The Corporate Governance Statement has been structured with reference to the ASX Corporate Governance Council's "Corporate Governance Principles and Recommendations".
In accordance with this document, the Corporate Governance of CogState Limited is based on the following principles:
1. Lay solid foundations for management and oversight
The Board is responsible for ensuring that management’s objectives and activities are aligned with the expectations and risk identified by the Board.
Therefore, while the Board has delegated the management of day to day operational matters to the Chief Executive Officer, who is an Executive Director, the Board has reserved a number of matters for itself:
- Board approval of a strategic plan designed to meet stakeholders' needs and manage business risk;
- ongoing development of the strategic plan and approving initiatives and strategies designed to ensure the continued growth and success of the entity; and
- implementation of budgets by management and monitoring progress against budget - via the establishment and reporting of both financial and non financial key performance indicators.
- approval of the annual and half-yearly financial reports;
- review and approval of material market disclosures;
- approving and monitoring the progress of major capital expenditure, capital management, and acquisitions and divestitures;
- ensuring that any significant risks that arise are identified, assessed, appropriately managed and monitored; and
- reporting to shareholders.
2. Structure the Board to add value
Structure of the Board
The Cogstate Board of Directors has collective skills and expertise in the corporate sector, including biotechnology and medical device companies, as well as medical practice and research. The Board meets 11-12 times a year.
The primary criterion in the appointment of potential members to the Board is suitability to discharge their responsibilities effectively and so contribute toward success of the company.
Where the Board identifies the need for a particular skill on the Board, or the need to expand its numbers, it shall, via the Remuneration and Nomination Committee, identify and approach suitable candidates, undertake an appropriate selection process and, in accordance with the Company’s Constitution, appoint the selected candidate.
The Company’s Constitution provides that incumbent directors retiring by rotation may notify the Company that they are available for re-election. The Board shall assess whether an incumbent director be recommended for re-election, based on the same criteria it would apply to a new appointment, and, if so, confirm that recommendation by documenting it in the notice of the relevant general meeting.
Procedures agreed to by the board enable directors to seek independent professional advice at the company's expense, should it be necessary for the effective performance of their duties.
Nomination
The Remuneration and Nomination Committee is responsible for the following Board nomination-related matters:
- review the composition of the Board and ensure that the Board has an appropriate mix of expertise, experience and skills;
- assess and review the performance of the Directors of the Board;
- Identify potential Board candidates;
- consider all matters in respect to the appointment of Board members.
The Remuneration and Nomination Committee meets at least twice per year and is comprised of non-executive directors of the Board, currently four in number, a majority of whom are independent directors.
The Board’s policy for nomination and appointment of directors is:
- the Board shall continually ensure that the Board has the appropriate expertise, experience and skills in order for the Board to address current issues of the Company and focus on the strategic plans of the Company;
- where the Board believes that, in order to function appropriately, it needs to expand its expertise, experience, skills or numbers it shall seek appropriate Board candidates for nomination and appointment, in accordance with the Board’s selection and appointment procedures.
Performance of directors and key executives
The performance of the Board and key executives is reviewed regularly. The performance criteria against which directors and executives are assessed are relevant to the objectives of CogState Limited. Directors whose performance is consistently unsatisfactory may be asked to retire.
3. Promote ethical and responsible decision making
Code of Conduct
A summary of the Company’s employment code of conduct is as follows:
- employees are expected to avoid personal situations, which might be construed as a conflict of interest.
- employees without prior approval may not engage in any other business activity if pursued for gain, profit or other advantage during normal business hours.
- employees that are contemplating additional employment that may not be a conflict of interest must inform their Manager as this employment may place a burden on the individual or cause a conflict with possible emergency coverage required as part of their employment with CogState.
- all employees must sign confidentiality agreements at the commencement of employment.
Policy for Dealing in Company Securities
A summary of the Company’s share trading policy is as follows.
Directors and Key Management Personnel, or any of their associates, must not trade in, or procure trading in, any securities of the Company at any time when they are in possession of inside information in relation to those securities.
Additionally, Key Management Personnel and Directors must not trade in the Company’s securities during a closed period. The following periods are designated as closed periods for the purposes of this Policy:
• The period commencing two weeks before each half yearly and annual balance date and ending at 10am on the business day after release of CogState's half yearly and annual results; and
• If a quarterly report is required to be released, the period commencing two weeks before each quarterly balance date ending and at 10am on the business day after the release of CogState’s quarterly results.
Also, additional closed periods when the Company’s Key Management Personnel are prohibited from trading can be imposed by the Board from time to time, if considered appropriate by the Board.
All other employees may trade at any time provided they are not in possession of inside information.
The fixed closed periods, during which directors and Key Management Personnel must not trade in company securities, will be reviewed by the Board of Directors as part of the annual review process of this Policy.
Directors and Key Management Personnel must seek prior written clearance before trading in CogState securities outside of a closed period. Written requests for trading outside a closed period should be provided to the Company Secretary for consideration, at least two weeks prior to the proposed trade date. Electronic clearance, via email, is considered acceptable. In the case of the Company Secretary, the clearance should be sought from the Chief Executive Officer.
If any directors or Key Management Personnel become aware of any information which may be inside information, they must not deal CogState securities, regardless of any other provision of the policy or any written clearance provided.
A full copy of the securities trading policy is also attached. Click Here to Download
4. Safeguard integrity in financial reporting
Audit & Compliance Committee
In discharging its responsibility to ensure that an effective internal control and financial reporting framework exists within CogState, the Board has established an Audit and Compliance Committee and approved a charter that sets out the committee's operation. The Audit Committee is responsible for the establishment and maintenance of a framework of internal control and ethical standards for the management of the company.
The committee's duties include dealing with the effectiveness and efficiency of significant business processes, the safeguarding of assets, the maintenance of proper accounting records and the reliability of financial information. The Audit Committee also deals with non-financial matters.
All members of the audit committee are non-executive directors. The committee meets at least three times per year.
External Auditor: Selection, Appointment and Rotation
The Company’s procedures for the selection and appointment of the external auditor, and for the rotation of external audit engagement partners is:
- the Board shall, as and when necessary, review the external audit function and assess whether, for any reason, it would be in the interest of the Company and its stakeholders to conduct a tender for this function. The process will take full account of all relevant matters, including the tenderers’ expertise, experience in the Company’s industry and cost/benefit for shareholders;
- in relation to the issue of rotation of external audit engagement partners, the Board notes that audit partner rotation obligations are imposed by:
o the Corporations Act; and
o generally, audit firms’ internal policies.
The Board feels these obligations are sufficient, but would also request rotation of an audit engagement partner if it reasonably believed that:
- the partner’s independence was compromised; or
- the partner lacked the necessary professional or other abilities to properly perform the audit.
5. Make timely and balanced disclosures
A summary of the Company’s policies designed to guide compliance with Listing Rule disclosure requirements regarding timely and balanced disclosure of material information to investors and the market policy is as follows:
- the Board and senior management shall develop and maintain a strong and practical understanding of the Company’s Listing Rule obligations to make timely and balanced disclosure of material information to investors and the market;
- the information that needs to be disclosed is any price-sensitive information;
- the Company Secretary shall ensure that Directors and Executives of the Company are aware of the Company’s continuous disclosure obligations, their responsibility to enable the Company to meet its compliance obligations, and the process by which potential price-sensitive information is identified and communicated to the Chief Executive Officer and Company Secretary;
- the roles and responsibilities of directors, officers and employees of the company in the disclosure context are:
o the Board has primary responsibility for ensuring that the company complies with its disclosure obligations and for deciding what information will be disclosed;
o the Chief Executive Officer shall, immediately upon identifying the existence of any disclosable information, prepare a draft ASX release; and circulate it to the Board members;
o the Board members shall approve the document for release to the market - in order to avoid the emergence of a false market in the Company’s securities, which may arise if the Company provides incomplete information to the ASX or if the Company fails to respond to market and media speculation that may, or may be likely to, have an impact on the price of the Company’s securities, the Company shall give the ASX such information as is necessary to correct or prevent the false market, or if it is unable to do so, will request a trading halt until such information can be released;
- confidentiality of corporate information shall be preserved in order to avoid premature disclosure:
- only the Chief Executive Officer or, in his absence, the Chairman shall be authorised to:
o respond to media enquiries;
o make comments to the media; or
o respond to comments made in the media; - external communications such as analyst briefings and responses to shareholder questions, which disclose previously undisclosed price sensitive information, shall first be released to the ASX.
6. Respect the rights of shareholders
- providing timely and relevant business updates to the market via release to the ASX;
- providing timely and relevant business updates to the market via release to the ASX;
- placing all ASX releases on the Company website as soon as practicable after their release to the market;
- placing on the Company website all previous full year and half year financial reports;
- placing on the Company website links to previous analyst reports and other external reports about the Company.
7. Recognise and manage risk
The Board determines the Company's risk profile and is responsible for overseeing and approving risk management strategy and policies, internal compliance and internal control. The Company's process of risk management and internal compliance and control includes:
- establishing the Company's goals and objectives, and implementing and monitoring strategies and policies to achieve these goals and objectives;
- continuously identifying and measuring risks that might impact upon the achievement of the Company's goals and objectives, and monitoring the environment for emerging factors and trends that affect these risks;
- formulating risk management strategies to manage identified risks, and designing and implementing appropriate risk management policies and internal controls;
- monitoring the performance of, and continuously improving the effectiveness of, risk management systems and internal compliance and controls, including an annual assessment of the effectiveness of risk management and internal compliance and control.
8. Remunerate fairly and responsibly
The Board is responsible for determining and reviewing compensation arrangements for the directors, the CEO and the executive team. CogState remunerates directors and key executives fairly and appropriately, in relation to relevant employment market conditions.
The expected outcomes of the remuneration structure are:
- Retention and motivation of key executives
- Attraction of quality management to the company
- Performance incentives for the executives that contribute to the success of CogState Limited.
In relation to the Company’s Employee Share Option Plan, the Company has:
- considered the issue of an employee entering into transactions in associated products which limit the economic risk of participating in unvested entitlements under any equity-based remuneration schemes, such as so-called “cap and collar” arrangements;
- has reasonably concluded that, at present, it is unlikely that such arrangements would arise; and
- therefore, no policy on this issue is currently necessary.
The Board shall keep this matter under review.
There is no scheme to provide retirement benefits, other than statutory superannuation, to non-executive directors.
Remuneration and Nomination Committee
The Board has established the Remuneration and Nomination Committee which undertakes the following Board remuneration-related matters:
- makes recommendations to the Board regarding compensation arrangements for the directors themselves, the chief executive officer and the executive team;
- ensure that executive and Board remuneration is reasonable, with reference to company and personal performance, stakeholder expectations and relevant market remuneration levels.
The Remuneration and Nomination Committee meets at least twice per year and is comprised of non-executive directors of the Board, currently four in number, a majority of whom are independent directors.
ANNUAL REPORT DISCLOSURE
In accordance with ASX Listing Rule 4.10, CogState provides a statement in the annual report disclosing the extent to which the Council's best practice recommendations have been followed in the reporting period, together with reasons for instances in which they have not been followed.
CONSTITUTION
A copy of the Company's Constition is available here.
