AICD ANNuAL REvIEw 2007/2008 - Company Directors

REPORT FROM THE CHAIRMAN AND ACTING CEO

BOARD OF DIRECTORS

AICD HIGHLIGHTS

MEMBERSHIP

AICD ANNuAL REvIEw 2007/2008

MembershipMembers continued to strongly support AICD, with overall membership numbers again increasing at a healthy rate around Australia during 2007/2008. Total membership rose by 7.1 per cent to exceed 23,500 by 30 June 2008, while the retention rate remained very strong at nearly 91 per cent.

AICD has invested heavily in ensuring it delivers the most relevant quality events and courses. With our level of member participation reaching 42 per cent in 2007/2008 (unique members attending at least one course or event during the year), this is a clear indicator that AICD is meeting the challenge.

In a recent independent benchmarking survey1, where AICD was compared to 14 other peer organisations, AICD’s overall performance was rated as “excellent” by 51 per cent of respondents, and as “good” by a further 32 per cent. Of the 15 member associations in our strategic group, AICD ranked a close second for overall performance.

Director and Board DevelopmentMembers and non-members alike signed up for AICD’s Director and Board Development programs at an expanding rate in recognition that the organisation provides a range of highly relevant services aimed at enhancing the knowledge and skills of Australian directors.

Participation levels in the Company Directors Course grew to 2,312, an increase of 163 people on the previous year. The satisfaction rate for the program, already at 90 per cent, edged higher to 92 per cent. After initial success staging an International Company Directors Course in Shanghai, China, in May 2007, a second such event was staged in Singapore and attracted high calibre participants from a range of Asian and Australian organisations. Three more courses have been scheduled – Dubai in November, Sydney next January and Singapore in May 2009.

The number of Short Courses, designed to fill gaps in the skills of directors with differing levels of experience, jumped strongly by 18 per cent to more than 770 participants. Attendance at the

Directors Essentials courses for new directors was maintained at around 3,800, while there was good growth in the tailored In-Boardroom offering.

The AICD has successfully designed a program specifically for directors of Indigenous corporations. This initiative, partially funded by Indigenous Business Australia, and strongly advocated by our South Australian and Northern Territory office, was first piloted in Darwin in April 2008. Four additional courses of the program have since been piloted in the Northern Territory and Western Australia.

Events and Member ServicesAn impressive indication of the support AICD received from members and the broader community was the number of people who attended events around Australia during the year. Some 645 events attracted more than 36,000 people, an increase of 23 per cent.

A national series of member-only seminars that highlighted changes in director responsibilities, called Directing Tomorrow Today, was launched with great success. With more than 1,600 people attending, it was decided to repeat the complimentary series in 2008. International corporate governance expert Professor Bob Garratt also addressed AICD members and guests across Australia in our second national series for the year.

Director InitiativesA number of important initiatives have been approved by the Board to boost AICD’s services and advocacy on behalf of members. The projects are still in the early stages of development, but cover a wide range of matters that focus on particular member segments, issues of strong topical importance and others intended to have a long-term impact. We look forward to disclosing these initiatives in more detail in the future.

Company Directors ConferenceMembers supported the return of AICD’s popular Company Directors Conference to Australian shores by attending in greater numbers than the last domestic conference held in 2006. The event held in May at Coolum in Queensland attracted 462 delegates and 151 partners. An overall

participant satisfaction rating of 86 per cent was a record for AICD conferences.

The theme 'Into a New World' explored how directors could lead in the development of a sustainable, desirable and prosperous world. The program included a line-up of thought-provoking speakers from Europe and North America as well as from Australia. The unanimous conference highlight was an address from Noel Pearson, director of the Cape York Institute, on the social and economic disengagement of Indigenous Australians.

The next Company Directors Conference will be held in Tokyo in May 2009, the second time that AICD has moved its premier event offshore.

Policy, Advocacy and CommunicationsAICD’s Policy and Advocacy department was again supported by a large number of experienced members and stakeholders who gave their time on an honorary basis to deliberate on a wide range of director issues and recommend meaningful and far-reaching policies. Together, AICD’s policy contributors aim to advance the principles of good directorship in Australia in a manner that contributes to the improvement of the economy and society.

A highlight for the year was AICD’s submission to the Parliamentary Joint Committee Inquiry into Shareholder Engagement, which was compiled after extensive consultation with committees, divisional councils and the wider membership. The resulting report endorsed Australia’s corporate governance system – recognising that Australia’s standards of corporate governance are relatively high – and agreed with the recommendation made by AICD in its submission that future improvements to shareholder engagement are best made via a principles-based approach, rather than by legislating minimum standards.

A recent independent survey2 regarding Company Director readership found that 81 per cent of members regularly read the journal, 88 per cent viewed it as credible, and 83 per cent felt it was informative.

REPORT FROM THE CHAIRMAN AND ACTING CEO

We are pleased to present an overview of highlights for the Australian Institute of Company Directors (AICD) following what has been another exceptional year of performance.

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In an effort to continually improve our communication, further changes were made to Company Director and The Boardroom Report to reflect the feedback received from members, with articles published designed to appeal to a broader cross-section of members.

Financial ResultAICD’s total revenue surpassed $30 million for the first time ($30.9 million, up 12 per cent on 2006/2007), as a result of a strong operating year, including unprecedented demand for AICD courses. The operating result of $2 million for the financial year was impacted by the worldwide investment downturn, as AICD sustained an unrealised loss on its investment portfolio of $1.2 million. This loss was offset by a recovery of past payroll tax payments of $1.6 million (after an exemption from payroll tax in NSW was granted). The net surplus for the year was $1.7 million (compared to $2.2 million in 2006/2007).

Board changes and AICD teamMr John Colvin, the former head of Freehills’ Sydney office was appointed AICD’s Chief Executive Officer effective 1 September 2008. He replaced Mr Ralph Evans who stepped down in December 2007. The board acknowledged the contribution of Mr Evans during the four years that he served as CEO. He ensured that the organisation’s voice was heard on important director issues and assisted AICD achieve its position as the pre-eminent organisation representing company directors in Australia.

In November 2007, Mr Ashley Harris and Mr Keith Smith OAM retired as AICD presidents for Tasmania and South Australia/Northern Territory respectively, and Dr Helen Nugent retired in September 2007 as a national board member. We thank them for their contribution on behalf of AICD and its members.

Three new division presidents joined the board: Lyn Cox (Tasmania), Alan Hewitt (South Australia/Northern Territory) and Richard Lee (New South Wales). In addition, Ms Elizabeth Bryan, formerly President of the NSW division, was appointed a national board member.

We would also like to take this opportunity to thank all board members and AICD’s employees for their hard work and contribution to our success during the year.

Finally, to all our members: Thank you for your participation in AICD’s activities this year. We look forward to your ongoing support of our initiatives to promote professional directorship and good governance.

Andrew Madry Acting Chief Executive Officer

John Story Chairman

Vol 24 No 05 June 08

Preparing for the future AICD Conference warns about a new world order

Robert Elstone The ASX boss hits back at critics

PLUS...A look at the murky world of non-financial KPIs

How to lift indigenous communities

NoelPEARSON

1 Beaton Consulting Annual Business and Professions Study 2008 2 Ipsos Media Company Director Metrics and Editorial Evaluation 2007

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Mr Terence Budge FAICD, National DirectorChairman, Landcorp; Director, Aspen Group; Westoz Investment Company Limited; Chairman, Leadership WA; Chancellor, Murdoch University. Terry Budge has had over 30 years’ experience in the Australian banking industry. He was Managing Director of BankWest from December 1997 to May 2004 and previously worked at National Australia Bank for 25 years in a number of senior executive roles.

Mr Dale Budd OBE FAICD, President Australian Capital Territory DivisionMember of the Advisory Committee of the Canberra Business Council; Chairman of the Development Advisory Board of the Rail Industry Safety and Standards Board. Dale has operated his own consultancy since 1978; between 1985 and 2000 he was actively involved in the development of proposals for high-speed rail services in Australia. From 2001 to 2007 he was a Director of the Australian Rail Track Corporation (ARTC), and was vice-chairman of the Board from 2004. From 1975 to 1978 and again in 1981, Dale was Chief-of-Staff to the then Prime Minister, Malcolm Fraser.

Ms Elizabeth Bryan FAICD, National DirectorChairman, Caltex Australia Limited; Director, Westpac Banking Corporation and Westpac New Zealand Limited; Chair, UniSuper Limited and UniSuper Management Pty Ltd. Before pursuing a career as a non-executive director, Elizabeth served as the Chief Executive Officer of Deutsche Asset Management (Australia). She has a successful track record in managing businesses and wide experience in the financial sector.

Mr Colin Galbraith AM FAICD, National DirectorChairman of BHP Billiton Community Trust; Director of Commonwealth Bank of Australia, CARE Australia and OneSteel Limited. Special Adviser, Gresham Partners Limited and Trustee of the Royal Melbourne Hospital Neuroscience Foundation. Formally a partner of Allens Arthur Robinson.

Mr Lyn Cox FAICD, President Tasmania DivisionDirector, B&E Limited; Member, Sullivans Cove Waterfront Authority (Tasmanian Government); Formerly State Chairman and National Councillor of the Institute of Chartered Accountants, Lyn was also National Treasurer and National Director of the National Heart Foundation. He was a Partner in accounting firm, Deloitte Touche Tohmatsu until October 2007 and until 2006, was the Managing Partner for Tasmania. He was a partner in accounting firms from 1976, specialising in the areas of assurance and advisory, corporate finance, risk assessment and governance.

Mr John Story FAICD, ChairmanChairman, Suncorp Metway Limited and Tabcorp Holdings Limited; Director, CSR Limited. Member of the Senate of the University of Queensland and Commissioner of the Service Delivery and Performance Commission (Queensland Government). John has previously served as Chairman and Queensland Managing Partner of Corrs Chambers Westgarth. A partner of the firm for 36 years, John practised in the areas of corporate and commercial law, public trusts, public fundraising, mergers and acquisitions and commercial documentation.

BOARD OF DIRECTORS

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Ms Fiona Harris FAICD, President western Australia DivisionChairman, Barrington Consulting Group Pty Ltd; Director, Vulcan Resources Limited, Territory Resources Limited, Foodbank of WA Inc, Perron Group Limited and PG Holdings Limited, Heytesbury Pty Ltd, and WASO Holdings Ltd. Former director Alinta Limited, Alinta Infrastructure Holdings, and NM Rothschild & Sons (Australia) Limited. Previously, Fiona spent 14 years with KPMG in Perth, San Francisco and Sydney, and was an Audit and Assurance partner in the New South Wales practice when she retired in 1994.

Mr Martin Kriewaldt FAICD, President Queensland DivisionChairman, Opera Queensland Ltd; Director, Suncorp Metway Ltd, Oil Search Ltd, Campbell Brothers Ltd, GWA International Ltd and ImpediMed Ltd. Martin acts in an advisory capacity for Allens Arthur Robinson and Aon Holdings Australia Ltd and is a member of the Major Performing Arts Board.

Ms Linda Nicholls AO FAICD, President victoria DivisionChair-elect, Healthscope; Director St George Bank Limited, Sigma Company Limited and Insurance Manufacturers of Australia Pty Ltd. Former Chair of Australia Post. Member of Council of The Walter and Eliza Hall Institute for Medical Research, and a Director of United States Studies Centre. Linda runs her own corporate advisory practice specialising in business strategy in financial services and health care, and has over 30 years experience as a senior executive and company director.

Mr Alan Hewitt FAICD, President South Australia and Northern Territory DivisionFormer Chairman, Community CPS Australia Ltd and Eastwoods Group Pty Ltd; Alan is a consultant and was Managing Director of HH Advisory Pty Ltd, following 10 years as State Manager of the Australian Property Group. He is a Fellow of the Australian Property Institute, a Fellow of the Australasian Mutuals Institute and a Senior Associate of the Financial Services Institute of Australasia.

Mr Richard Lee FAICD, President New South wales DivisionChairman, Salmat Limited; Deputy Chairman of Ridley Corporation Limited; Director CSR Limited and Newcrest Mining Limited. Richard is also an Independent Director of the Insurance Division of Wesfarmers Limited, Cash Services Australia Pty Limited and the Australian Rugby Union. In addition, Mr Lee is a director of several private companies and provides consulting services to various corporations. He is also a Governor of the Institute of Neuromuscular Research. Previously, Richard was Chief Executive of the NM Rothschild Australia Group.

Information correct as at 12 September 2008

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AICD HIGHLIGHTS

A collection of images reflecting member participation at AICD events and a snapshot of operational activities, statistics and achievements.

Surpassed landmark 2,000 members in SA and 1,000 members in the ACT

International Company Directors Course held in Singapore & Sydney, assisting Australian directors working across borders to build their knowledge of the international corporate governance environment

Membership up by more than 10% in both WA and Queensland

High participation continues in Queensland – average of 500 guests attended Leaders Edge luncheons

All Director & Board Development courses were reviewed and the course portfolio refreshed. The Company Directors Course structure revised – ‘Decision Making’ module added and ‘Strategy’ condensed to single module.

56% of Tasmanian members attended courses and events

Regional events: Strong participation growth across Queensland regional areas – Cairns, Townsville, Gold Coast, Mackay, Toowoomba; new regional program implemented in Victoria; first Company Directors Course for Port Lincoln, SA; first event in Albany, WA; future events planned for Kalgoorlie, Geraldton and Bunbury

Member participation in Director & Board Development activity: In addition to members advancing their own professional development by undertaking AICD courses, members also assisted AICD through piloting new courses; reviewing draft course material; and contributing to focus groups and committees

KNOwLEDGE

COMMuNITy

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In-Boardroom: 14% activity increase. Programs delivered to 132 organisations nationally. 50 days of delivery in NSW, 455 participants from 24 organisations in WA

Indigenous Governance program pilot conducted in Darwin, part of a suite of six programs developed in conjunction with Indigenous Business Australia

Three e-learning courses piloted

Continued focus on public sector governance: conducted annual one-day conference and initiated In-Boardroom development program in ACT

Not-for-Profit Board program developed to assist directors and boards to understand their duties and responsibilities and sector specific issues

Inaugural Fellows activities: Black tie dinner in Victoria; “Fellows on Tour” launched in WA, with visit to BHP Billiton’s new Ravensthorpe nickel mine. More Fellows events have been planned

Development into university governance sector in NSW: In-Boardroom Company Directors Course

Reporting to the Board course designed to improve skills in preparation and presentation of board reports was developed and implemented

Introduction of sector-specific programs incorporating both education and events in NSW

ADvANCEMENT

AICD presented at the Senate Economics Committee Inquiry into Private Equity. Committee report reflected AICD’s views

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AICD HIGHLIGHTS

Appearance before Parliamentary Joint Committee public hearing in April 2008 following AICD’s submission to Inquiry into Shareholder Engagement and Participation

Website homepage given new look with content organised for improved usability. Member login boxes added on all pages to streamline click-through to ‘members only’ content

AICD participated in Federal Treasury roundtables on sanctions in corporate law, following lodgement of a submission advocating broad extension of business judgment rule to the Corporations Act

Contribution to ASX Corporate Governance Council Review of Corporate Governance Principles and Recommendations and Release of 2nd Edition; success in widening definition to clarify that director independence is a matter for boards to determine

Submissions and Position Papers on Reporting matters: A Solvency Based Test for Dividends – advocating removal of requirement for dividends to be paid out of profits and instead rely on overriding solvency test; Application of International Financial Reporting Standards to Australian SMEs and Financial reporting by unlisted public companies

Podcasts launched on website in May 2008 providing access to audio recordings from the Company Directors Conference, AICD Events and Interviews. Within the first month, more than 1,000 unique members visited AICD Podcasts and 460 members logged into the member-only area to access audio files

CONTRIBuTION

ADvOCACy

continued

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Introduced a series of interviews with authors of DirectorBooks publications. AICD is building its collection of author interview podcasts, selecting authors who are well known, experts in their fields and whose subject speciality is relevant to our members

FAQs on AICD’s website recorded more than 53,000 hits

AICD brand advertising, focused on theme of knowledge continued at Sydney, Melbourne and Brisbane airports

Conversion of all AICD published works to E-books progressed strongly; print-on-demand facility available

More than 350 member queries were received and addressed by AICD’s Information & Research Centre

International Members: First event for international members held in Singapore in May 2008, organised by AICD WA. More than 70 members and guests from Singapore and the surrounding region attended, including His Excellency High Commissioner Miles Kupa

Thank you to all our corporate supporters and sponsors

INFORMATION

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25000

20000

15000

10000

5000

02003 20082007200620052004

4% 2%

30%

17%8%

4%

24%

11%

O/S

Tas

SA/NT

Vic

WA

Qld

ACT

NSW

6%

28%

21%

45%

FAICD

MAICD

AAICD

GAICD

3%1%

49%

25%

13%

8%

5-9 years

25-29 years

20-24 years

>30 years

15-19 years

<5 years

10-14 years

1%

AICD MEMBER NuMBERS 2003 TO 2008

AICD MEMBERS By DIvISION 2008

AICD MEMBER DESIGNATIONS 2008 AICD yEARS OF MEMBERSHIP 2008

MEMBERSHIP

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Documents

AICD ANNuAL REvIEw 2007/2008 - Company Directors