The Board of Directors of Pacific Hydro (Pacific Hydro or the Company) is responsible for ensuring that the Company maintains an appropriate corporate governance structure. The key objective of Pacific Hydro’s corporate governance structure is to protect and further enhance shareholder value by ensuring the integrity of reporting, and by maintaining appropriate internal controls.

To this end, the Board of Pacific Hydro is committed to the Australian Stock Exchange Corporate Governance Council’s “Principles of Good Corporate Governance and Best Practice Recommendations” (ASX Standards). The ASX Standards identify 10 principles and 28 recommendations, which are intended to maximise corporate performance and accountability for the benefit of shareholders and for the overall protection of the integrity of the broader economy.
While the ASX Standards are not prescriptive, non-listed companies are encouraged to comply with the Standards as they capture many aspects of good practice.

In addition, and to increase your understanding of the extent to which Pacific Hydro satisfies the ASX Standards, this section of the website details the level and nature of compliance that Pacific Hydro has achieved against each of the 10 principles identified in the ASX Standards. Where appropriate, and as recommended by the ASX Standards, links to documents which demonstrate such compliance have been included.

Principle 1 – Lay solid foundations for management and oversight

The Board of Directors of Pacific Hydro recognises the importance of clearly defining its role and the role of management. Accordingly, the Board has devised and adopted the PH Board Charter. Among other things, the PH Board Charter lists the matters reserved to the Board and those delegated to management.

Principle 2 – Structure the board to add value

The ASX Standards state that a majority of the Board should be independent directors. Pacific Hydro complies with this recommendation, as representatives of the Company’s  shareholder currently hold 3 Board positions and the remaining 5 positions are held by independent non-executive directors.

The Appointments and Remuneration Committee (formerly Remuneration Committee) was established in 1999. The Appointments and Remuneration Committee’s role is recommending and deciding upon Board and executive appointments, and reviewing remuneration and benefit policies for employees and Directors.

A Major Contracts Committee was established in 2004. The Major Contracts Committee’s role is monitoring the Company’s approach to contracts so as to protect and optimize Pacific Hydro’s legal, commercial, financial and strategic position.

Principle 3 – Promote ethical and responsible decision-making

Pacific Hydro’s Code of Business Conduct (Code) guides employee and Director behaviour in relation to the practices necessary to maintain confidence in the Company’s integrity.

Principle 4 – Safeguard integrity in financial reporting

To safeguard the integrity of financial reporting, an Audit Committee was established at the original formation of Pacific Hydro. It has since become the Audit and Risk Committee. All executive managers of Pacific Hydro (including the Chief Executive Officer and Chief Financial Officer) are required to sign a written statement to the Board, confirming that the Company’s financial report presents a true and fair view of the Company’s financial condition and operational results, and is in accordance with relevant accounting standards.

Principles 5 and 6 – Make timely and balanced disclosure; and
Respect the rights of shareholders

While Pacific Hydro has only one shareholder, continual disclosure to that shareholder occurs through the shareholder’s representation on the Board.  Pacific Hydro is also committed to making timely and balanced disclosures to its other stakeholders through its website and other media.

Principle 7 – Recognise and manage risk

The Board has established a comprehensive Risk Management Policy, and while the Audit and Risk Committee administer this policy, the Managing Director and Chief Financial Officer are responsible for implementing the appropriate risk-mitigation strategies on behalf of the Audit and Risk Committee.

The Risk Management Policy identifies the risks that may materially affect the delivery of the Company’s budgeted financial performance in the short to medium term. Such risks are:
• objectively evaluated in terms of likelihood, financial consequence and ability to mitigate;
• assessed on a profit-centre basis; and
• reflective of the various lifecycle stages of major projects (development, construction and operation).

The Audit and Risk Committee regularly reviews risk management strategies and makes appropriate recommendations to the Board, and as part of the strategic planning process, the Company undertakes an annual portfolio review to update its risk profile.

All executive managers of Pacific Hydro (including the Managing Director and Chief Financial Officer) are required to sign a written statement to the Board, confirming that the statement given in relation to the financial reports (under Principle 4) is founded on a sound system of risk management and internal compliance and control which reflects the policies adopted by the Board. These statements should also confirm to the Board that the risk management and internal compliance and control systems are operating efficiently and effectively.

Principle 8 – Encourage enhanced performance

To encourage enhanced Board performance and management effectiveness, the Board of Pacific Hydro has implemented various initiatives. Some of the main initiatives are:
• an annual performance self-assessment of the Board (and each of its committees), which is conducted annually during August and September;
• annual performance reviews for all employees (including executive managers), which are conducted during September and October;
• formal inductions for new employees and Directors; and
• access by employees and Directors to continued professional development.

Principle 9 – Remunerate fairly and responsibly

Executive Remuneration Policy
Pacific Hydro is committed to remunerating its executives in a manner that is market competitive, consistent with best practice and supportive of the interests of shareholders. Accordingly, executives are remunerated through a combination of:
• base salary;
• short-term performance-based cash bonuses; and
• participation in a Long Term Incentive Scheme.

This mix of remuneration aligns the interests of Pacific Hydro’s executives with those of its shareholders, therefore increasing shareholder value.

Non-Executive Director Remuneration Policy
Non-Executive Directors are paid Directors’ fees at a level in line with the market.

Non-Executive Directors receive a fixed amount for Board membership, plus extra pre-determined amounts in recognition of memberships and/or chairing of Board committees.

Non-Executive Directors are entitled to statutory superannuation, payable from their base fees, but do not receive performance based bonuses.

Principle 10 – Recognise the legitimate interests of stakeholders

The Code of Conduct was established to guide Director and employee behaviour in relation to the practices necessary to maintain confidence in the Company’s integrity, and to guide compliance with legal and other obligations to legitimate stakeholders.