Humanis Group Limited and its controlled entities ("the Group") are committed to implementing the highest standards of corporate governance.  In determining what those high standards should involve, the Group has turned to the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations. The Group is pleased to advise that the Group’s practices are largely consistent with those ASX guidelines. As consistency with the guidelines has been a gradual process, where the Group did not have certain policies or committees recommended by the ASX Corporate Governance Council (“the Council”) in place during the reporting period, we have identified such policies or committees.

Where the Group’s corporate governance practices do not correlate with the practices recommended by the Council, the Group is working towards compliance.  However, it does not consider that all the practices are appropriate for the Group due to the size and scale of the Group’s operations.

To illustrate where the Group has addressed each of the Council’s recommendations, the following table cross-references each recommendation with sections of this report.  The table does not provide the full text of each recommendation but rather the topic covered.  Details of all of the recommendations can be found on the Council’s website at http://www.asx.com.au/supervision/governance/principles_good_corporate_governance.htm.

1.         Board of Directors

1.1       Role of the Board

The Board’s role is to govern the Group rather than to manage it.  In governing the Group, the Directors must act in the best interests of the Group as a whole.  It is the role of senior management to manage the Group in accordance with the direction and delegations of the Board and the responsibility of the Board to oversee the activities of management in carrying out these delegated duties.  The Board will be responsible for regularly reviewing the performance of its senior management. 

In carrying out its governance role, the main task of the Board is to drive the performance of the Group.  The Board must also ensure that the Group complies with all of its contractual, statutory and any other legal obligations, including the requirements of any regulatory body.  The Board has the final responsibility for the successful operations of the Group.

1.2       Composition of the Board

To add value to the Group, the Board has been formed so that it has effective composition, size and commitment to adequately discharge its responsibilities and duties given its current size and scale of operations.  Directors are appointed based on the specific skills required by the Group and on their decision-making and judgment skills. The names and profiles of the directors of the company in office at the date of this Annual Report are provided in the Directors Report.

The Group recognises the importance of Non-Executive Directors and the external perspective and advice that Non-Executive Directors can offer.  Mr. Bryan Gardiner, Mr. Andrew Parker and Mr. Craig Munro are Non-Executive Directors.  Mr. Bryan Gardiner is the Chairman.  Mr Angus Mason became a non-executive director during the year and Mr Vito Interlandi and Mr. Steve Heather were also appointed as Non-Executive Directors during the year. Mr. Andrew Parker, Mr. Steve Heather and Mr Angus Mason did not satisfy the criteria as independent directors of the Company. Non-Executive Directors are independent directors as they meet the following criteria for independence adopted by the Group:

An Independent Director is a Non-Executive Director and:

• is not a substantial shareholder of the Company or an officer of, or otherwise associated directly with, a substantial shareholder of the Company;
• within the last three years has not been employed in an executive capacity by the Company or another group member, or been a Director after ceasing to hold any such employment;
• within the last three years has not been a principal of a material professional adviser or a material consultant to the Company or another group member or an employee materially associated with the service provided;
• is not a material supplier or customer of the Company or another group member, or an officer of or otherwise associated directly or indirectly with a material supplier or customer;
• has no material contractual relationship with the Company or other group member other than as a Director of the Company;
• has not served on the Board for a period which could, or could reasonably be perceived to, materially interfere with the Director’s ability to act in the best interests of the Company; and
• is free from any interest and any business or other relationship which could, or could reasonably be perceived to, materially interfere with the Director’s ability to act in the best interests of the Company.

Mr. George Gelavis is the Managing Director of the Company and does not meet the Group’s criteria for independence.  Mr. Dion Smith is the Executive Director of the Company and does not meet the Group’s criteria for independence.  Whilst Mr. Andrew Parker and Mr Angus Mason are Non-Executive Directors of the Company, they do not meet the Group’s criteria for independence. Mr. Steve Heather became a Non-Executive Director during the year, but did not meet the criteria for independence.

The roles of the Chair and the Chief Executive Officer are not exercised by the same individual. Mr. George Gelavis is the Managing Director/Chief Executive and Mr. Bryan Gardiner is the Chairman.

1.3       Responsibilities of the Board

In general, the Board is responsible for, and has the authority to determine, all matters relating to the policies, practices, management and operations of the Group.  It is required to do all things that may be necessary to be done in order to carry out the objectives of the Group.

Without intending to limit this general role of the Board, the principal functions and responsibilities of the Board include the following. 

• Leadership of the Organisation:  overseeing the Group and establishing codes that reflect the values of the Group and guide the conduct of the Board.
  
• Strategy Formulation:  to set and review the overall strategy and goals for the Group and ensuring that there are policies in place to govern the operation of the Group.
  
• Overseeing Planning Activities:   the development of the Group’s strategic plan.
  
• Shareholder Liaison:  ensuring effective communications with shareholders through an appropriate communications policy and promoting participation at general meetings of the Group.
  
• Monitoring, Compliance and Risk Management:  the development of the Group’s risk management, compliance, control and accountability systems and monitoring and directing the financial and operational performance of the Group.
  
• Group Finances:  approving expenses and approving and monitoring acquisitions, divestitures and financial and other reporting.
  
• Human Resources:  appointing, and, where appropriate, removing the Managing Director as well as reviewing their performance and monitoring the performance of senior management in their implementation of the Group’s strategy.
  
• Ensuring the Health, Safety and Well-Being of Employees:  in conjunction with the senior management team, developing, overseeing and reviewing the effectiveness of the Group’s occupational health and safety systems to ensure the well-being of all employees.
  
• Delegation of Authority:  delegating appropriate powers to the Managing Director to ensure the effective day-to-day management of the Group and establishing and determining the powers and functions of the Committees of the Board.

1.4       Board Policies

1.4.1    Conflicts of Interest

Directors must:

• disclose to the Board actual or potential conflicts of interest that may or might reasonably be thought to exist between the interests of the Director and the interests of any other parties in carrying out the activities of the Group; and
  
• if requested by the Board, within seven days or such further period as may be permitted, take such necessary and reasonable steps to remove any conflict of interest.

If a Director cannot or is unwilling to remove a conflict of interest then the Director must, as per the Corporations Act, absent himself or herself from the room when discussion and/or voting occurs on matters about which the conflict relates. 

1.4.2    Commitments

Each member of the Board is committed to spending sufficient time to enable them to carry out their duties as a Director of the Company.

1.4.3    Confidentiality

In accordance with legal requirements and agreed ethical standards, Directors and key executives of the Group have agreed to keep confidential, information received in the course of the exercise of their duties and will not disclose non-public information except where disclosure is authorised or legally mandated.

1.4.4    Continuous Disclosure

The Board has designated the Company Secretary as the person responsible for overseeing and coordinating disclosure of information to the ASX as well as communicating with the ASX.  In accordance with the ASX Listing Rules the Company immediately notifies the ASX of information:

• concerning the Group that a reasonable person would expect to have a material effect on the price or value of the Company’s securities; and
  
• that would, or would be likely to, influence persons who commonly invest in securities in deciding whether to acquire or dispose of the Company’s securities.

In addition each Director of the Company must provide the Company Secretary with details of any interest notifiable to ASX in accordance with Listing Rule 3.19A including:

• any relevant interest (within the meaning of section 9 of the Corporations Act) in securities of the Company or a related body Corporate; and
  
• any interest in contracts to which the Director is a party or under which the Director is entitled to benefit, and that confer a right to call for or deliver shares in, debentures of, or interests in a managed investment scheme made available by the Company of a related body corporate. 

This information must be provided to the Company Secretary as soon as the Director becomes aware of the circumstances referred to above.

1.4.5    Education and Induction

It is the policy of the Group that new Directors undergo an induction process in which they are given a full briefing on the Group.  Where possible this includes meetings with key executives, tours of the premises, an induction package and presentations.  Information conveyed to new Directors includes:

• details of the roles and responsibilities of a Director;
  
• formal policies on Director appointment as well as conduct and contribution expectations;
  
• guidelines on how the Board processes function;
  
• details of past, recent and likely future developments relating to the Board;
  
• background information on and contact information for key people in the organisation;
  
• an analysis of the Group;
  
• a synopsis of the current strategic direction of the Group; and
  
• a copy of the Constitution of the Company.

In order to achieve continuing improvement in Board performance, all Directors are encouraged to undergo continual professional development.  Specifically, Directors are provided with the resources and training to address skills gaps where they are identified. 

1.4.6    Independent Professional Advice

The Board collectively and each Director has the right to seek independent professional advice at the Company’s expense, up to specified limits, to assist them to carry out their responsibilities, subject to the prior approval of the Chairman whose approval will not be unreasonably withheld.

1.4.7    Related Party Transactions

Related party transactions include any financial transaction between a Director and the Company.  Unless there is an exemption under the Corporations Act from the requirement to obtain shareholder approval for the related party transaction, the Board cannot approve the transaction.

1.4.8    Shareholder Communication

The Company respects the rights of its shareholders and to facilitate the effective exercise of those rights the Company is committed to:

• communicating effectively with shareholders through releases to the market via ASX, information mailed to shareholders and the general meetings of the Company;
• giving shareholders ready access to balanced and understandable information about the Company and corporate proposals;
• making it easy for shareholders to participate in general meetings of the Company; and
• requesting the external auditor to attend the annual general meeting and be available to answer shareholder questions about the conduct of the audit and the preparation and content of the auditor’s report. 

The Company also makes available a telephone number and email address for shareholders to make enquiries of the Company. 

1.4.9    Trading in Company Shares

Due to the size of the Group, the Board does not consider it appropriate to implement a Share Trading Policy.  Rather, it reminds directors, officers and employees of the prohibition in the Corporations Act 2001 concerning trading in the Company’s securities when in possession of “inside information”.

1.4.10    Performance Review/Evaluation

It is the policy of the Board to conduct evaluation of its performance.  The objective of this evaluation will be to provide best practice corporate governance to the Group.  The Chair regularly reviews the Board’s overall performance as well as the performance individual directors. This is undertaken by a series of peer reviews to identify areas of concern and opportunities for improvement. The reviews are undertaken on an ongoing basis.

1.4.11    Attestations by Chief Executive Officer and Chief Financial Officer

It is the Board’s policy, that one of the Non-Executive Directors will be appointed to make the attestations recommended by the ASX Corporate Governance Council as to the Group’s financial condition prior to the Board signing the Annual Report.

The Managing Director and the CFO have provided statements to the Board that in all material respects:

• The CompanyGroup’s financial statements present a true and fair view of the Group’s financial condition and operational results; and
• The risk management and internal compliance and control systems are sound, appropriate and operating effectively.

2.         Board Committees

2.1       Audit and Finance Committee

The members of the Audit and Finance Committee include: Mr Craig Munro (Chairman Audit and Finance Committee), Mr Bryan Gardiner (Chairman of the Board) & Mr Joe Pannuzzo (CFO).

2.1.1    Role

The Audit and Finance Committee is responsible for reviewing the integrity of the Group’s financial reporting and overseeing the independence of the external auditors. 

2.1.2    Responsibilities

The Audit and Finance Committee reviews the audited annual and half-yearly financial statements and any reports which accompany published financial statements and recommends their approval to the members.

The Audit and Finance Committee each year reviews the appointment of the external auditor, their independence, the audit fee, and any questions of resignation or dismissal.

The Audit and Finance Committee is also responsible for establishing policies on risk oversight and management.

The audit committee currently consists only of non executive directors and is currently chaired by an independent chair that is not a chair of the board. The audit committee currently has three members.

2.1.3    Risk Management Policies

The Board is responsible for ensuring there is a sound system for overseeing and managing risk. As the whole Board only consists of six (6) members, the Company does not have a Risk Management Committee because it would not be a more efficient mechanism than the full Board for focusing the Company on specific issues.

All business activities contain an element of risk. The Group’s philosophy on risk is to identify a risk in advance, determine potential risk mitigation strategies, assess the risk in terms of risk and reward and then determine how to proceed. The key areas of risk faced by the Group are:

• Financial risk, which includes fraudulent activities, the risk of financial loss from losing business from key customer and/or credit risk attached to non payment by a customer.
• Contractual risk, being the nature of performance and indemnity requirements in contracts with customers.
• OHS risk in respect of our employees.
• Operational risk, which arises from inadequate or failed internal processes, people and systems, or from external events.

Appropriate policies and procedures have been developed to help manage these risks. The board is responsible for approving the Group’s risk management strategy. The Executive team is responsible for the implementation of the strategy and for developing policies, processes and procedures to identify and manage risks. The Executive team is required to report to the Board at least annually on the effectiveness of the risk management process for the Group’s material risks.

2.2       Remuneration Committee

2.2.1    Role

The role of a Remuneration Committee is to assist the Board in fulfilling its responsibilities in respect of establishing appropriate remuneration levels and incentive policies for employees.

As the whole Board only consists of six (6) members, the Company does not have a remuneration committee because it would not be a more efficient mechanism than the full Board for focusing the Group on specific issues. 

2.2.2    Responsibilities

The responsibilities of a Remuneration Committee include setting policies for senior officers’ remuneration, reviewing and making recommendations to the Board on the Group’s incentive schemes and superannuation arrangements, reviewing the remuneration of both Executive and Non-Executive Directors and making recommendations on any proposed changes and undertaking reviews of the Managing Director’s performance, including, setting with the Managing Director goals and reviewing progress in achieving those goals.

2.2.3    Remuneration Policy

Directors’ Remuneration for the majority of directors is approved at a Board meeting from time to time.

2.2.3.1 Senior Executive Remuneration Policy

The Group is committed to remunerating its senior executives in a manner that is market-competitive and consistent with best practice as well as supporting the interests of shareholders.  Consequently, under the Senior Executive Remuneration Policy the remuneration of senior executives may be comprised of the following:

• fixed salary that is determined from a review of the market and reflects core performance requirements and expectations;
• a performance bonus designed to reward actual achievement by the individual of performance objectives and for materially improved Group performance;
• participation in any share/option scheme with thresholds approved by shareholders; and
• statutory superannuation. 

By remunerating senior executives through performance and long-term incentive plans in addition to their fixed remuneration the Group aims to align the interests of senior executives with those of shareholders and increase Group performance.

The value of shares and options were they to be granted to senior executives would be calculated using the Black and Scholes method.

The objective behind using this remuneration structure is to drive improved Group performance and thereby increase shareholder value as well as aligning the interests of executives and shareholders. 

The Board may use its discretion with respect to the payment of bonuses, stock options and other incentive payments. 

2.2.3.2 Non-Executive Director Remuneration Policy

Non-Executive Directors are to be paid their fees out of the maximum aggregate amount approved by shareholders for the remuneration of Non-Executive Directors.  Non-Executive Directors do not receive performance based bonuses. 

Non-Executive Directors are entitled to but not necessarily paid statutory superannuation. 

2.2.4    Current Director Remuneration

Full details regarding the remuneration of Directors, is included in the Directors’ Report.

2.3       Nomination Committee

2.3.1    Role

The role of a Nomination Committee is to help achieve a structured Board that adds value to the Group by ensuring an appropriate mix of skills are present in Directors on the Board at all times.

As the whole Board only consists of six (6) members, the Company does not have a nomination committee because it would not be a more efficient mechanism than the full Board for focusing the Group on specific issues.

2.3.2    Responsibilities

The responsibilities of a Nomination Committee include devising criteria for Board membership, regularly reviewing the need for various skills and experience on the Board and identifying specific individuals for nomination as Directors for review by the Board.  The Nomination Committee also oversees management succession plans and evaluates the Board’s performance and make recommendations for the appointment and removal of Directors. Currently the Board as a whole performs this role.

2.3.3    Criteria for selection of Directors

Directors are appointed based on the specific governance skills required by the Group.  Given the size of the Group and the business that it operates, the Group aims at all times to have at least two Directors with experience appropriate to the Group’s target market.  In addition, Directors should have the relevant blend of personal experience in accounting and financial management and Director-level business experience.