti-bribery and anti-corruption laws. We also seek to ensure that gifts, prizes and hospitality are not given or accepted in inappropriate circumstances, including where the offering or acceptance may (or may be perceived to) compromise independence or be construed as a bribe.
  • Conflicts of interest and outside activities – helping our employees and contractors understand what would be a conflict of interest, how to avoid actual, potential or apparent conflicts of interest, and how to manage them if a conflict arises.
  • Whistleblowing providing an avenue for anyone to report suspected unethical, illegal or improper behaviour. Our whistleblowing process is supported by an independent service provider and all disclosures are treated confidentially and can be made anonymously.
  • Securities trading – setting out the rules and restrictions relating to buying, selling and otherwise dealing in Telstra securities by our Directors, CEO, senior management, specified other employees and their closely related parties, through a trading windows approach.
  • Market disclosure – outlining responsibilities and the process for the approval of our ASX announcements, including where Board approval is required, as well as the role of our CEO, CFO and Continuous Disclosure Committee in relation to disclosure matters. We aim to ensure that we provide our shareholders, investors and the financial community with appropriate and timely information while ensuring we fulfil our statutory reporting obligations under the Corporations Act and the ASX Listing Rules.
  • Social media – providing guidance to employees and contractors who use social media, either as part of their job or in a personal capacity, about our expectations when they talk online about us, our products and services, our people, our competitors and/or other business related individuals or organisations.