Corporate Governance

CORPORATE GOVERNANCE STATEMENT

The Board of Directors of Stokes Limited (“Stokes” or “the Company”) is responsible for the corporate governance of the economic entity. The Board guides and monitors the business and affairs of Stokes on behalf of the shareholders by whom they are elected and to whom they are accountable.

To ensure that the Board is well equipped to discharge its responsibilities, it has established guidelines and accountability as the basis for the administration of corporate governance.

Corporate Governance Disclosures

The Board and management are committed to good corporate governance and have followed the “Principles of good Corporate Governance and Best Practice Recommendations” issued by the Australian Securities Exchange (“ASX”) Corporate Governance Council to the extent that they are applicable to the company.

In summary, Stokes departs from the Guidelines in four key areas:

  • First, the majority of the Board is not deemed to be independent Directors. Currently there is one independent director Terence Grigg, a Non Executive,  Independent Director on the Company’s board of directors. This is a departure from Recommendation 2.1;
  • Second, Stokes does not have a separate Nomination Committee. This is a departure from Recommendation 2.4. The full Board attends to the matters normally attended to by a Nomination Committee;
  • Third, Stokes does not have a separate Remuneration Committee. This is a departure from Recommendation 8.1. The full Board attends to the matters normally attended to by a Remuneration Committee. Remuneration levels are set by the company in accordance with industry standards to attract suitable qualified and experienced Directors and senior executives; and
  • Fourth, Stokes currently does not have a separate audit committee. This is a departure from Recommendation 4.1. The company is of a size and a level of current activity that enables the full Board to be able to attend to the matters normally attended to by the Audit Committee.

Role Of The Board

The key responsibilities of the Board include:

  • appointing, evaluating, rewarding and if necessary the removal of senior management;
  • development of corporate objectives and strategy with management and approving plans, new investments, major capital and operating expenditures and major funding activities proposed by management;
  • monitoring actual performance against defined performance expectations and reviewing operating information to understand at all times the state of the health of the company;
  • overseeing the management of business risks, safety and occupational health, environmental issues and community development;
  • satisfying itself that the financial statements of the company fairly and accurately set out the financial position and financial performance of the company for the period under review;
  • satisfying itself that there are appropriate reporting systems and controls in place to assure the Board that proper operational, financial, compliance, risk management and financial and other reporting; including reporting under listing rules 3.19A and 3.19B and section 205G of the Corporations act 2001, are in place and functioning appropriately.
  • assuring itself that appropriate audit arrangements are in place;
  •  ensuring that the company acts legally and responsibly on all matters and assuring itself that the company has adopted, and that the company’s practice is consistent with, a number of guidelines, being:
  • Directors and Executive officers Code of Conduct;
  • Dealings in Securities;
  • Reporting and Dealing with Unethical Practices; and
  • Reporting to and advising shareholders.

 Structure Of The Board

Directors of Stokes are considered to be independent when they are independent of management and free from any business or other relationship that could materially interfere with or could reasonably be perceived to materially interfere with the exercise of their unfettered and independent judgment.

An independent director is a non-executive director (that is, is not a member of management) 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 its subsidiaries, or been a director after ceasing to hold any such employment;
  • is not a principal or employee of a professional advise to the company or its subsidiaries whose billings are a material amount of the adviser’s total revenue;
  • is not a significant supplier or customer of the company or its subsidiaries, or an officer of or otherwise associated directly or indirectly with a significant supplier or customer. A significant supplier is defined as one whose revenues from the company are a material amount of the supplier’s total revenue. A significant customer is one whose amounts payable to the company are a material amount of the customer’s total operating costs;
  • has no material contractual relationship with the company or its subsidiaries 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;
  • 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.

In accordance with the definition of independence above, there are currently no Directors of Stokes who are considered to be independent:

There are procedures in place, agreed by the Board, to enable the Directors in furtherance of their duties to seek independent professional advice at the company’s expense.

The term in office held by each director is as follows:

Name                                           Term

Peter Jinks                                   No Contract

Greg Jinks                                    No Contract

Terence Grigg                              No Contract

When a Board vacancy exists, through whatever cause, or where it is considered that the Board would benefit from the service of a new director with particular skills, the full board will recommend a candidate or panel of candidates with the appropriate expertise.

The Board then appoints the most suitable candidate who must stand for election at the next general meeting of shareholders. 

The Company secretary is responsible for co-ordination of all Board business, and communication with regulatory bodies, ASX, ASIC and all statutory filings and is accountable to the Board and all Directors have access to the company secretary. The decision to appoint or remove the company secretary is made by the Board.

Remuneration and Nomination Committee

The Board has not established a formal Remuneration or Nomination Committee. The full Board attends to the matters normally attended to by a Remuneration and a Nomination Committee. Remuneration levels are set by the company in accordance with industry standards to attract suitable qualified and experienced Directors and senior executives.

For full discussion of the company’s remuneration philosophy and framework and the remuneration received by Directors and executives in the current period please refer to the Remuneration Report, which is contained within the Director’s Report.

There is no scheme to provide retirement benefits to Non-Executive Directors other than superannuation as required by law.

The Board is responsible for determining and reviewing compensation arrangements for the Directors themselves.

Audit and Risk Management Committee

 The Board has not established an Audit and Risk Management Committee. The full Board attends to the matters normally attended to by such a Committee.

The Board acknowledges that when the size and nature of the company warrants an Audit and Risk Management Committee that the Committee will operate under a Charter approved by the Board. It is the Board’s responsibility to ensure that an effective internal control framework exists within the company. This includes internal controls to deal with both the effectiveness and efficiency of significant business processes, the safeguarding of assets, the maintenance of proper accounting records, and the reliability of financial information as well as non-financial considerations such as the bench marking of key performance indicators.

The Board will delegate responsibility for establishing and maintaining a framework of internal control and ethical standards to the Audit and Risk Management Committee.

The company’s policy is to appoint external auditors who clearly demonstrate independence. The performance of the external auditor is reviewed annually by the Board. The auditors have a policy of rotating the audit partner at least every 5 years. External auditor attends its AGM and is available to answer questions from security holders relevant to the audit.

 Risk Management

The Board recognises that the identification and management of risk, including calculated risk taking, is an essential part of creating long term shareholder value. The identification and management of risk by the Board will continue to be monitored. However, until such time as a business or project is acquired by the company, specific risks related to that business or project are currently unknown.

The company will undertake a comprehensive due diligence process, in consultation with its external legal and other advisers prior to making any acquisitions. The preparation of a comprehensive risk management matrix will be prepared once a suitable acquisition has been identified.

The equivalent of the CEO and CFO provide written assurance to the board on an annual basis that to the best of their knowledge and belief, the declaration provided by them in accordance with Section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively in relation to financial reporting risks.

The assurances from the equivalent of the CEO and CFO can only be reasonable rather than absolute due to factors such as the need for judgement and possible weaknesses in control procedures.

Any material changes in the company’s circumstances are released to the ASX and included on the company’s website.

 

Best Practice Recommendation

Outlined below are the 8 Essential Corporate Governance Principles as outlined by the ASX and the Corporate Governance Council. The company has complied with the Corporate Governance Best Practice Recommendations except as identified below:

Corporate Governance Policy Action Taken and reasons if not adopted
Lay solid foundation for management and oversight Adopted.
Principle 1: Recognise and publish the respective roles and responsibilities of the board and management
1.1  Formalize and disclose the functions reserved to the board and those delegated to management The company’s Corporate Governance Policies includes a Board Charter, which discloses the specific responsibilities of the Board
1.2  Disclose the process for evaluating the performance of senior executives. The Board monitors the performance of senior management including measuring actual performance against planned performance.
1.3  Provide the information indicated in ‘Guide to reporting on Principle 1’. The company has provided details of any departures from Principle 1 in this Annual Report
Structure the board to add value Adopted except as follows:
Principle 2: Have a board of an effective composition, size and commitment to adequately discharge its responsibilities and duties
2.1  A majority of the Board should be independent. Stokes does not comply with this recommendation as none of the Directors are independent.
2.2  The chairperson should be an independent Director. The Chairperson is not an independent director of the company.
2.3  The roles of chairperson and Managing Director should not be exercised by the same individual The roles of the chairperson and Managing Director are not exercised by the same individual.
2.4  The board should establish a nomination committee. The company is not of a size to justify having a Nomination Committee. Matters typically dealt with by such a Committee are dealt with by the full Board.
2.5  Disclose the process for evaluating the performance of the board, its committees and the individual directors. The Board has adopted a policy to assist in evaluating board performance.
2.6  Provide the information indicated in ‘Guide to Reporting on Principle 2’. The specified information, including details of any departures from principle 2 has been provided in this Annual Report.

 

Corporate Governance Policy Action Taken and reasons if not adopted
Actively promote ethical and responsible decision-making Adopted.
Principle 3: Promote ethical and responsible decision – making
Establish a code of conduct to disclose the code or a summary of the code as to:
The practices necessary to maintain confidence in the company’s integrity.the practices necessary to take into account their legal obligations and reasonable expectations of their stakeholders.the responsibility and accountability of individuals for reporting or investigating reports of unethical practices. The company’s Corporate Governance Policies include a Directors’ and Executive officer’s Code of Conduct Policy, which provides a framework for decisions and actions in relation to ethical conduct in employment.
Establish a policy concerning diversity and disclose the policy or a summary of that policy. The policy should include requirements for the board to establish measurable objectives for achieving gender diversity and for the board to assess annually both the objectives and progress in achieving them. Diversity includes, but is not limited to, gender, age, ethnicity and cultural background. The Company is committed to diversity and recognises the benefits of, and arising from, employee and Board diversity and the importance of benefiting from all available talent.The diversity policy outlines requirements for the Board to develop measurable objectives for achieving diversity and annually assess both the objectives and the progress in achieving those objectives
Disclose in each annual report measurable objectives for achieving gender diversity set by the board in accordance with the diversity policy and progress towards achieving them. Diversity policy outlines requirements for the Board to develop measurable objectives for achieving diversity and annually assess both the objectives and the progress in achieving those objectives. Accordingly, the Board has developed the following objectives regarding gender diversity and aims to achieve these objectives over the next five years as Director and senior executive positions become vacant and appropriately qualified candidates become available:
Disclose in each annual report the proportion of women employees in the whole organisation, women in senior executive positions and women on the board.

Women on the Board – Actual=0, %=0.

Women in senior Management roles – Actual=0, %=0.

Women employees in the group – Actual=10, %=16.

 

  

 

Corporate Governance Policy Action Taken and reasons if not adopted
Establish a policy concerning trading in company securities by directors, senior executives and employees and disclose the policy or a summary of that policyProvide the information indicated in ‘Guide to Reporting on Principle 3’ The Company’s Corporate Governance Policies includes a Dealing in Securities Policy which provides comprehensive guidelines on trading in the company’s securities.The company has provided details of any departures from principle 3 in this Annual Report.
Safeguard integrity in financial reporting
Principle 4: Establish a structure to independently verify and safeguard integrity in financial reporting Adopted except as follows:
The Board should establish an audit committee. The company is not of a size to justify having a separate Audit and Risk Management Committee. However, matters typically dealt with by such a Committee are dealt with by the full Board
 Structure the audit committee so that it consists of:·Only non-executive directors· A majority of independence directors. An independent chairperson who is not the chairperson on the Board Not applicable
The audit committee should have a formal operating charter.Provide the information indicated in the ‘Guide to reporting on Principle 4’. Not applicable. The company has provided details of any departures from principle 4 in this annual Report
Promote timely and balanced disclosure Adopted.
Principle 5: Make timely and balance disclosure of all material matters concerning the company
Establish written policies and procedures designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior management level for that compliance and disclose those policies or a summary of those policies. The company has a Continuous Disclosure Policy which is designed to ensure compliance with the ASX Listing Rules requirements on disclosure and to ensure accountability at a board level for compliance and factual presentation of the company’s financial position.
Provide the information indicated in the ‘Guide to reporting on Principle 5’. The company will provide details of any departures from Principle 5 in its Annual Report.

 

Corporate Governance Policy Action Taken and reasons if not adopted
Respect the rights of shareholders Adopted.
Principle 6: Respect the rights of shareholders and facilitate the effective exercise of those rights
Design and disclose a communications policy to promote effective communication with shareholders and encourage effective participation at general meetings and disclose the policy or a summary of the policy. The company’s Corporate Governance Policies includes a Shareholder Communications Policy which aims to ensure that the shareholders are informed of all material developments affecting the company’s state of affairs.
Provide the information indicated in the ‘Guide to reporting on Principle 6’. The company has provided details of any departures from Principle 6 in its Annual Report
Recognise and manage risk Adopted.
Principle 7: Establish a sound system of risk oversight and management and internal control
The Board or appropriate Board committee should establish policies on risk oversight and management of material business risk and disclose a summary of those policies. The company’s Corporate Governance Policies includes a Risk Management Policy which aims to ensure that all material business risks are identified and mitigated. The Board identifies the company’s ‘risk profile’ and is responsible for overseeing and approving risk management strategies and policies, internal compliance and internal controls. The Company’s Risk Management policy is available on the company’s website
The Board should require management to design and implement the risk management and internal control system to manage the company’s material business risks and report to it on whether those risks are being managed effectively. The Board should disclose that management has reported to it as to the effectiveness of the company’s management of its material business risks. The Board requires that the Managing Director designs and implements continuous risk management and internal control systems and provides reports at relevant times.
The Board should disclose whether it has received assurance from the chief executive officer (or equivalent) and the chief financial officer (or equivalent) that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound risk management and internal control and that the system is operating effectively in all material respects in relation to the financial reporting risks. The board seeks, at the appropriate times, these relevant assurances from the individuals appointed to perform the role of Managing Director and the Chief Operating Officer.
Provide the information indicated in the ‘Guide to reporting on Principle 7’. The company has provided details of any departures from Principle 7 in this Annual Report.
Remuneration fairly and responsibly Adopted except as follows:
Principle 8: Ensure that the level and composition of remuneration is sufficient and reasonable and that its relationship to corporate and individual performance is defined
The board should establish a remuneration committee. The company in not of a size to justify having a separate remuneration committee. However, matters typically dealt with by such a committee are dealt with by the full Board.
The remuneration committee should be structured so that it:consists of a majority of independent directors;· is chaired by an independent director; and has at least three members. Not applicable.
Clearly distinguishes the structure of non-executive director’s remuneration from that of executive directors and senior executives. The board distinguishes the structure of non-executive Director’s remuneration from that of executive Directors and senior executives. The company’s Constitution provides that the remuneration of non-executive Directors will be not more than the aggregated fixed sum by a general meeting of shareholders.