S E C T I O N 2 : C O R P O R A T E O P E R A T I O N S
LEGAL FRAMEWORK As a public company limited by guarantee, Dairy Australia operates within the legal framework of the Corporations Act 2001, other relevant laws and the Dairy Australia Constitution. In addition, as the industry services body under the Dairy Produce Act 1986, Dairy Australia is party to a funding deed with the Commonwealth of Australia and is bound by the terms of the deed. CONSTITUTION Dairy Australia’s Constitution is the key set of rules which governs the operation of the Company. The Constitution deals with matters such as the Company’s objects, the criteria for eligibility for membership, how members’ voting entitlements are determined and requirements for the composition of the Board and the election and rotation of Directors. Together with the provisions of the Corporations Act 2001, the Constitution sets out the Company’s reporting responsibilities to members. FUNDING DEED Since its inception in 2003, Dairy Australia has operated in accordance with the terms of a Statutory Funding Deed with the Commonwealth. A new deed was negotiated with the Commonwealth during the year and came into effect on 1 June 2006. Under the funding deed, the Commonwealth agrees to pay the Company Dairy Service Levy funds paid by dairy farmers and matching Government R&D funds. In addition, the deed sets out the respective obligations of Dairy Australia and the Commonwealth with regards to the terms of payment of the levy and matching R&D funds, how those funds may be used, and Dairy Australia’s reporting and accountability requirements to the Commonwealth. It also deals with Dairy Australia’s responsibilities in its role as trustee of the Dairy Structural Adjustment Fund. MEMBERSHIP Under Dairy Australia’s Constitution, all Australian dairy farmers who pay Dairy Service Levy or who have levy deducted from the proceeds of their milk sales are eligible to become Group A members of Dairy Australia and participate in general meetings of the Company and the election of Directors. In addition, bodies that represent a significant sector of the Australian dairy industry are eligible to become Group B members of the Company. Dairy Australia’s Constitution provides for formal consultation with Group B members in relation to the Company’s strategic and operating plans. At 30 June 2007, Dairy Australia had 12,266 Group A members (including 5,919 joint members). These members represented 64.36 per cent of active dairy enterprises. Dairy Australia has two Group B members - the Australian Dairy Farmers Limited and the Australian Dairy Products Federation. The Company Constitution and the funding deed with the Commonwealth are on Dairy Australia’s website. CORPORATE GOVERNANCE Dairy Australia is committed to high standards of corporate governance because this is in the best interests of the Company, its members and other stakeholders. The Company has in place a Corporate Governance Statement, Code of Conduct, and Board and Committee Charters. These corporate governance policies and documents have been formulated with regard to best practice recommendations relevant to Dairy Australia’s status as a public company limited by guarantee and the nature of its stakeholders. THE BOARD ROLE AND RESPONSIBILITIES The Board is responsible for guiding and monitoring the Company on behalf of its members to whom they are accountable. The role and responsibilities of the Board are set out in detail in the Board Charter. These include ensuring that appropriate policies, procedures and systems are in place to manage risk and ensure high standards of accountability, ethical behaviour and legal compliance. While day-to-day management of the Company is delegated by the Board to the Managing Director and other senior managers under a formal schedule of delegations, Dairy Australia recognises that an effective Board is crucial to the achievement of Company and industry objectives. Accordingly, Dairy Australia has structured its Board to ensure that the Board has the skills and experience to enable it to understand and deal with current and emerging industry issues, and is able to effectively and independently review management performance and decisions. COMPOSITION The Dairy Australia Board comprises eight non-executive Directors (including the Chairman) and the Managing Director. The Board’s size and composition enables the Board to make decisions in an expedient fashion with input from Directors with a variety of skills and perspectives. The skills, experience and expertise of each Director in office at the date of this report is set out in detail in the Directors’ Report. The Board recognises that the relevant dairy industry skill and experience requirements for Directors may, at times, lead to a conflict of interest for a Director. Directors provide a standing declaration of interests each year and also provide notice when a new office or interest is acquired. A policy exists for dealing with conflicts of interest when they arise. ROTATION OF DIRECTORS The Company Constitution provides for three-year terms for non-executive Directors. At each Annual General Meeting, the Company’s Group A members elect Directors to fill Board vacancies created by Directors retiring by rotation. This process allows Board composition to be reviewed annually to ensure that the Board continues to have the skills and experience necessary to meet the challenges facing the Company and industry.