Macquarie Group 2014 Annual Report Financial 2014 2014 Annual Financial Report macquarie.com.au Macquarie Group MACQUARIE GROUP LIMITED ACN 122 169 279 Corporate Governance Statement company has followed the governance recommendations of Macquarie’s approach to Corporate the ASX Corporate Governance Council (ASX Governance Recommendations) during the reporting period. Macquarie's Macquarie’s approach to governance, which has remained corporate governance remains consistent with the ASX largely consistent over time, is to: Recommendations. A summary of the ASX – promote the long term profitability of Macquarie while Recommendations and reference to the applicable prudently managing risk Macquarie governance practice is available on Macquarie’s – drive superior and sustainable shareholder value over website at macquarie.com.au the long term through the alignment of the interests of Macquarie as a non-operating holding company of a shareholders and staff licensed Australian bank, Macquarie Bank Limited – meet stakeholder expectations of sound corporate (Macquarie Bank), is regulated by the Australian Prudential governance as part of Macquarie’s broader Regulation Authority (APRA). APRA’s prudential standards responsibility to clients, shareholders, investors and include governance requirements. Macquarie also has the communities in which it operates. subsidiaries that are supervised by regulators in the overseas Macquarie recognises that a key factor in delivering long jurisdictions in which they operate. The notes to Macquarie’s term shareholder returns is providing superior services to financial statements include a list of material subsidiaries of clients. Macquarie recruits high quality staff and expects the company. staff to uphold the company’s Goals and Values. Macquarie's corporate governance framework continues to Macquarie Group Limited (Macquarie) is a global financial evolve to respond to regulatory changes in the global services provider and its shares are listed on the Australian markets in which it operates. Securities Exchange (ASX). As an ASX-listed company, Macquarie is required to report on the extent to which the Corporate Governance framework 3 Macquarie Group Limited and its subsidiaries 2014 Annual Financial Report macquarie.com.au Corporate Governance Statement continued Board oversight Director Independence The primary role of the Board is to promote the long-term Macquarie recognises that independent directors have an health and prosperity of Macquarie. The Macquarie Board important role in assuring shareholders that the Board is consists of eleven Voting Directors, ten of whom are able to act in the best interests of Macquarie and independent. Kevin McCann, an Independent Director, is independently of Management. Chairman. Nicholas Moore, Macquarie’s Managing Director The independence of directors is reviewed annually by the and Chief Executive Officer (CEO), is the only executive Board Governance and Compliance Committee (BGCC). Board member. Based on Macquarie’s criteria for assessing director During the year, Gary Banks, Patricia Cross and Nicola independence, each independent director is asked to Wakefield Evans were appointed to the Board, and confirm whether they have any material interests or Catherine Livingstone and John Niland retired on 25 July relationships with Macquarie, other than as a director. 2013 and 31 December 2013, respectively. Schedule 1 of At its meeting in March 2014, the BGCC determined that the Directors' Report includes when each Voting Director while some Directors noted commercial relationships joined the Board. between Macquarie and other large companies of which The table below sets out the current composition of the they are a director as well as professional service providers Board and the membership of each Board Committee. of which, within the last three years, they were a partner, Details of each Voting Director’s experience are summarised there were no interests or relationships that could interfere in Schedule 1 of the Directors’ Report. with the Non-Executive Director's ability to act in the best interests of Macquarie and independently of Management. Macquarie’s Constitution sets out requirements concerning Each Director's experience and directorships are set out in the setting of board size, meetings, election of directors Schedule 1 of the Directors' Report. The BGCC confirmed and the powers and duties of directors. In accordance with that, excluding the CEO, all directors continued to be the Constitution, the Board has resolved that the maximum independent. number of Voting Directors is currently eleven. The criteria used to assess independence, including A copy of the Constitution is available on Macquarie’s guidance for determining materiality, are reviewed annually website. and are available on Macquarie’s website. Decision-making authority Directors are able to consult independent experts at The Board has reserved certain matters for its approval Macquarie’s expense, subject to the estimated costs and has delegated specific authorities to its various being approved by the Chairman in advance as being Board Committees. The Managing Director, who is also reasonable, and also have unlimited access to senior Macquarie’s CEO, has been granted general authority for management of Macquarie. those matters not reserved for the Board or a Board Board Committees Committee. Macquarie’s Executive and Operations Review Committees, appointed by the Managing Director, operate Macquarie’s five standing Board Committees assist the as management committees to assist in the exercise of the Board in its oversight role. Each Board Committee has an Managing Director’s delegated authority. independent director as its Chairman. All Board members are sent Board Committee meeting agendas and may attend The CEO, the Chief Risk Officer and the Chief Financial any Board Committee meetings. Subsequent to each Board Officer report to the Board at each monthly Board meeting. Committee meeting, the minutes are included in the Board In addition to regular reporting from Management, the Board papers and presented to the Board by the respective Board has unlimited access to senior management as well as Committee Chairmen. external advisers. The Audit, Governance and Compliance, Nominating and The Board Charter, which is available on Macquarie’s Remuneration Committees comprise members who are website, details the Board’s role and responsibilities and its independent directors. The Board Risk Committee includes relationship with Management. all members of the Board and the Managing Director of Macquarie Bank to focus appropriate attention on the oversight of risk. Members’ attendance at Board and Board Committee meetings during the past year is set out at the beginning of the Directors’ Report. The Board Committee Charters, detailing the responsibilities of each Committee and how they exercise their authority, are available on Macquarie’s website. 4 Board and Board Committee membership Governance Macquarie and Board Audit Compliance Nominating Remuneration Risk Macquarie Independent Directors Kevin McCann AM* Chairman Chairman Member Member Gary Banks AO Member Member Member Michael Coleman Member Chairman Member Member Patricia Cross Member Member Member Chairman Diane Grady AM Member Member Member Member Michael Hawker AM Member Member Chairman Member Member Peter Kirby Member Member Member Member Helen Nugent AO Member Member Chairman Member Nicola Wakefield Evans Member Member Member Peter Warne Member Member Member Member Macquarie Managing Director and Chief Executive Officer Nicholas Moore Member Member Macquarie Bank Managing Director and Chief Executive Officer Greg Ward Member * The Chairman attends meetings of Board Committees of which he is not a member. 5 Macquarie Group Limited and its subsidiaries 2014 Annual Financial Report macquarie.com.au Corporate Governance Statement continued Allocation of responsibilities between determines that extending the term will be of significant Board Committees benefit to Macquarie. Previously independent directors were appointed for a maximum term of 12 years or the end of their Primary responsibility for ensuring an appropriate risk final three year term. management framework, including the establishment of policies for the control of risk, lies with the Board Risk Board performance Committee. The Board Risk Committee receives information on the risk profile and policy framework of the Group and Director induction and development external developments that may have an impact on the All new Directors undertake an induction program to effectiveness of the risk management framework. It also familiarise themselves with Macquarie, its Board practices approves significant changes to risk management policies and procedures and prudential requirements. In addition to and the framework. briefings with members of senior management, Non- Executive Directors (NEDs) identify business awareness The Board Audit Committee (BAC) assists the Board with needs on an ongoing basis and regular board education its oversight of the integrity of the financial statements sessions are held during the year. including compliance with the requirements of the Corporations Act 2001 (Cth) (the Act) as well as other The Board and Directors mandatory professional reporting requirements. In addition, The Board reviews its performance and the performance of it is responsible for reviewing the adequacy of the each Director on an annual basis with emphasis on those Group’s