Governance Statement

DuluxGroup’s directors and management are committed to conducting the company’s business ethically and in accordance with high standards of corporate governance.

This statement describes DuluxGroup’s approach to corporate governance. The Board is committed to DuluxGroup’s governance policies and practices being consistent with ASX Corporate Governance Council Principles and Recommendations.

1. Role and composition of the Board

Role

The Board of DuluxGroup Limited sees its primary role as the protection and enhancement of long term shareholder value. The Board is accountable to shareholders for the performance of the company. It directs and monitors the business and affairs of the company on behalf of shareholders and is responsible for the company’s overall corporate governance.

The Board responsibilities include appointing the Managing Director/CEO and succession planning, approving major strategic plans, monitoring the integrity and consistency of management’s control of risk, agreeing business plans and budgets, approving major capital expenditure, acquisitions and divestments, approving funding plans and capital raisings, agreeing corporate goals and reviewing performance against approved plans.

Responsibility for managing, directing and promoting the profitable operation and development of the company, consistent with the primary objective of enhancing long term shareholder value, is delegated to the Managing Director/CEO, who is accountable to the Board.

The Board recognises the respective roles and responsibilities of the Board and management in the charters prepared for the Board, Managing Director/CEO and Chairman and in the company’s delegated and reserved authorities approved by the Board.

Composition

The Board considers that its structure, size, focus, experience and use of committees will enable it to operate effectively and add value to the company.

DuluxGroup maintains a majority of non-executive directors on its Board and separates the role of Chairman and Managing Director/CEO. The composition of the Board seeks to provide an appropriate range of experience, skills, knowledge and perspective to enable it to carry out its obligations and responsibilities.

The Remuneration and Nominations Committee is charged with responsibility for ensuring that the balance of skills and experience of the Board is critically and regularly reviewed.

Independence

The Board recognises the special responsibility of non-executive directors for monitoring executive management and the importance of independent views.

The Chairman and all non-executive directors are independent of executive management and free of any business or other relationship that could materially interfere with the exercise of unfettered and independent judgment or compromise their ability to act in the best interests of the company.

The independence of each director is considered on a case by case basis from the perspective of both the company and the director. Materiality is assessed by reference to each director’s individual circumstances, rather than by applying general materiality thresholds. Each director is obliged to immediately inform the company of any fact or circumstance, which may affect the director’s independence.

Selection and Appointment of Directors

The directors are conscious of the need for Board members to possess the diversity of skill and experience required to fulfil the obligations of the Board. In considering membership of the Board, directors take into account the appropriate characteristics needed by the Board to maximise its effectiveness and the blend of skills, knowledge and experience necessary for the present and future needs of the company.

Nominations for appointment to the Board will be considered by the Remuneration and Nominations Committee and approved by the Board as a whole. Directors (other than the Managing Director/CEO) appointed by the Board must stand for election at the AGM following their appointment and non-executive directors are subject to shareholder re-election by rotation at least every three years.

All directors must obtain the Chairman’s prior approval before accepting directorships or other significant appointments.

2. Operation of the Board

Board Meetings

The Board schedules at least 8 meetings per year. Additional meetings will be held as the business of the company may require. Directors receive comprehensive Board papers in advance of the Board meetings. As well as holding regular Board meetings, the Board will set aside a two day meeting annually to comprehensively review business plans and company strategy. Directors will also receive regular exposure to DuluxGroup’s businesses and the major regulatory controls relevant to the company. The Board calendar also includes site visits to a range of DuluxGroup operations to meet with employees, customers and other stakeholders.

In those months that Board meetings are not scheduled directors will receive financial and safety & sustainability reports and an update from the Managing Director on the performance of the company and any issues that have arisen since the last Board meeting.

The non-executive directors also meet together periodically without the presence of management and the executive directors to discuss company matters.

Board and Executive Performance

DuluxGroup is committed to a performance culture and to ensuring that a range of formal processes are in place to evaluate the performance of the Board, Board Committees and executives.

At the conclusion of the year, the Board intends to carry out a review of its performance, as well as the performance of its Committees.

The non-executive directors are responsible for regularly evaluating the performance of the Managing Director/CEO. The evaluation is based on specific criteria, including the company’s business performance, short and long term strategic objectives and the achievement of personal objectives agreed annually with the Managing Director/CEO.

All DuluxGroup executives are subject to an annual performance review. The review involves an executive being evaluated by their immediate superior by reference to their specific performance contract for the year, including the completion of key performance indicators and contribution to specific business and company plans.

3. Board Committees

The Board has established, or will establish, the following standing committees to advise and assist the Board in the effective discharge of its responsibilities:

Audit and Risk Committee;
Remuneration and Nominations Committee; and
Safety and Sustainability Committee.

The functions and responsibilities of these Committees are set out in their Charters.

The Committee Chairmen will report on the Committees as a standing item of the Board agenda. Additionally any director is welcome to attend any committee, and minutes of the committees are circulated to the Board.

Audit and Risk Committee

The Audit and Risk Committee will comprise three independent non-executive directors with relevant financial, commercial and risk management experience. The Chairman of the Board Audit and Risk Committee will be separate from the Chairman of the Board. The composition of the Audit and Risk Committee will be determined upon the appointment of the CFO, Stuart Boxer, and an additional non-executive director to the Board. Garry Hounsell will be the Chairman of the Audit and Risk Committee.

The Committee is charged with assessing the adequacy of the company’s financial and operating controls, oversight of risk management systems and compliance with legal requirements affecting the company. The Committee will meet at least four times per year.

The Committee assesses and reviews external and internal audits and risk reviews and any material issues arising from these audits or reviews. It also assesses and reviews the accounting policies and practices of the group as an integral part of reviewing the half yearly and full year accounts for recommendation to the Board. It also makes recommendations to the Board regarding the appointment of external auditors and the level of their fees and provides a facility, if necessary, to convey any concerns raised by the internal and external auditors independent of management influence. The external and internal auditors attend committee meetings and meet privately with the Committee.

The Audit and Risk Committee monitors the level of any other services provided by the external auditor for compatibility in maintaining auditor independence. Restrictions are placed on other services performed by the external auditor and projects outside the scope of the approved audit program require the approval of the Chairman of the Audit and Risk committee. Any other services with a value of greater than $20,000 must be submitted to the Committee for approval in advance of the work being undertaken. The Committee is asked to ratify any other services less than $20,000 in value. The fees paid to the company’s external auditors for audit and other services will be set out in the Annual Report.

Remuneration and Nominations Committee

The Remuneration and Nominations Committee will have at least 3 directors, be chaired by an independent director, and consist of a majority of independent directors. The composition of the Committee will be determined upon the appointment of the CFO, Stuart Boxer, and an additional non-executive director to the Board.

This Committee assists the Board in the effective discharge of its responsibilities for the oversight of management process and performance in the provision of human resources necessary to effectively execute the company’s strategy over the long term. The Committee recommends to the Board on the company’s recruitment, organisational and people development, retention, employee relations, policies and workplace capability, including the capability of candidates considered for succession to Managing Director/CEO and Group Executive positions. The Committee will meet at least four times per year.

Remuneration arrangements for the Managing Director/CEO, Executive Directors and executives reporting to the Managing Director/CEO, including short term incentive payments, performance targets and bonus payments, remain matters for all non-executive directors.

This Committee will also deal with the nomination of directors and considers the most appropriate processes for review of the Board’s composition and performance. The Committee evaluates the composition of the Board and the annual program of matters considered by the Board to determine whether the appropriate mix of members and business exists to enable the Board to discharge its responsibilities to shareholders.

Safety and Sustainability Committee

The composition of the Safety and Sustainability Committee will be determined upon the appointment of the CFO, Stuart Boxer, and an additional non-executive director to the Board.

The Committee will assist the Board in the effective discharge of its responsibilities in relation to safety and sustainability matters arising out of activities within the company as they affect employees, contractors, visitors and the communities in which it operates. The Committee also reviews the company’s compliance with the environment policy and legislation and reviews safety and sustainability objectives, targets and due diligence processes adopted by the company. The Committee will meet at least four times per year.

A Letter of Assurance for Safety and Sustainability will be written by the Managing Director/CEO and presented to the Committee on an annual basis after a thorough process of assessment by each business.

Special Committees

From time to time special committees may be formed on an as-needs basis to deal with specific matters. Powers delegated to special committees will be set out in Board resolutions.

4. Board Governance Policies

Access to Information and Independent Advice

Each director has the right of access to all relevant company information and to the company’s executives and, subject to prior consultation with the Chairman or with the approval of a majority of the board, may seek independent professional advice at the company’s expense.

Pursuant to a deed to be executed by the company and each director, a director also has the right to have access to all documents which have been presented to meetings or made available whilst in office, or made available in relation to their position as director for a term of ten years after ceasing to be a director or such longer period as is necessary to determine relevant legal proceedings that commenced during this term.

Conflicts of Interest

If a conflict of interest arises, the director concerned does not receive the relevant Board papers and is not present at the meeting whilst the item is considered. Directors must keep the Board advised, on an ongoing basis of any interests that could potentially conflict with those of the company.

5. DuluxGroup Governance Policies

Code of Conduct

DuluxGroup acknowledges the need for directors, executives, employees and contractors to observe the highest ethical standards of corporate and business behaviour. DuluxGroup will adopt a Code of Conduct which applies to its employees in all countries in which DuluxGroup operates The Code of Conduct sets out the standards of business conduct required of all employees and contractors of the company. It is aimed at ensuring the company maximises its good reputation and that its business is conducted with integrity and in an environment of openness.

The Code of Conduct provides clear direction and guidance with regard to expected standards of behaviour and conduct with respect to (amongst other things):

safety and sustainability;
protection of information and the company’s resources;
competition law and trade practices compliance;
privacy;
conflict of interest;
insider trading and dealing in securities;
equal employment opportunity and harassment;
gifts and benefits;
prevention of bribery and facilitation payments; and
prevention of, and dealing with, fraud.

The Code of Conduct will be periodically reviewed and approved by the Board and processes will be put in place to promote and communicate the Code of Conduct and relevant company policies and procedures. A Speak Up line will be established to enable employees to report (on an anonymous basis) breaches of the Code of Conduct. If a report is made, it is escalated as appropriate for investigation and action.

The Code of Conduct is overseen by the CFO, General Manager Human Resources and the General Counsel & Company Secretary, who review compliance with the Code of Conduct over the relevant reporting period and make recommendations to the Board to address any systemic issues.

Shareholdings of Directors and Employees

The Board will approve guidelines for dealing in securities.

Subject to the restriction that persons may not, directly or indirectly, buy or sell the shares or other securities of DuluxGroup when in possession of unpublished price sensitive information, which could materially affect the value of those securities, directors and employees generally may buy or sell DuluxGroup shares during the following trading windows:

in the 28 day period commencing 1 day after the announcement of the DuluxGroup half-year results; and
in the 28 day period commencing 1 day after the announcement of the DuluxGroup full-year results; and
at such other times as determined by the Board.

Directors and employees must receive clearance from the Chairman or Company Secretary for any proposed dealing in DuluxGroup shares outside of a trading window. The guidelines also set out ‘blackout periods’ prior to the periodic results announcements during which directors and employees will not ordinarily be permitted to trade in DuluxGroup shares.

Directors and employees must not deal in DuluxGroup securities on a short-term basis or enter into short-term derivative arrangements except in circumstances of special hardship, with the approval of the Chairman. Directors and employees must not deal in securities via a margin loan arrangement in relation to their DuluxGroup securities.

Any transaction conducted by directors in DuluxGroup securities is notified to the ASX. Each director has entered into an agreement with the company to provide information to allow the company to notify the ASX of any transaction within 5 business days.

Continuous Disclosure and Keeping Shareholders Informed

The company is committed to ensuring it provides relevant and timely information to its shareholders and to fulfilling its obligations to the broader market for continuous disclosure and enabling equal access to material information about the company.

The Board has approved a continuous disclosure policy so that the procedures for identifying and disclosing material and price sensitive information in accordance with the Corporations Act and ASX Listing Rules are clearly articulated. This policy sets out the obligations of employees and guidelines relating to the type of information that must be disclosed.

Under the policy, DuluxGroup will immediately notify the market, by announcing to the ASX, of any information concerning the business of DuluxGroup, which a reasonable person would expect to have a material effect on the price or value of DuluxGroup’s securities.

DuluxGroup will not release such ‘material information’ to any other person until it has given the information to the ASX and received an acknowledgement that ASX has released the information to the market.

Information provided to and discussions with analysts are subject to the continuous disclosure policy. Material information must not be selectively disclosed prior to being announced to the ASX. The Company Secretary is the person responsible for communication with the ASX.

DuluxGroup will adopt a Shareholder Communication Policy that sets out the company’s commitment to communicating with shareholders in a way that enables them to exercise their rights as shareholders in an informed manner.

Integrity of Reporting

The company has controls in place that are designed to safeguard the company’s interests and integrity of its reporting. These include accounting, financial reporting, safety and sustainability and other internal control policies and procedures, which are directed at monitoring whether the company complies with regulatory requirements and community standards.

Both the Managing Director/CEO and CFO are required to state in writing to the Board that:

the company’s financial reports represent a true and fair view of the group’s financial condition and operational results and are in accordance with relevant accounting standards; and
these statements are founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks.

These assurances are based on a financial letter of assurance that cascades down through management and includes sign-off by business general managers and business finance managers.

Comprehensive practices have been adopted to monitor:

that capital expenditure and revenue commitments above a certain size obtain prior Board approval;
safety and sustainability standards and management systems to achieve high standards of performance and compliance; and
that business transactions are properly authorised and executed.

Internal audit has a mandate for reviewing and recommending improvements to controls, processes and procedures used by the company across its corporate and business activities. The company’s internal audit function is supported by an independent external firm of accountants.

The company’s financial statements are subject to an annual audit by an independent, professional auditor who also reviews the company’s half-yearly financial statements. The Audit and Risk Committee oversees this process on behalf of the Board.

Risk Identification and Management

DuluxGroup believes that effective risk management supports the company’s ability to grow. DuluxGroup recognises the importance of risk management practices across all businesses and operations. Effective risk management highlights for management’s attention the risks of loss of value and provides a framework to achieve and deliver the company’s strategy.

The Board establishes the policies for the oversight and management of material business risks and internal control. The design and implementation of the risk management and internal control systems to manage the company’s material business risks is the responsibility of management. The Board satisfies itself that management has developed and implemented a sound system of risk management and internal control.

The key elements of the policies for the oversight and management of material business risks are:

material financial and non-financial business risks are systematically and formally identified and assessed by the Board, General Management Team and business platforms on (at least) an annual basis;
risk assessments are also performed for individual material projects, capital expenditure, products and country risks;
internal controls are identified and where appropriate, management plans are established for each significant identified risk outlining the mitigation strategy and tasks, and the management responsible for the action; and
formal risk reporting is provided to the Board on an ongoing basis including information in relation to whether material business risks are being managed effectively – this includes information relating to risk profiles and progress against plans.

The Managing Director/CEO and CFO are required to report to the Board that the risk management and internal control systems have been designed and implemented to manage the company’s material business risks, and management has reported to the Board as to the effectiveness of the company’s and consolidated entity’s management of its material business risks.

An independent external firm of accountants assists the internal audit function in ensuring compliance with internal controls and risk management programs by regularly reviewing the effectiveness of the risk management and internal control systems, and periodically provides assistance and input when undertaking risk assessments.