CORPORATE
GOVERNANCE
STATEMENT
2015
COMMONWEALTH BANK OF AUSTRALIA | ACN 123 123 124
2015 Corporate Governance Statement
1
INTRODUCTION
This statement outlines the key aspects of the
Commonwealth Bank’s and its related bodies corporate
(Group), corporate governance framework. The Group is
committed to ensuring that its policies and practices
reflect a high standard of governance. The Board has
adopted a comprehensive framework of Corporate
Governance Guidelines, designed to balance properly
performance and conformance. This enables the Group
to undertake, in an effective manner, the prudent risk-
taking activities which are the basis of its business.
Throughout the 2015 financial year, the Group’s
governance arrangements were consistent with the
Corporate
Governance
Principles
and
Recommendations (3rd edition) published by the ASX
Corporate Governance Council.
This statement is current as at 12 August 2015, and has
been approved by the Board of the Commonwealth
Bank (Bank).
THE BOARD
The Board’s Directors are accountable to the
shareholders for the Group’s performance and
governance. Management is responsible for
implementing the Group’s strategy and objectives, and
for carrying out the day-to-day management and control
of the Group’s affairs.
Charter
The Board’s role and responsibilities are set out in the
Board Charter. The responsibilities include:
• The Group’s corporate governance, including the
establishment of Committees;
• Oversight of the business and affairs of the Group
by:
- Establishing, with management, and approving
the strategies and financial objectives;
- Approving major corporate and capital
management initiatives, capital expenditure,
acquisitions and divestments in excess of limits
delegated to management;
- Overseeing the establishment of appropriate
risk management systems, including defining
the Group’s risk appetite and establishing
appropriate financial policies such as target
capital and liquidity ratios;
- Monitoring the performance of management
and the environment in which the Group
operates;
• Approving documents (including reports and
statements to shareholders) required by the Bank’s
Constitution and relevant regulation;
• Approving the Group’s major HR policies and
overseeing the development of strategies for senior
and high performing executives;
• Employing the Chief Executive Officer (CEO); and
• Reviewing diversity initiatives and progress,
including monitoring and reporting on the relative
proportion of women and men in the workforce at all
levels of the Group.
A copy of the Board Charter is available on the Group’s
website.
Delegation of Authority
The Board has delegated to the CEO and, through the
CEO, to other senior executives, responsibility for the
day-to-day management of the Group’s business and
implementation of the Group’s strategy and policy
initiatives. The CEO and other senior executives
operate in accordance with a comprehensive set of
management delegations under the Group’s Delegation
of Authorities framework. These delegations cover
commitments around project investment, operational
expenditure and non-financial activities and processes,
and are designed to accelerate decision-making and
improve both efficiency and customer service.
Overview of Corporate Governance Framework
An overview of the Group’s Corporate Governance
Framework is depicted below.
Corporate Governance Framework
Delegated
authority
Board of Directors
Independent
Directors
CEO
Board Committees
Executive Committee
Independent
advice and
assurance
available
M
de
CEO
Provides advice to the
CEO on key decisions
made under management
delegation
Management
delegated
authority
Accountable through
reporting obligations
Audit
Board Performance
and Renewal
Risk
Remuneration
2015 Corporate Governance Statement
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Company Secretary
The Company Secretary is accountable directly to the
Board, through the Chairman, on all matters to do with
the proper functioning of the Board.
Composition of the Board
The Bank’s Constitution provides that there will be a
minimum of nine (9) Directors and a maximum of
thirteen (13) Directors on the Board, including the
Managing Director/ CEO, and not more than three
Executive Directors
The Board currently comprises of eleven (11) Directors
of which ten (10) are independent Non-Executive
Directors and one is an Executive Director, being the
CEO.
The roles of Chairman and CEO are not exercised by
the same individual, and the Bank’s Constitution
provides that the CEO and any other Executive
Directors are not eligible to stand for election as
Chairman of the Bank.
Details of the period of office held by each current
Director and the year of their last election are as follows:
Director
Appointed
Last Elected
at an AGM
David Turner
(Chairman)
2006
2012
Ian Narev (CEO)
2011
-
Sir John Anderson
2007
2013
Shirish Apte
2014
2014
Jane Hemstritch
2006
2013
Sir David Higgins
2014
2014
Launa Inman
2011
2014
Brian Long
2010
2013
Andrew Mohl
2008
2014
Wendy Stops
2015
-
Harrison Young
2007
2012
Details of the number of times the Board met throughout
the 2015 financial year and the individual attendances
of the Directors at those meetings is contained in the
Directors’ Meetings section of the Directors’ Report on
page 40 of the 2015 Annual Report.
Chairman
The Chairman is an independent Non-Executive
Director. The Chairman leads the Board and sets its
tone, and is responsible for the effective organisation
and conduct of the Board’s affairs. The Chairman builds
and maintains an effective working relationship with the
CEO, and encourages contribution by all Board
members. The Chairman also represents the Bank to
shareholders and in the wider community.
Committees
To assist the Board to carry out its responsibilities, the
Board has established a Board Performance & Renewal
Committee, a Remuneration Committee, an Audit
Committee, and a Risk Committee.
These Committees review matters on behalf of the
Board and as determined by the relevant Charter:
• Refer matters to the Board for decision, with a
recommendation from the Committee, or
• Determine matters (where the Committee acts with
delegated authority), which the Committee then
reports to the Board.
The Chairman of each Committee provides a report to
the Board following each Committee meeting.
Tenure
The Bank’s Constitution specifies that at each Annual
General Meeting (AGM), one third of Directors (other
than the CEO) will retire from office and may stand for
re-election.
The policy of the Board is that Non-Executive Directors
are normally expected to serve a term of six (6) years
from the date of first election by shareholders, subject
to re-election by shareholders as required under the
Bank’s Constitution and the Australian Securities
Exchange (ASX) Listing Rules. That term may be
extended to nine (9) years where, at the end of the initial
six (6) year period, the Board determines that such an
extension would be of benefit to the Bank and the
Director is agreeable. On an exceptional basis, the
Board may annually exercise its discretion to further
extend the term of a Director should the circumstances
be such that the Board deems it appropriate, subject to
the total term of appointment not exceeding twelve (12)
years. The Chairman would normally be expected to
serve a term of at least five (5) years in that capacity.
Director Independence
The Bank’s Non-Executive Directors are required to be
independent of management and free of any business
or other relationship that could materially interfere with
the exercise of unfettered and independent judgement.
The Board regularly assesses each Director’s
independence to ensure ongoing compliance with this
requirement.
Directors are required to conduct themselves in
accordance with the ethical policies of the Bank and be
meticulous in their disclosure of any material contract or
relationship. This disclosure extends to the interests of
family companies and spouses. Directors must also
strictly adhere to the participation and voting constraints
in relation to matters in which they may have an interest.
Each Director may from time to time have personal
dealings with the Bank or be involved with other
companies or professional firms which may have
dealings with the Group. Details of offices held by
Directors with other organisations are disclosed in the
Directors' Report on pages 36 to 40 of the 2015 Annual
Report and on the Group's website. Full details of
related party dealings are set out in the notes to the
Financial Statements as required by law in the 2015
Annual Report.
All the current Non-Executive Directors of the Bank
have been assessed as independent Directors. In
reaching that determination, the Board has taken into
account (in addition to the matters set out above):
• The specific disclosures made by each Non-
Executive Director;
• Where applicable, the related party dealings
referable to each Non-Executive Director;
• That no Non-Executive Director is, or has been
associated directly with, a substantial shareholder of
the Bank;
• That no Non-Executive Director has ever been
employed by the Bank or any of its subsidiaries;
2015 Corporate Governance Statement
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• That no Non-Executive Director is, or has been
associated with, a supplier, professional adviser,
consultant to or customer of the Group which is
material under the accounting standards;
• That no Non-Executive Director personally carries on
any role for the Group otherwise than as a Director
of the Bank; and
• That no Non-Executive Director has a material
contractual relationship with the Group other than as
a Director of the Bank.
David Turner has served on the Board for more than
nine (9) years. In October 2015 Jane Hemstritch will
have served on the Board for nine (9) years. The Board
does not believe that their tenure interferes with their
ability to act in the best interests of the Group or
compromises their ability to exercise independent
judgement.
Director Induction and Education
Directors participate in an induction program upon
appointment and in ongoing education sessions on a
regular basis. This program of continuing education
ensures that the Board is kept up to date with
developments in the industry both locally and globally.
It also includes sessions with local and overseas
experts in the particular fields relevant to the Group’s
operations.
Board Performance and Renewal Committee
The Board Performance and Renewal Committee
assists the Board’s function by considering and advising
the Board on issues relevant to:
• The Governance of the Group;
• The selection, remuneration, education and
evaluation of Directors;
• The relationship between Board and Management;
and
• Policies relating to diversity for the Board and the
Group Executives.
The Board Performance and Renewal Committee
consists solely of independent Non-Executive Directors.
The minimum number of Committee members is three
(3) and the Chairman of the Board chairs the
Committee.
A copy of the Board Performance and Renewal
Committee Charter is available on the Group’s website.
The Committee’s members are:
David Turner (Chairman)
Sir John Anderson
Brian Long (from 12 August 2015)
Harrison Young
Details of the number of times the Board Performance and
Renewal Committee met throughout the 2015 financial
year and the individual attendances of the members at
those meetings is contained in the Committee Meetings
section of the Directors’ Report on page 41 of the 2015
Annual Report.
The Board Performance and Renewal Committee
annually reviews the Group’s corporate governance
procedures. It considers the composition and
effectiveness of the Bank’s Board and also the boards
of the Bank’s major wholly owned subsidiaries. It also
ensures that the Board annually reviews its own
performance, policies and practices. These reviews
seek to identify where improvements can be made in
Board processes. The review also assesses the quality
and effectiveness of information made available to
Directors.
Evaluation of Board Performance
The Board conducts regular evaluations of the
performance of the Board, individual Directors and the
Board’s Committees. Every two (2) years, this process
is facilitated by an external consultant. Every other year,
the assessment is carried out internally.
During the 2015 financial year the Board used an
external consultant to evaluate the performance of the
Board and of individual Directors.
The assessment has been considered by the Board,
enhancements to process were implemented, and
individual Director assessments have been
discussed.
After considering the results of the performance review,
the Board determined to endorse the Directors to stand
for re-election at the 2015 AGM.
The Non-Executive Directors meet several times a year
without management, in a forum intended to allow for an
open discussion on Board and management
performance. This is in addition to the consideration of
the CEO’s performance and remuneration, which is
conducted by the Board in the CEO’s absence.
Non-Executive Directors spend at least sixty (60) days
each year (considerably more in the case of Committee
Chairmen) on Board business and activities, including
Board and Committee meetings, meetings with senior
management to discuss strategy, visits to operations, and
meetings with employees, customers and other
stakeholders. During the 2015 financial year, the Board
spent a week in Silicon Valley in the United States (US)
and met with several companies and leaders in the
technology space. The Board also spent a week in
South Africa where it met with a range of political,
business and other leaders across the country in
various industries including financial services, retail and
technology.
Assessment of Senior Executive Performance
Senior executives are provided with a written
employment agreement which sets out the terms and
conditions of their appointment. Senior executives’
annual performance evaluations are conducted
following the end of the financial year. For the 2015
financial year, the evaluations were conducted in July
2015.
Details on the Group’s short and long-term performance
approach and outcomes are contained in the
Remuneration Report section of the Directors’ Report
on pages 44 to 65 of the 2015 Annual Report.
Selection of Directors
The Board Performance and Renewal Committee’s set
of criteria for Director appointments is reviewed
annually and adopted by the Board. The criteria is
aimed at creating a Board capable of challenging,
stretching and motivating management to achieve
sustained, outstanding performance in all respects. The
Group’s aim is to ensure that any new appointee is able
to contribute to the Board constituting a competitive
advantage for the Group. Based on these criteria, each
Director should:
2015 Corporate Governance Statement
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• Be capable of operating as part of an effective team;
• Vigorously debate and challenge management in a
constructive manner;
• Contribute outstanding performance and exhibit
impeccable values;
• Be capable of contributing strongly to risk
management, strategy and policy;
• Provide a mix of skills and experience required to
challenge and contribute to the future strategy of the
Group;
• Be well prepared and receive all necessary
education; and
• Provide important and significant insights, input and
questions to management from their experience and
skill.
Professional intermediaries are engaged to identify a
diverse range of potential candidates for appointment
as Directors based on the identified criteria.
The Board Performance and Renewal Committee
assesses the skills, experience and personal qualities
of these candidates. It also takes into consideration
other attributes, including diversity, to ensure that any
appointment decisions adequately reflect the
environment in which the Group operates. Information
on the Group’s diversity strategy more generally can
also be found in the Corporate Responsibility section of
the 2015 Annual Report on pages 32 to 35.
Appropriate checks are undertaken prior to appointing a
person and recommending that person for election as a
Director. These include checks as to the person’s
character, experience, education, criminal record and
bankruptcy history. As a Director is a responsible person
under the applicable Australian Prudential Regulation
Authority (APRA) Prudential Standard background
checks as to fitness and propriety are carried out before
a person is appointed to the Board.
Candidates who are considered suitable for
appointment as Directors by the Board Performance
and Renewal Committee are then recommended for
decision by the Board and, if appointed, stand for
election at the next AGM, in accordance with the
Constitution. The Bank includes in the Notice of Meeting
for the AGM all material information known to the Bank
which is relevant to a decision whether or not to elect or
re-elect a Director.
On behalf of the Bank, the Chairman provides a letter to
each new Director upon appointment, setting out the
terms of appointment and relevant Board policies.
These include time commitment, code of ethics and
continuing education. All current Directors have been
provided with a letter confirming the terms of their
appointment. A copy of the form of the appointment
letter is available on the Group’s website.
Director skills and experience
The skills, experience and expertise of each Director is
described in the Directors’ Report on pages 36 to 39 of
the 2015 Annual Report.
The Directors possess a range of skills which, as a
group, enable the Board to discharge its obligations
effectively, challenge management and contribute to the
Bank’s strategic debate. Every Director has had
considerable exposure to current corporate governance
practices and all Directors possess significant financial
acumen, with five (5) of the Directors being qualified
accountants.
The following table summarises the key skills and
experience of the Directors:
Skills and Experience
No. of
Directors
Retail & Corporate Banking/ Financial
Institutions
5
Financial Acumen
11
New Media & Technology
4
Experience as a non-executive
director of at least two other listed
entities
7
General management exposure to
international operations
11
Held CEO or similar position in non-
financial organisation
6
Expert experience in financial
regulation
5
The Board currently comprises of eleven (11) Directors
of which ten (10) are independent Non-Executive
Directors and one (1) is an Executive Director, being the
CEO.
Policies
Board policies relevant to the composition of the Board,
its Committees and the functions of Directors and
Committee Members include that:
• The Board will consist of a majority of independent
Non-Executive Directors. The Chairman of the
Board will be an independent Non-Executive
Director;
• The Board Performance and Renewal Committee
will consist of at least three (3) members. All
members must be independent Non-Executive
Directors. The Chairman of the Board should chair
the Committee;
• The Remuneration Committee will consist of at least
three (3) members. All members must be
independent Non-Executive Directors and have an
appropriate level of knowledge and understanding of
remuneration practice, including legal and regulatory
requirements. The Board will determine the
Committee Chairman;
• The Audit Committee will consist of at least three (3)
members. All members must be independent Non-
Executive Directors and financially literate. The
Audit Committee shall be chaired by an independent
Non-Executive Director who is not the Chairman of
the Board;
• The Risk Committee will consist of at least four (4)
members. All members must be independent Non-
Executive Directors. The Risk Committee shall be
chaired by an independent Non-Executive Director
who is not the Chairman of the Board;
• The Board will meet on a regular and timely basis.
The meeting agendas and papers will provide
adequate information about the affairs of the Group.
They also enable the Board to guide and monitor
management, and assist in its involvement in
discussions and decisions on strategy. Strategic
matters are given priority on regular Board meeting
2015 Corporate Governance Statement
5
agendas. In addition, ongoing strategy is the major
focus of at least one Board meeting annually;
• The Directors are entitled to obtain access to Group
documents and information, and to meet with
management; and
• The Directors are entitled, after appropriate
consultation, to seek independent professional
advice, at the expense of the Group, to assist them
to carry out their duties as Directors. The policy of
the Group provides that any such advice is generally
made available to all Directors.
ETHICAL STANDARDS
Conflicts of Interest
In accordance with the Bank’s Constitution and the
Corporations Act 2001 (Corporations Act), Directors are
required to disclose to the Board any material contract
in which they may have an interest. In compliance with
section 195 of the Corporations Act, any Director with a
material personal interest in a matter being considered
by the Board will not vote on the matter or be present
when the matter is being considered. If the material
personal interest is disclosed or identified before a
Board or Committee meeting takes place, those
Directors will also not receive a copy of any paper
dealing with the matter.
Share Trading
The Board has adopted a Group Securities Trading
Policy. Under that Policy, Directors are permitted to
deal with the Group’s securities only within certain
periods, as long as they are not in the possession of
unpublished price-sensitive information.
These periods include the thirty (30) days after the half
yearly and final results announcements, and fourteen
(14) days after quarterly trading update releases.
The Policy also requires that Directors do not deal on
the basis of considerations of a short term nature or to
the extent of trading in those securities. Similar
restrictions apply to Executives of the Group, which is in
addition to the prohibition of any trading (including
hedging) in positions prior to vesting of shares or
options.
Directors and Executives who report to the CEO are
also prohibited from:
• Any hedging of publicly disclosed shareholding
positions; and
• Entering into or maintaining arrangements for
margin borrowing, short selling or stock lending, in
connection with the securities of the Group.
A copy of the Group Securities Trading Policy is
available on the Group’s website.
REMUNERATION
Remuneration Committee
The Remuneration Committee assists the Board to fulfil
its responsibilities to shareholders and regulators in
relation to remuneration within the Bank and the Group.
In general, the Remuneration Committee is responsible
for recommending to the Board for approval:
• Remuneration arrangements and all reward
outcomes for the CEO, senior direct reports to the
CEO and other individuals whose roles may affect
the financial soundness of the Group;
• Remuneration arrangements for Finance, Risk &
Internal Control Personnel; and
• Significant changes in remuneration policy and
structure, including superannuation, employee
equity plans and benefits.
The Remuneration Committee also serves as the
remuneration committee for those entities within the
Group that are regulated by APRA, and those offshore
entities subject to remuneration-related regulation that
may delegate their remuneration committee function to
the Board’s Committee from time to time.
The Remuneration Committee consists solely of
independent Non-Executive Directors who are free from
any business or other relationship that, in the opinion of
the Board, would materially interfere with the exercise
of his or her independent judgement as a member of the
Remuneration Committee. The minimum number of
Committee members is three (3) and meetings are
chaired by an independent Non-Executive Director.
Committee members are expected to have an
appropriate level of knowledge and understanding of
remuneration practice, as well as legal and regulatory
requirements relating to remuneration.
A copy of the Remuneration Committee Charter is
available on the Group’s website.
The Committee’s members are:
Jane Hemstritch (Chairman)
Launa Inman
Andrew Mohl
David Turner
David Higgins
Wendy Stops
Meetings are held quarterly or more frequently if
required. Details of the number of times the
Remuneration Committee met throughout the 2015
financial year and the individual attendances of the
members at those meetings is contained in the
Committee Meetings section of the Directors’ Report on
page 41 of the 2015 Annual Report.
The Remuneration Committee is authorised to appoint
independent remuneration experts to advise them on
specific remuneration issues, and will do so
independently of management.
The Remuneration Committee has free access at all
times to risk and financial control personnel and any
other parties (internal and external) in carrying out its
duties.
The Remuneration Committee has the power to call any
individuals to attend Committee meetings.
Remuneration Arrangements
Details of the governance arrangements and policies
relevant to remuneration are set out in the
Remuneration Report on pages 44 to 65 of the 2015
Annual Report.
AUDIT
Audit Committee
The Audit Committee assists the Board in fulfilling its
statutory, regulatory and fiduciary responsibilities. It
provides an objective and independent review of the
effectiveness of:
• The external reporting of financial information,
including the suitability of accounting policies, and
the application of accounting requirements;
2015 Corporate Governance Statement
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• The internal control environment of the Group,
including the governance of financial, tax and
accounting risks;
• The Group Audit’s and external audit functions,
including an assessment of the independent,
adequacy and effectiveness of these functions; and
• The Group’s Risk Management Framework, in
conjunction with the Risk Committee.
The Audit Committee consists solely of independent
Non-Executive Directors who are financially literate.
Members between them have the accounting and
financial expertise and sufficient understanding of the
financial services industry to be able to discharge the
Audit Committee’s mandate effectively. The term of
each member will be determined by the Board through
annual review.
The minimum number of Committee members is three
(3) and meetings are chaired by an independent Non-
Executive Director who is not the Chairman of the
Board. The Risk Committee Chairman is a member of
the Audit Committee and vice-versa to assist with the
flow of relevant information between the two
Committees.
A copy of the Audit Committee Charter is available on
the Group’s website.
The Committee’s members are:
Brian Long (Chairman)
Sir John Anderson
Shirish Apte
Sir David Higgins
Launa Inman
Harrison Young
Meetings are held at least quarterly or more frequently
if required. Details of the number of times the Audit
Committee met throughout the 2015 financial year and
the individual attendances of the members at those
meetings is contained in the Committee Meetings
section of the Directors’ Report on page 41 of the 2015
Annual Report.
The external auditor and the Group’s internal auditor will
be invited to all meetings. Meetings will be held from
time to time with the external and internal auditor without
management or others being present.
The Audit Committee has the power to call attendees as
required, including open access to management,
external and internal auditors and the right to seek
explanations and additional information.
Senior management and the external and internal
auditor have free and unfettered access to the Audit
Committee with the Group Auditor having a direct
reporting line, while maintaining a management
reporting line to the Chief Financial Officer (CFO).
The Committee has the option, with the concurrence of
the Chairman of the Board, to retain independent legal,
accounting or other advisors, to the extent the
Committee considers necessary, at the Group’s
expense.
Prior to approval of the Group’s financial statements for
the 2015 financial half-year, the CEO and the CFO gave
the Board a declaration that, in their opinion, the
financial records of the Group had been properly
maintained in accordance with the Corporations Act,
that the financial statements complied with the
appropriate accounting standards and gave a true and
fair view of the financial position and performance of the
Group, and that their opinion had been formed on the
basis of a sound system of risk management and
internal compliance and control which was operating
effectively.
Internal Audit
The Bank has an Internal Audit function, called Group
Audit and Assurance (GAA). GAA comprises of three
main functions which include Internal Audit, Credit
Portfolio Assurance and Retail Network Assurance.
GAA’s responsibilities include the following:
• Develop a risk based Annual Audit Plan (Plan) for
approval by the Audit Committee, and adjust the
Plan, where necessary, to reflect current and
emerging risks and changes in the Group’s
business, risks, operations, programs, systems and
controls;
• Execute the approved Plan in line with the relevant
GAA methodologies, and report the results of work
performed to senior management and the Audit
Committee;
• Issue periodic reports summarising progress
against the approved Plan, any significant changes
to the Plan, the results of GAA activities including
reportable issues (defined as very high or high
rated) raised, and other matters that need to be
brought to the attention of the Audit Committee;
• Maintain regular and formal dialogue with the
external auditors and other assurance functions
(e.g. Operational Risk and Group Security) to share
knowledge of significant issues, and ensure
effective collaboration and appropriate reliance on
each other’s work;
• Escalate to senior management and the Audit
Committee, as appropriate, instances where GAA
believes that management has accepted a level of
risk in excess of any relevant approved risk appetite;
• Maintain effective relationships with regulators,
including providing access to relevant work files in
the event of an inspection or if otherwise required by
law;
• Maintain a professional team of GAA personnel with
appropriate skills, knowledge and experience;
• Agree annually, with the Chairman of the Audit
Committee, the Bank’s Directors’ Key Performance
Indicators (KPIs) and report at least annually to the
Audit Committee against KPIs;
• Maintain an appropriate Quality Assurance
programme to ensure the effectiveness and
continuous improvement of the GAA function,
including annual reporting of the results of internal
assessments and independent assessments at
least once every five (5) years;
• At the request of management, provide assurance
to external parties to meet their respective risk
management requirements. GAA will establish in
writing the scope and objectives of such assurance,
with clear definition of the acceptable use and
distribution of the results; and
• Fulfil all regulatory requirements pertaining to GAA.
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While maintaining a management reporting line to the
CFO, the head of GAA has a direct reporting line to the
Audit Committee so as to bring the requisite degree of
independence and objectivity to the role.
External Auditor
PricewaterhouseCoopers (PwC) was appointed as the
external auditor of the Bank at the 2007 AGM, effective
from the beginning of the 2008 financial year.
The PwC partner managing the Group’s external audit
will attend the 2015 AGM and be available to respond
to shareholder questions relating to the external audit.
In line with current legislation, the Group requires that
the partner be changed within five (5) years of being
appointed. The lead partner from PwC was changed
with effect from 1 July 2012.
The Group and its external auditor must continue to
comply with US Auditor independence requirements.
US Securities and Exchange Commission (SEC) rules
still apply to various activities that the Group undertakes
in the US, even though the Bank is not registered under
its Exchange Act.
Non-Audit Services
The External Auditor Services Policy (Policy) requires
the Audit Committee (or its delegate) to approve all audit
and non-audit services before engaging the external
auditors to perform the work. The Policy also prohibits
the external auditors from providing certain services to
the Group or its affiliates. The objective of this Policy is
to
avoid
prejudicing
the
external
auditor’s
independence.
The Policy is designed to ensure that the external
auditors do not:
• Assume the role of management or act as an
employee;
• Become an advocate for the Group;
• Audit their own work;
• Create a mutual or conflicting interest between
themselves and the Group;
• Require an indemnification from the Group to
themselves;
• Seek contingency fees; or
• Have a direct financial or business interest or a
material indirect financial or business interest in the
Group or any of its affiliates, or an employment
relationship with the Group or any of its affiliates.
Under the Policy, the external auditor must not provide
certain services, including the following services:
• Bookkeeping or other services relating to accounting
records or Financial Statements of the Group;
• Financial information systems design and
implementation;
• Appraisal or valuation services (other than certain
tax only valuation services) and fairness opinions or
contribution-in-kind reports;
• Actuarial services unless approved in accordance
with independence guidelines;
• Internal audit outsourcing services;
• Management functions, including acting as an
employee and secondment arrangements;
• Human resources;
• Broker-dealer, investment adviser or investment
banking services;
• Legal services;
• Expert services for the purpose of advocating the
interests of the Group;
• Services relating to marketing, planning or opining
in favour of the tax treatment of certain transactions;
• Tax services in connection with certain types of tax
transactions;
• Tax services to individuals, and any immediate
family members of any individuals, in a Financial
Reporting Oversight Role;
• Certain corporate recovery and similar services; and
• Certain assurance or other services relating to
regulatory
investigations
or
potential
contravention of legislation.
In general terms, the permitted services are:
• Audit services to the Group or an affiliate;
• Related services connected with the lodgement of
statements or documents with the Australian
Securities and Investments Commission (ASIC),
ASX, APRA or other regulatory or supervisory
bodies;
• Services reasonably related to the performance of
the audit services;
• Agreed-upon procedures or comfort letters provided
by the external auditor to third parties in connection
with the Group’s financing or related activities; and
• Other services pre-approved by the Audit
Committee.
RISK MANAGEMENT
Risk Management governance originates at Board
level, and cascades through the Group via policies,
delegated authorities and committee structures. The
Board and its Risk Committee operate under the
direction of their respective Charters.
The Board sets the foundation for risk management via
its articulated Risk Appetite Statement (RAS). It is also
responsible for overseeing the establishment of
systems of risk management by approving
management’s Risk Management Strategy (RMS)
document and the key frameworks and policy
components.
Risk Committee
The Risk Committee oversees and annually reviews the
Group’s Risk Management Framework (RMF) and
helps formulate the Group’s risk appetite for
consideration by the Board. It reviews regular reports
from management on the measurement of risk and the
adequacy and effectiveness of the Group’s risk
management and internal controls systems. Such
reviews took place in the 2015 financial year. Tax and
accounting risks are governed by the Audit Committee.
The Committee monitors management's compliance
with the Group's RMF, including management's
implementation of key policies that underpin the Group
RMS.
The Risk Committee also monitors the health of the
Group’s risk culture, and reports any significant issues
to the Board.
2015 Corporate Governance Statement
8
The Risk Committee consists solely of independent
Non-Executive Directors. The minimum number of
Committee members is four (4) and meetings are
chaired by an independent, Non-Executive Director of
the Board. The Audit Committee Chairman is a member
of the Risk Committee and vice-versa to ensure the flow
of relevant information between the two Committees.
A copy of the Risk Committee Charter is available on
the Group’s website.
The Committee’s members are:
Harrison Young (Chairman)
David Turner
Sir John Anderson
Shirish Apte
Jane Hemstritch
Brian Long
Andrew Mohl
Meetings are held at least quarterly or more frequently
if required. Details of the number of times the Risk
Committee met throughout the 2015 financial year and
the individual attendances of the members at those
meetings is contained in the Committee Meetings
section of the Directors’ Report on page 41 of the 2015
Annual Report.
The Risk Committee will meet the regulators on request.
The Risk Committee has the option, with the
concurrence of the Chairman of the Board, to retain
independent legal, accounting or other advisors, to the
extent the Committee considers necessary, at the
Group’s expense.
Risk Management Framework
The Group has an integrated RMF in place to manage
risks and risk adjusted returns on a consistent and
reliable basis.
The Group’s RMF incorporates the requirements of
APRA’s prudential standard for risk management
(CPS220) and is structured around the interaction and
integration of its key documentary components, which
consists of RAS, RMS and the Group’s business plan.
A high-level description of the RMF including the
Group’s material risks is set out in Note 31 to the
Financial Statements on page 134 of the 2015 Annual
Report.
Material Exposure to Economic, Environmental
and Social Sustainability Risks
There are a number of material business risks that could
adversely affect the Group and the achievement of the
Group’s financial performance objectives. Those risks
and how they are managed by the Group are described
in Notes 31 to 34 to the Financial Statements on pages
135 to 157 of the 2015 Annual Report. Environmental,
social and governance (ESG) risks and how those risks
are managed by the Group are also described in the
Corporate Responsibility section of the 2015 Annual
Report on pages 32 to 35.
CONTINUOUS DISCLOSURE
Matters which could be expected to have a material
effect on the price or value of the Bank’s securities
must be disclosed under the Corporations Act and the
ASX Listing Rules. The Group’s Guidelines for
Communication between the Bank and Shareholders
is available on the Group’s website. These set out the
processes to ensure that shareholders and the
market are provided with full and timely information
about the Group’s activities in compliance with
continuous disclosure requirements.
Continuous disclosure policy and processes are in
place throughout the Group to ensure that all material
matters which may potentially require disclosure are
promptly reported to the CEO. This is achieved via
established reporting lines or as part of the deliberations
of the Group’s Executive Committee. Matters reported
are assessed and, where required by the ASX Listing
Rules, advised to the market. The Bank’s Company
Secretary is responsible for communications with the
ASX and for ensuring that such information is not
released to any person until the ASX has confirmed its
release to the market.
SHAREHOLDER COMMUNICATION
The Group believes it is very important for its
shareholders to make informed decisions about their
investment in the Bank. In order for the market to have
an understanding of the business operations and
performance, the Group aims to provide shareholders
with access to quality information in the form of:
• Interim and final results;
• Annual Reports;
• Shareholder newsletters;
• Matters discussed at the Annual General Meeting;
• Quarterly trading updates and Business Unit
briefings where considered appropriate;
• All other price sensitive information will be released
to the ASX in a timely manner;
• The Group’s website at www.commbank.com.au; and
• The Group’s investor relations app.
The Group employs a wide range of communication
approaches, including direct communication with
shareholders, publication of all relevant Group
information on the shareholder centre section of the
website and webcasting of most market briefings for
shareholders. Upcoming webcasts are announced to
the market via ASX announcements and publicised on
the website to enable interested parties to participate.
To make its general meetings more accessible to
shareholders, the Group moves the location of its AGM
between Australian capital cities each year and live
webcasts are available for viewing online. The Group
has taken these actions to encourage shareholder
participation at general meetings. Shareholders have
the option to receive communications from, and send
communications to, the Bank and its share registry
electronically.
The Group has in place an investor relations
programme to facilitate effective two way
communication with investors. A summary record of
issues discussed at one-on-one or group meetings with
investors and analysts, including a record of those
present, time and venue of the meeting, is kept for
internal reference only.
The Group is committed to maintaining a level of
disclosure that meets the highest of standards and
provides all investors with timely and equal access to
information.
2015 Corporate Governance Statement
9
ETHICAL POLICIES
The values of the Group are integrity, collaboration,
excellence, accountability and service. The Board
carries out its legal duties in accordance with these
values and having appropriate regard to the interests of
the Group’s customers, shareholders, people and the
broader community in which the Group operates.
Policies and codes of conduct have been established by
the Board and management to support the Group’s
objectives, vision and values.
Statement of Professional Practice
The Group’s code of ethics, known as the Statement of
Professional Practice, sets standards of behaviour
required of all employees and Directors including:
• To act properly and efficiently in pursuing the
objectives of the Group;
• To avoid situations which may give rise to a conflict
of interest;
• To know and adhere to the Group’s Equal
Employment Opportunity policy and programs;
• To maintain confidentiality in the affairs of the Group
and its customers; and
• To be absolutely honest in all professional activities.
These standards are regularly communicated to the
Group’s people. In addition, the Group Securities
Trading Policy is designed to ensure that unpublished
price-sensitive information is not used in an illegal
manner for personal advantage.
OUR PEOPLE
The Group has implemented various policies,
processes and systems to enable its people to carry out
their duties in accordance with the Group’s values.
These include:
•
Workplace Conduct (EEO);
•
Work Health and Safety;
•
Recruitment and Selection;
•
Performance Management;
•
Talent Management and Succession Planning;
•
Remuneration and Recognition;
•
Employee Share Plans; and
•
Supporting Professional Development.
Diversity
Information on the Group’s Diversity and Inclusion
Strategy can be found in the Corporate Responsibility
section on pages 32 to 35 of the 2015 Annual Report.
In December 2009 the Group set a target to increase
the representation of women in Executive Management
and above roles from 26.6% to 35% by December 2014.
As at 30 June 2015 the Group achieved 35% women in
Executive Management and above roles. Overall,
women make up almost 60% of the Group’s workforce
and 43% of them are in management roles.
In the senior leadership roles, women make up 33.3%
of the Executive Committee and 30% of the Non-
Executive Directors on the Board.
The Group’s most recent Gender Equality Indicators, as
defined in and published under the Workforce Gender
Equality Act, can be viewed at www.wgea.gov.au
Workplace Responsibilities, Behaviours and
Compliance
The Group is strongly committed to maintaining an
ethical workplace and to complying with its legal and
ethical responsibilities. The Group has a number of
policies relating to workplace responsibilities,
behaviours and compliance that apply to and must be
observed by Group staff.
The Group has a system in place which allows staff to
report (and remain anonymous if they wish) suspected
fraud or corrupt, unlawful or improper conduct. The
Group also has a “SpeakUP Hotline” which is available
for staff to raise issues (anonymously if they wish)
affecting their role or their wellbeing at work. The
SpeakUP Hotline is an external telephone and email
service staffed by independent consultants qualified
and equipped to respond to such matters.
CODE OF CONDUCT
The Board operates in a manner reflecting the Group’s
values and in accordance with its Corporate
Governance Guidelines, the Bank’s Constitution, the
Corporations Act and all other applicable regulations.
The Board employs and requires at all levels
impeccable values, honesty and openness. Through its
processes it achieves transparent open governance
and communications, and it addresses both
performance and compliance.
The Board’s policies and codes include detailed
provisions dealing with:
• The interaction between the Board and
management to ensure there is effective
communication of the Board’s views and decisions,
resulting in motivation and focus towards long term
shareholder value behaviours and outcomes;
• Disclosure of relevant personal interests so that
potential conflict of interest situations can be
identified and appropriate action undertaken to
avoid compromising the independence of the Board;
and
• Security dealings in compliance with the Group’s
strict guidelines and in accordance with its values of
integrity, collaboration, excellence, accountability and
service.
WEBSITE
The current Charters and summary of Policies and
Guidelines referred to in this statement can be viewed
at:
https://www.commbank.com.au/about-
us/shareholders/corporate-profile/corporate-
governance.html
CONCLUSION
The Board recognises that practices and procedures
can always be improved. Accordingly, the Group’s
Corporate Governance Framework is kept under review
to take into account changing standards and
regulations.
