The Board has established a Nomination Committee, a Remuneration Committee and an Audit and Risk Committee as standing committees to assist with the discharge of its responsibilities. Details of the current membership and composition of each committee are set out in the 2019 Corporate Governance Statement.
Role of the Nomination Committee
As part of the Nomination Committee’s oversight of Board succession planning, it is also responsible for identifying suitable candidates to fill Board vacancies as and when they arise, or to identify candidates to complement the existing Board, and to make recommendations to the Board on their appointment. Where appropriate, external consultants are engaged to assist in searching for candidates. The Nomination Committee is responsible for scheduling regular performance reviews of the Board, its committees and individual non-executive directors. The performance review process involves a one-on-one meeting between the Chairman and each individual non-executive director. The outcomes of the review are discussed by the Board and its committees. From time to time, the evaluation process may be facilitated by an external consultant.
More details are available in the 2019 Corporate Governance Statement.
Key focus areas of the Nomination Committee during the 2019 financial year included:
Identification and nomination of Mike Roche and Sharon Warburton as new non-executive directors for election to the Board bringing skills, experience and expertise to augment those of current directors; and
Consideration of feedback from major shareholders during the Chairman’s Roadshow conducted prior to the 2018 Annual General Meeting.
Role of the Remuneration Committee
Full details of the remuneration paid to non-executive directors, the executive director and senior executives, along with details on Wesfarmers’ policy on the remuneration of senior executives are set out in the remuneration report on pages 85 to 110 in the 2019 Annual Report.
Senior executives comprising members of the Wesfarmers Leadership Team have a variable or ‘at risk’ component as part of their total remuneration package under the Key Executive Equity Performance Plan (KEEPP). The mix of remuneration components and the performance measures used in the KEEPP have been chosen to ensure that there is a strong link between remuneration earned and the achievement of the Group’s strategy and business objectives, alignment with the Group’s values, management of risk in accordance with the Group’s risk appetite, and, ultimately, generating satisfactory returns for shareholders.
Annual performance reviews of each member of the Wesfarmers Leadership Team, including the Group Managing Director, for the 2019 financial year have been undertaken. More details about Wesfarmers' performance and development review process for senior executives is set out in the 2019 Corporate Governance Statement.
Key focus areas of the Remuneration Committee during the 2019 financial year included:
Reviewing and making a recommendation to the Board in relation to the fixed and variable remuneration of the Group Managing Director and his direct reports;
Reviewing and making recommendations to the Board in relation to the Wesfarmers variable remuneration plans, including recommending to the Board the vesting outcomes of the 2015 Wesfarmers Long Term Incentive Plan shares, based on the achievement of the performance conditions as at 30 June 2019;
Reviewing the succession and transition plans for the Wesfarmers Leadership Team;
Reviewing the senior executive remuneration framework and policies, including terms of employment such as notice periods, restraint and non-solicitation clauses;
Reviewing and recommending to the Board in relation to the impact, if any, upon the senior executive long-term incentive plans as a result of significant portfolio change including the demerger of Coles; and
Reviewing and making a recommendation to the Board on non-executive director fees.
The corporate governance section of the company's website (www.wesfarmers.com.au/cg) contains access to all relevant corporate governance information, including Board and committee charters, and Group policies referred to in the 2019 Corporate Governance Statement.
Role of Audit and Risk Committee
The Audit and Risk Committee assists the Board in fulfilling its responsibilities in overseeing the company’s financial reporting, compliance with legal and regulatory requirements, the setting and reviewing of risk parameters and the risk appetite of the Wesfarmers Group, and proactively managing the Group’s systems of internal control and its financial and non-financial risk management framework in accordance with the Group’s purpose, values and strategic direction.
Key focus areas of the Audit and Risk Committee during the 2019 financial year included:
Reviewing and assessing the Group’s processes which ensure the integrity of financial statements and reporting, and associated compliance with accounting, legal and regulatory requirements;
Monitoring the Group’s cyber security framework, including data protection management, third party data risk management and the reporting structure and escalation process on information security risks;
Monitoring the ethical sourcing of products for resale through the Group’s retail networks to ensure that there are appropriate safeguards and processes in place;
Monitoring the retail shrinkage control measures and reporting procedures in the Group’s divisions;
Reviewing the processes and controls around the recognition of commercial income by the retail divisions to ensure recognition is in accordance with Accounting Standards and accepted industry practice;
Reviewing and evaluating the adequacy of the Group’s insurance arrangements to ensure appropriate cover for identified operational and business risks;
Monitoring the Group’s tax compliance program both in Australia and overseas, including cross-border intra-Group transactions, to ensure its obligations are met in the jurisdictions in which the Group operates;
Monitoring the processes and framework established for the divisional audit and risk committees;
Appointing the Group’s internal auditor for a three-year term following a competitive tender process;
Overseeing the Group’s transition to the new lease accounting standard AASB 16 Leases, including reviewing the transition plan for the implementation of the new standard and ensuring associated disclosures are consistent with work undertaken and accepted industry practice; and
Monitoring compliance with Group policies including the Code of Conduct and reporting processes.
Role of the external auditor
The company’s external auditor is Ernst & Young and Darren Lewsen was appointed as the lead audit partner from 1 July 2013. In accordance with the requirements of the Corporations Act 2001, the Board on the recommendation of the Audit and Risk Committee approved Mr Lewsen to act as the lead partner for a sixth consecutive year for the 2018 - 2019 financial year. Mr Lewsen retired as the lead audit partner on completion of the audit of the financial statements for the year ended 30 June 2019. Mr Trevor Hammond (Partner-Assurance Ernst & Young) was appointed as the new lead audit partner from 1 July 2019.
Ernst & Young has provided the required independence declaration to the Board for the financial year ended 30 June 2019. The independence declaration forms part of the directors’ report and is provided on page 84 of the annual report.