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Governance Summary

AGL is committed to ensuring that its corporate governance framework, policies and practices are of a high standard. Delivering on this commitment requires AGL to have a sound understanding of current governance requirements and practices, as well as being attuned to emerging governance trends and shifting stakeholder expectations. Set out below is a summary of selected aspects of AGL’s corporate governance framework and a highlight of the key governance issues affecting AGL during FY19.

Throughout FY19, AGL’s corporate governance arrangements were consistent with the Corporate Governance Principles and Recommendations (3rd edition) published by the ASX Corporate Governance Council (ASX Principles). AGL has considered the recently released 4th edition of the ASX Principles and expects that its governance arrangements will be consistent with the 4th edition of the ASX Principles throughout FY20. AGL’s 2019 Corporate Governance Statement is available at agl.com.au/CorporateGovernance.

AGL’s 2019 Corporate Governance Statement outlines AGL’s arrangements in relation to its Board, Board Committees, Executive Team, risk management framework and financial reporting, diversity and inclusion, key corporate governance policies and shareholder engagement.

AGL's governance framework is summarised in the diagram below.

Changes to Board composition during FY19

During FY19, the following changes were made to AGL’s Board:

  • Andy Vesey ceased to be a Director on 23 August 2018;
  • Belinda Hutchinson retired from the Board on 12 December 2018;
  • Brett Redman was appointed as the Managing Director & CEO on 1 January 2019; and
  • Patricia McKenzie was appointed as a Non-Executive Director on 1 May 2019.

The following changes were made to AGL’s Board Committees during FY19:

  • Belinda Hutchinson retired from the People & Performance Committee (P&PC) and Audit & Risk Management Committee (ARMC) following her retirement from the Board on 12 December 2018;
  • Peter Botten was appointed to the P&PC on 12 December 2018; and
  • Patricia McKenzie was appointed to the Nominations Committee, ARMC and P&PC on 21 May 2019.

Board skills

The Board Skills Matrix (Table 1) summarises the mix of skills and experience that the current AGL Directors possess. During FY19, the Board utilised this Matrix in relation to the appointment of Patricia McKenzie, who provides additional experience in gas, electricity, operations/asset management, risk management and compliance, and large public company/governance.

The Board considers that its current members have an appropriate mix of skills that enable the Board to discharge its responsibilities and deliver AGL’s strategic objectives. As part of the FY19 update of the Board Skills Matrix, the Board has identified additional skills and experience that may be required in the future and is taking steps to address those competency requirements.

Key areas of focus during FY19

The key areas of focus for the Board during FY19, in addition to standing agenda items, are set out in Table 2.

The key areas of focus for the Board Committees, in addition to standing agenda items, are set out in Table 3.

Table 1 – Board Skills Matrix

Skills required

Description

Board

SSCR

AMRC

P&PC

Gas experience

Knowledge of the supply, storage and transportation aspects of Australia’s gas markets, including trading, contracting and wholesale pricing.

6/8

2/4

3/4

3/4

Operations/asset management

Having led or overseen the management of complex operating assets which require the leadership of a large, skilled workforce.

8/8

4/4

4/4

4/4

Risk management and compliance

A working knowledge of contemporary risk and compliance management practices. Experience managing business risks and controls and the activities necessary to effectively manage and mitigate risk.

8/8

4/4

4/4

4/4

Technology/industry transformation

Experience and insights from industries that have been through significant technology/digital disruption or transformation. Experience with new and emerging technologies.

6/8

3/4

3/4

2/4

Strategy and growth

Experience developing strategic objectives and driving growth opportunities in large, complex organisations.

8/8

4/4

4/4

4/4

Electricity experience

Knowledge of the essential elements of the National Electricity Market (NEM), including trading, contracting and wholesale and retail pricing. A knowledge of the generation market (renewables, coal and gas) as well as downstream retail and commercial and industrial market dynamics.

5/8

1/4

3/4

2/4

Corporate finance

Experience leading or overseeing the corporate finance function within a large business or investment banking environment. Experience dealing with a range of funding sources and capital structuring models and financial accounting and reporting.

8/8

4/4

4/4

4/4

Customer and retail

Knowledge of customer segmentation models and how to influence customer behaviour in an increasingly digital world. This experience would ideally come from a retail environment, however business-to-business sales in the commercial or industrial environment is also highly relevant.

6/8

3/4

2/4

3/4

Large public company / governance

Experience as a Director of public company Board(s) within the ASX100. Particularly relevant are businesses with an exposure to complex political, regulatory and business environments with a strong track record of environmental and social governance and significant people and performance structures.

8/8

4/4

4/4

4/4

Table 2 – Board Focus Areas

Committee

Key Focus Areas in FY19

Business Value
Drivers

Board

  • CEO succession processes, including overseeing an extensive domestic and international search process that culminated in the appointment of Brett Redman as Managing Director and CEO in January 2019.
  • Overseeing the processes to appoint new members to the Executive Team, including the Chief Financial Officer, Chief Customer Officer, EGM People & Culture and EGM Strategy & Corporate Development.
  • Group performance (including financial performance, asset performance, customer metrics and HSE performance) .
  • Growth options available to AGL, including by optimising existing assets, evolving AGL’s core energy market offerings and new growth opportunities.
  • The non-binding, indicative proposal that AGL made to acquire Vocus Group Limited.
  • Customer pricing and affordability initiatives, including consideration of proposed regulatory changes to energy pricing and assisting customers to take up government-led residential battery schemes.
  • Implementation of AGL’s transformation programs, including the Customer Experience Transformation project and the enterprise resource planning upgrade.
  • AGL’s governance and risk management systems and identifying ways to further strengthen governance, accountability and culture within AGL.
  • Action AGL is taking to deliver on its strategic priority to build Social Licence, including approving a new set of purpose and values for AGL.
  • The ongoing feasibility of the LNG import jetty project at Crib Point.

Table 3 – Board Committee Focus Areas

Committee

Key Focus Areas in FY19

Business Value
Drivers

Safety, Sustainability & Corporate Responsibility

  • Site visits to AGL’s power stations at Loy Yang and Macquarie to oversee key health, safety and environmental issues affecting the sites.
  • Visit to Crib Point, the site of AGL’s proposed LNG import jetty, including meeting with various stakeholders and community members to allow Directors to understand key concerns.
  • AGL’s safety, culture, systems, capability and risk, including overseeing initiatives to improve health, safety and environmental performance.
  • Monitoring safety and environmental incidents, including the suspension of coal ash sales from the Bayswater and Liddell Power Stations following reporting of elevated levels of metals in the ash, including overseeing reports which confirmed that the use of the ash did not pose a risk to human health.
  • Key themes in relation to AGL’s customers including complaint handling processes, brand health, initiatives to drive improved customer advocacy and the effectiveness of customer campaigns.
  • Action AGL is taking to deliver on its strategic priority to build Social Licence and to promote stakeholder advocacy.
  • AGL’s performance against sustainability framework targets set out in the 2018 Sustainability Report.

Audit & Risk Management

  • Overseeing the issues, incidents and risks identified by management in the quarterly Group Audit, compliance and risk reports and ensuring there is clear accountability for, and effective closure of, relevant issues.
  • Overseeing AGL's financial reporting processes, including consideration of AGL's half-year and full year reports.
  • AGL’s transition to reporting that meets the principles of the International Integrated Reporting Framework.
  • Reviewing the effectiveness of AGL’s governance and risk management systems and identifying ways to further strengthen governance, accountability and culture within AGL, including the consideration of improvement opportunities across AGL’s business in the areas of culture, governance, remuneration and customers, following the release of the Final Report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
  • AGL’s preparedness for peak period operations and reviewing performance of assets during peak periods, including risk controls and lessons learned.
  • Reviewing reports from management on emerging sources of risks and the mitigation measures in place to deal with those risks, including in relation to IT security and climate change.

People & Performance

  • Overseeing the preparation of AGL’s Remuneration Report.
  • Changes to AGL’s Executive Remuneration Framework, as set out in the Remuneration Report.
  • CEO and Executive Team FY19 objectives, as set out in the Remuneration Report.
  • Consideration of AGL’s Diversity Targets.
  • Executive succession planning and talent development.
  • Action AGL is taking to foster employee engagement and monitoring of workplace culture.

Nominations

  • FY19 Board Review process.
  • Updating of the Board Skills Matrix.
  • Succession planning to address AGL’s future opportunities and challenges, including the identification and appointment of Patricia McKenzie as a new Non-Executive Director and the CEO succession process.

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