Corporate Objectives & Governance
OBJECTIVES
To maximise returns to shareholders while at the same time conserving adequate funds to provide the necessary working capital for the continued operation and growth of the Company.
Information relating to dividend payments and financial gearing is available in our Key Ratio Analysis which is provided for the last 10 years.
This document can be downloaded here.
To expand the distribution base of Peter Lehmann Wines products in both the domestic and export markets.
PLW's strategy of moving more of the wine made into the value-added bottled wine segment has been very successful.
Progress can be reviewed in the Discussion of Financial Result section, under Investors>Latest Annual Report.
To maintain the reputation of the Peter Lehmann Winery business as a producer of premium wines.
PLW, located in the renowned Barossa Valley, has a strong regional focus and a commitment to excellence in winemaking. This is evidenced by awards received in international and domestic wine shows.
To acquire top quality fruit by developing further the strong relationship between the Peter Lehmann Winery and Barossa grape growers.
PLW places great emphasis on working with the independent growers. Grape intake data is included in the Operations section, under Our Winery.
Provide a safe workplace for employees.
Workplace management and injury statistics are provided in the OHSW Management section, under Annual Report.
Use resources in an environmentally sustainable way.
We believe it is our responsibility to ensure available resources are used efficiently, the effects of the winery operations on the environment are minimised, and materials are recycled wherever possible. Information on our environmental initiatives is included in the Environment section.
Be a good corporate citizen both socially and environmentally.
PLW strives to maintain its reputation as a responsible corporate citizen by:
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providing employment
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buying locally wherever possible
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paying taxes
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distributing dividends
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controlling its impact on the environment
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supporting local community groups
GOVERNANCE
The directors set out to develop a transparent and accountable framework from the time of the Company’s formation in 1993. This direction and attitude have shaped the policies, practices and culture of PLW.
Board of Directors & its committees
Role of the Board
The directors have the overall obligations to act in the best interests of the shareholders and to protect the shareholders’ investment.
Download Board Charter here.
Responsibilities of the Board
The board is responsible for the strategic direction of the business, establishing goals for management and monitoring the achievement of goals directly and through its committees. Responsibility for day to day activities is delegated to the Managing Director.
Matters considered by the Board
The board charter defines the purpose, responsibilities and operation of the board. Issues of substance affecting PLW are considered by the full board of directors, with advice from appropriate committees and external advisers as required.
Specific matters reserved for the Board -
- Review and approval of the business strategies developed by management
Approval of financial and other reporting - Appointment and, where appropriate, removal of the managing director
- Ratifying the appointment and, where appropriate, the removal of the chief financial officer and company secretary
- Review and approval of the operating budget and capital expenditure projects
- Monitoring the financial performance and capital management of the business
- Reviewing and ratifying the risk management system and compliance with internal controls, codes of conduct and legal compliance
- Monitoring senior management’s performance and implementation of the business strategy.
Composition
The Constitution requires a minimum of three and a maximum of ten directors. Up to five directors may be executive directors. The board’s policy is for the chairman to be a non-executive director and for there to be a majority of non-executive directors.
The board has determined that a broad portfolio of skills and experience are required to complement the specific wine industry experience of the executive director. All the directors are involved in the process of appointing new directors by firstly defining the characteristics required and then deciding whether the prospective appointee is best secured by way of consultancy advice or by the board’s own research. A nominations committee is not considered to be appropriate given the size and culture of the business.
All directors, with the exception of the managing director, are subject to election by shareholders at the first opportunity after their appointment. With the exception of the managing director, by rotation one third of the directors are required to be re-elected at each annual general meeting.
The board presently comprises four non-executive directors, one of whom is the chairman, and one executive director. The board has a portfolio of skills including CEO experience, finance and capital markets, and commercial law. The names of the directors in office are given under Board of Directors on the website.
Chairmanship
The election of the chairman should be a unified decision of the board. The chairmanship, should be, and be seen to be, completely independent of the Lehmann family.
Process
The board generally schedules at least 4 meetings each year at the winery and this provides directors with the opportunity to visit the production facilities and for contact with a wide group of employees. Other meetings and any extraordinary meetings may be convened at shorter notice and held at other venues or conducted by conference calls. Details of directors’ attendance at board and committees meetings are given in the Directors’ Report in the annual report.
The agenda for meetings is prepared by the company secretary in conjunction with the chairman and managing director. Standing items include the managing director’s report, finance report, strategic matters, sales and marketing reports, governance and compliance. Board papers are circulated in sufficient time to allow effective preparation. All directors have access to the company secretary.
To assist in the execution of its responsibilities the board has established an audit committee and a remuneration committee. These committees have written charters and their effectiveness is monitored regularly.
Each director has the right to seek independent professional advice at the company’s expense after first obtaining the chairman’s approval. The chairman has the discretion to approve expenditure without prior reference to the board or to refer the request to the board.
Board members are expected to devote sufficient time to prepare for meetings and contribute to the governance of the business. The board undertakes a self assessment review annually to evaluate its effectiveness.
Conflict of Interest
Directors must keep the board advised, on an ongoing basis, of any interest that could potentially conflict with those of the Company. Where the board believes there is a significant conflict of interest exists, the director concerned does not receive the relevant board papers and does not attend the meeting whilst the item is considered.
Audit Committee
A documented Charter detailing the role, membership, responsibilities and reporting has been determined. The role of the audit committee is to oversee and enhance the credibility of the financial reporting process of PLW.
The objectives of the committee include:
- assessing the risk and control environment – review accounting policies, internal controls, practices and disclosures to assist the board in making informed decisions
- overseeing the financial reporting to ensure it is appropriate and of a high quality prior to recommending adoption of the financial statements by the board for release to the ASX and shareholders
- evaluating the audit process, particularly the scope, effectiveness and outcome
The audit committee is comprised of non-executive directors. Committee members are financially literate, that is, have the ability to read and understand financial reports including statements of financial performance, financial position and cash flow. One member who is the committee chairman, has accounting or related financial experience. The committee chairman, is a non-executive director and not the Company chairman. The chairman is knowledgeable about the business, financial and auditing processes and responsible for the planning and conduct of meetings and overseeing the reporting to the board.
The audit committee meets at least each half year to coincide with the production of published financial statements and the assessment of external audit reports. The external auditor, the managing director and chief financial officer/company secretary are invited to audit committee meetings. The committee members consult directly with the external auditor as required. This consultation may be independent of management in order to provide an opportunity for the auditor to discuss any contentious issues or raise concerns. The audit engagement partner attends the Company’s annual general meetings.
The managing director and chief financial officer complete a detailed questionnaire regarding the financial reports and underlying internal controls and risk management system. They provide a written statement that, in all material respects, the financial reports present a true and fair view and the risk management system and internal controls are operating efficiently and effectively.
The audit committee reviews the performance of the external auditors on an annual basis and normally meets with them during the year to discuss the external audit, identify any significant changes which are likely to impact on the financial statements and review the fees proposed for the audit work to be performed. The external audit firm was appointed in 1993 and the audit engagement partner was last rotated in 2009. In April 2002 the board formally advised the audit firm that PLW requires assurance and tax compliance services only.
The Company is subject to legal and regulatory compliance. Procedures are in place to ensure compliance with label integrity, export, trademarks, liquor licence and environmental requirements. The Company is cognisant of its responsibilities in relation to food safety, effective lifecycle management of packaging and paper products, and the hazard analysis critical control point methodology as applied to the wine industry. A formal legal compliance program was adopted in 2001 and the audit committee reviews compliance with the program.
Remuneration Committee
A documented Charter detailing the role, membership, responsibilities and reporting has been determined.
The committee reviews and makes recommendations to the board on the remuneration packages of directors and senior executives. The committee is also responsible for the consideration of incentive performance packages. The remuneration policy is defined in the Directors’ Report in the annual report. The non-executive directors form the committee with the managing director invited to attend at the discretion of the committee.
Ethical Standards
All directors and employees are expected to act with the utmost integrity and objectivity, striving at all times to enhance the reputation and performance of the Company.
PLW has reviewed its procedures and documented codes of conduct for directors and staff and finance officers. These will be reviewed regularly by the directors and processes are in place to promote and communicate these policies.
Business Risk Management
The board as a whole considers the major risks affecting the business. The company operates in the wine industry which has the inherent risk of seasonal vagaries. The wine industry has experienced substantial growth during the 1990's as a result of a boom in exports and a strong domestic market. Since 2003 the market has been turbulent as the increase in the global supply of wine together with the consolidation of retailers triggered aggressive discounting by the large Australian wine producers.
PLW has developed a risk management system to evaluate and control risks effectively to ensure opportunities are not lost, competitive advantage is enhanced, and management time is not spent reacting to issues or events. It is not intended to eliminate risk. The risk management system encompasses all financial, operational and compliance controls and risk management.
Major business risks have been identified as the sourcing of grapes, the impact of exchange rate movements on sales, interest rate variations, actions by competitors and government policy changes. Procedures have been developed to minimise the effect of these risks wherever possible.
Grape Intake
The Company has long-standing arrangements with 150 independent growers. Written contracts are available to these growers, with 87% of the grape intake under formal agreement.
Exchange Rate Movements
Currently most sales are transacted in Australian dollars with the customer managing the exchange rate exposure. This practice may be varied as the business expands and the exposure to exchange rate movements will increase. PLW has developed a treasury management policy to ensure personnel do not engage in unauthorised trading positions.
Interest Rate Movements
Interest rate risk emanates from changes in market interest rates impacting on the Company’s short and long term debt. This exposure is managed by combining interest rate swaps with floating rate arrangements.
Internal Control System
The board acknowledges that it is responsible for the overall internal control framework but recognises that no cost effective internal control system will preclude all errors and irregularities. The system is based upon written procedures, policies and codes, division of responsibility, and the careful selection and training of qualified personnel.
The system provides the structure for controlling the business – planning, running the operation and monitoring activities to assess progress on achieving defined business objectives.
There are a number of committees established to oversee matters relating to operational activities - occupational health and safety, environment and enterprise conditions. These committees meet regularly with senior management who report to the board.
Shareholder Involvement
The directors aim to ensure that the shareholders are informed of all major developments affecting the Company.
The Company’s website provides information on the winery, the people, the range of wines made and sold as well as financial statements.
Company publications sent to shareholders each year include –
- Notice of AGM
- MD’s AGM address
- Outcome of resolutions proposed at the AGM
- Half Year Financial Summary
- Vintage Outcome
The annual report is posted on the website. It may be sent to shareholders at their request.
The Discussion and Analysis is written in non-technical terms to assist readers in understanding the Company’s operation. A copy of the full financial statements is available on request or from the Company’s website.
The board encourages full participation of shareholders at the annual general meeting to ensure a high level of accountability and identification with PLW’s strategy and goals. The shareholders are requested to vote on the appointment and aggregate remuneration of directors and changes to the Constitution. The Constitution is available on the website or on request.
Good corporate governance is regarded as a matter of “doing the right thing”. Policies and practices are not static and will change as the business evolves.
