Corporate Governance

The Board of Credit Union Australia Ltd (CUA) is responsible for the corporate governance of CUA and its controlled entities. This statement generally describes the practices and processes CUA has adopted to ensure sound management of CUA within the legal framework under which it operates. The key principles are accountability, disclosure and independence.

CUA is an Authorised Deposit-taking Institution (ADI) supervised by the Australian Prudential Regulation Authority (APRA) under the Banking Act 1959 (Cwlth). CUA is also supervised by the Australian Securities and Investments Commission (ASIC) under the Corporations Act 2001 (Cwlth) and has been granted an Australian Financial Services Licence.

Role of the Board

The Board‘s primary role is to protect and enhance long-term member value. To fulfil this role, the Board is responsible for providing strategic guidance to CUA and its related bodies corporate (the “CUA Group”); monitoring and providing effective oversight of CUA management; overseeing CUA’s risk management systems; and acting as an interface between CUA and its members.

The Board has delegated responsibility for the operation and administration of CUA to the Chief Executive Officer (CEO) and executive management team.

The role and responsibility of the CUA Board is set out in detail in CUA’s Board Charter.

Board processes

The Board holds regular scheduled meetings each year, as well as strategic planning meetings and any other meetings that may be required from time to time.

To assist in the execution of its responsibilities, the Board has established a number of key committees, each with its own charter that are reviewed annually. Details of the various Board committees are outlined below.

Composition of the Board

The constitution of CUA specifies that the number of directors shall be between six and nine and that their term of office is normally three years. Currently the Board comprises eight directors.

The Board comprises seven independent non-executive directors and one executive director (the CEO). In determining whether a director is independent, the Board has regard to APRA’s Prudential Standard APS510 (Governance). The Board does not consider that the length of service on the Board has impacted any individual director’s ability to act independently and in the best interest of members.

Conflict of interest

In accordance with the Corporations Act and CUA’s constitution, directors must keep the Board advised of any interest that could potentially conflict with the interests of CUA. The Board has developed guidelines to assist directors in disclosing potential conflicts of interest. Directors’ disclosures are formally updated annually as part of CUA’s Fit and Proper process. Transactions between non-executive directors and CUA are subject to the same terms and conditions that apply to members.

Board performance assessment

The Board is committed to continual improvement and has in place an annual evaluation process for assessing the Board and individual directors.

Independent professional advice and access to credit union information

Each director has the right of access to all relevant credit union information and to CUA’s management. Where there is a legal issue that may affect a director’s ability to exercise his or her duty as a director and/or a potential or actual conflict of interest, subject to prior consultation with and approval of the Chair, a director may seek independent professional advice from a suitably qualified adviser in the field, at the expense of CUA.

Member participation

Each member has two relationships with CUA: as a customer and as an owner or shareholder. As customers, members exercise choice by selecting the products and services they believe best suit their individual needs. As owners and shareholders, members have the right and are encouraged to participate in some of the activities of their credit union, including nominating and electing other members as directors, and attending or participating at general meetings, either in person or by proxy.

Ethics

To maintain member confidence in the integrity of the credit union, CUA directors have adopted and adhere to a directors’ code of conduct, which is based on the code developed by the Australian Institute of Company Directors.

CUA is committed to the principles of mutuality and is driven by its vision and values. The principles established here guide CUA’s behaviour and interaction with customers, other credit unions, staff and the broader community.

CUA is also committed to the privacy of member information.

CUA has in place a whistleblower protection program to facilitate and encourage confidential reporting of unacceptable or undesirable conduct.

Risk management

CUA manages a diverse range of significant risks. To this end, the Board of CUA and its subsidiaries are committed to identifying and managing these risks throughout the CUA group. The Board, through the CEO, has established a risk management system for assessing, monitoring and managing these risks.

The Board Risk Committee receives and reviews regular risk management reports.

Remuneration policies for directors

In determining director remuneration, the Board obtains independent advice on the appropriateness of remuneration given trends in comparable companies. Remuneration levels are designed to attract and retain appropriately qualified and experienced non-executive directors. Non-executive directors do not receive any performance-related remuneration. Directors’ remuneration covers all CUA Board activities, membership of committees and subsidiary companies and includes any superannuation contributions paid on behalf of a director. Subject to meeting specific criteria, directors retiring from the Board may receive a termination payment of up to three years directors’ fees.

Non-executive directors may maintain loans and credit facilities from CUA at normal member rates of interest and therefore no additional remuneration is obtained by way of a benefit.

Board committees

To assist in the execution of its responsibilities, the Board has established a number of committees, each with its own charter that is reviewed annually. Details of the Committees currently in place are outlined below.

Board Remuneration Committee

This committee assists the Board by reviewing the significant remuneration related policies and practices of CUA. It has been established to ensure compliance with APRA Prudential Standard APS 510 (Governance). The key responsibilities of the committee include:

• Conducting regular reviews of, and making recommendations to, the Board on the remuneration policy, including an assessment of compliance with the requirements of APS510
• Making annual recommendations to the Board on the remuneration of the CEO
• Considering and approving recommendations in relation to remuneration for direct reports of the CEO and other persons whose activities may, in the committee’s opinion, affect the financial soundness of the institution, and any other person specified by APRA 
• Considering and approving recommendations to the Board regarding remuneration of other categories of persons covered by the remuneration policy
• Having free and unfettered access to risk and financial control personnel and other parties (internal and external) in carrying out its duties 
• Having the power to engage third-party experts, if it chooses to do so, in a manner that ensures their engagement, including any advice received, is independent
• Considering and approving people-related strategies aimed at moving CUA towards being recognised as an equal-opportunity employer and an employer of choice
• Reviewing targets set and schemes designed to drive performance of CUA employees
• Reviewing the financial performance of the Company against the Variable Short and Long term Incentive scheme targets set by the Committee;
• Reviewing of major policies, guidelines and relevant initiatives associated with the management and development of Company employees;
• Reviewing of major structural changes of the Company affecting Company employees;
• Endorsing enterprise agreements or similar documents relating to remuneration and conditions of employment.
• Facilitating the appointment of the CEO;
• Approving appointments to the Executive Management Team as recommended by the CEO.

The committee is required to have at least two members and all members of the committee must be non-executive directors. A majority of members must be independent.

The committee meets as and when required.

Board Audit Committee

The Board Audit Committee is established by the Board of Directors of CUA to assist the Board in:

• reviewing the effectiveness of the CUA Group financial reporting and professional accounting requirements and approving CUA’s annual financial statements;
• overseeing the internal and external audit function; and
• monitoring compliance with statutory reporting, other legislative requirements (including APRA & ASIC) and internal company policy.

The committee is required to have at least three members and all members of the committee must be non-executive directors. A majority of members must be independent. The Chair of the CUA Board may not be the Chair of the BAC.

This committee also acts as the audit committee for one of CUA’s subsidiaries, CUA Financial Planning Pty Ltd (CUAFP). CUA Health Limited (CHL) and Credicorp Insurance Pty Ltd (CCI), each have their own separate board audit and risk committees.

Board Risk Committee

The Board Risk Committee is established by the Board of Directors of CUA to assist the Board in:

• overseeing and monitoring the management and alignment of risks of CUA;
• ensuring that CUA meets prudential and statutory requirements in relation to risk;
• ensuring that CUA has in place a risk management framework and management practices which limit the company’s risks to prudent levels; and
• providing an objective view on the effectiveness of, and assurance over, the internal control environment (including the risk management framework and financial and statutory reporting controls) of CUA.

The committee is required to have at least three members and all members of the committee must be non-executive directors. A majority of members must be independent.

This committee also acts as the risk committee for CUAFP. CHL and CCI each have their own board audit and risk committee.

Board Strategy Consultative Committee

This committee assists the Board and supports management in progressing major strategic issues and opportunities as required between Board meetings.

The duties and responsibilities of the committee include:

• Providing support and advice to CUA management in progressing strategic objectives and initiatives that:
• • Are consistent with the CUA Business Plan as approved or varied by the Board; or
  • May need to be considered for commercial and strategic enhancement of CUA.
• Assessing and making recommendations to the CUA Board, as necessary, regarding any strategic issue and in respect of any major proposals from third parties relating to the operations of and/or future ownership of CUA.
• Approving the appointment of and scope of work undertaken by specialised advisors or experts as required by the committee in support of strategic engagements.
• Ensuring appropriate advice is made available to all directors of the CUA Board in respect of strategic matters including, where appropriate, from external advisors, always subject to managing conflicts of interest and any regulatory and legal constraints.

The committee is required to have at least three members, with the majority of members being independent non-executive directors. One of these directors is required to chair the committee. The CEO is also required to be a member of the committee.

Board Nucleus Committee

The Board Nucleus Committee was established in May 2012 to assist the Board in discharging its governance and oversight responsibilities in relation to the implementation of a new core banking system for CUA (the Nucleus Project). The continued operation of the Committee shall be reviewed by the Board within the three months following completion of the Nucleus Project.

Controlled entities

The activities of the subsidiaries in the CUA group are overseen by their own Board of directors, principally drawn from the CUA Board and CUA executive management. These entities operate within the Group’s Corporate Governance Framework.