Governance & Risk Management

 

What are we trying to achieve?

Our goal is to foster a culture that rewards:

• Exemplary ethical standards in all our dealings with customers, suppliers, co-workers and the public;
• Personal and business integrity; and
• Safe and environmentally responsible behaviour. A detailed account of our governance processes can be found in our 2009 Annual Report.

How are we going about it?

Board structure and processes

The Board of Directors of Amcor Ltd is responsible for oversight of the corporate governance of the Company. The Board’s focus is to enhance the interests of the shareholders and other key stakeholders by providing oversight in relation to the economic, environmental and social performance of the Group.

As of 30 June 2009, the Board consisted of seven Directors: one executive Director (Ken MacKenzie, Managing Director and Chief Executive Officer) and six independent, non-executive Directors. Our current Chairman, Mr Christopher I. Roberts, is an independent, non-executive member of the Board.

Executive, Audit & Compliance, Human Resources and Nomination Board Committees have been established to ensure that Board responsibilities are upheld and executed to the highest level.

The Board has also established a framework for the management of the consolidated entity, including a system of internal control, an enterprise risk management (ERM) framework and the establishment of appropriate ethical standards.

During the reporting period, Amcor’s corporate governance practices and policies were reviewed against the Australian Securities Exchange (ASX) Corporate Governance Council’s Corporate Governance Principles and Recommendations, 2nd Edition, (‘the ASX Principles’). This review resulted in updates being made to the Board and Committee Charters. Amcor also took the opportunity to consolidate its previous public disclosures in relation to its policies on risk management, shareholder communications and executive remuneration into distinct summaries that are now included on our website. The Company complies with the ASX Principles.

Read more in our Corporate Governance Statement in our 2009 Annual Report.

Director induction and education

Our Board Charter requires that the majority of our Directors have extensive knowledge of the Company’s industries and that those who do not are required to have extensive expertise in significant aspects of financial reporting and risk management of large companies.

Amcor has in place a formal process to educate new Directors about the operation of the Board and its committees and financial, strategic, operations and risk management issues, the corporate strategy and the expectations of performance of Directors. Read more in our Corporate Governance Statement in our 2009 Annual Report.

Transparency and disclosure

Directors must keep the Board advised, on an ongoing basis, of any interest that could potentially conflict with those of the Company. The Board has developed procedures to assist Directors to disclose potential conflicts of interest and, each year, all independent Directors complete independence declarations.

Ethical standards

All Directors, managers and co-workers are expected to act with the utmost integrity and objectivity, striving at all times to enhance the reputation and performance of the Company. Every individual has a nominated supervisor to whom they may refer any issues arising from their employment. Alternatively, co-workers may use the Whistleblower Service, which is referred to below.

Disclosure and Communication processes

Shareholders are provided with information in accordance with our Disclosure Policy, which includes identifying matters that may have a material effect on the price of the Company’s securities, notifying them to the ASX, posting relevant information on the Company’s website and issuing media releases.

Details of other forms of shareholder communication are set out in the Shareholder Communication Policy, which is available on the Company’s website. Shareholders can communicate directly with the Amcor Board at the Annual General Meeting. All members of the Board attend this meeting and all shareholders are notified of the event.

Whistleblower Service

Amcor’s Whistleblower Service enables employees to report potential misconduct, including illegal activity, breach of the Code of Conduct, fraudulent or corrupt practices, harassment or discrimination, misleading or deceptive conduct of any kind, unethical behaviour, and health, safety or environmental hazards. Reporting is conducted through an independent third party, who is responsible for coordinating the investigation of issues raised on behalf of the Company and the Whistleblower. Employees who report suspected inappropriate conduct are protected from bullying, harassment or discrimination when they make reports in good faith. There were 41 reports recorded during the reporting period. Each such report is investigated thoroughly and appropriate action taken. Matters raised under the Whistleblower Service are reported to the Board Audit and Compliance Committee. The Committee also reviews the effectiveness of the Whistleblower Service. The most recent review was completed in May 2009, concluding that the Service was operating effectively.

The Service is promoted in our induction programs and internal audit procedures are in place to ensure that promotional materials are readily visible in our workplaces. We are constantly reviewing the Service to enhance its usability. For example, we are currently checking that the range of languages supported by the Service is appropriate to ensure accessability by our co-workers. In addition, a Third Party Complaints email and free post facility is available on the Company’s website to enable third parties such as suppliers, consumers, contractors and customers to report potential misconduct within the organisation.

Code of Conduct and Ethics Policy

Amcor aims to abide by the national laws in each country in which it operates and conduct its business in accordance with internationally accepted practices and procedures. Our Code of Conduct and Ethics Policy supports the OECD Guidelines for Multinational Enterprises and outlines our expectations for how our co-workers should conduct business. Amcor believes that these principles extend to all workers producing or providing products or services for Amcor, whether or not they are employees of Amcor.

The Policy also outlines our expectations regarding political involvement by the Company. Amcor Businesses may represent their views to governments and other third parties on matters that affect their business interests and the interests of their shareholders, co-workers and others involved in their operations. However, Amcor Businesses must not participate in party politics or make payments to political parties without the prior approval of the Amcor Board.

Each new employee is introduced to the Code as part of their induction training and employees are asked to sign a declaration confirming their compliance with the Code. Further training is periodically provided, together with articles published in the global staff publications reinforcing compliance with the Code.

The Board reviews the Code of Conduct and Ethics Policy regularly and processes are in place to promote and communicate these policies. View our Code of Conduct and Ethics Policy.

Group Internal Audit has the responsibility to oversee the fraud risk assessment process and all fraud investigations.

Investigations are thorough and Amcor takes a firm approach against individuals or parties in proven fraud cases.

The Fraud Policy is included in our Amcor employee induction program and is available to all employees on our intranet. Posters promoting the Fraud Policy are on public display at all of our operations and this is validated by Group Internal Audit. In addition, the Whistleblower Service enables Amcor staff and third parties to anonymously report suspected fraud or corruption.

We are not aware of any material instances of reported or suspected fraud during the period.

Environmental regulation

We are committed to achieving a high standard of environmental performance. Our operations are subject to significant environmental regulation in all countries in which we maintain a presence.

The Board provides oversight of the regular monitoring of Amcor Ltd’s environmental exposures.

To enable it to meet its responsibilities of oversight, the Board has established an internal reporting process. In FY 2008/09, compliance with the requirements of environmental regulations and with specific requirements of site environmental licences was substantially achieved across all operations.

Our Corporate Environment Policy states our commitment to managing our operations in an environmentally responsible way. The Policy outlines a range of precautionary behaviours that we have adopted. These are available on our intranet and public website. New co-workers are introduced to these policies as part of their induction into the Company. An online induction program will be introduced next year to enhance our tracking and management of these important training requirements.

 

 

Risk management

Amcor understands and recognises that rigorous risk and opportunity management is essential for corporate stability and for sustaining its competitive market position and long-term performance.

The following objectives drive Amcor’s approach to risk management:

• Having a culture that is risk aware and which is supported by high standards of accountability at all levels
• Achieving a truly integrated risk management approach where risk management forms part of all key organisational processes
• Supporting more effective decision making through better understanding and consideration of risk exposures
• Enhancing shareholder value through improved share price and earnings growth in the short to medium term whilst building a sustainable business for the longer term
• Improving stakeholder confidence and trust Enhancing organisational efficiencies
• Safeguarding the Company’s assets – human, property, reputation, knowledge
• Enabling the Board to fulfil its governance and compliance requirements
• Supporting the sign-off for ASX Principles 4 and 7 by the MD/CEO and EGM Finance.

Amcor has implemented an enterprise risk management (ERM) framework to improve its ability to meet the above objectives and achieve the desired outcomes.

Amcor’s approach incorporates the principles of effective risk management, as set out in the Global Risk Management Standard ISO 31000.

The Board and senior executives have responsibility for driving and supporting risk management across the Group. Each Business Group then has responsibility for implementing this approach and adapting it, as appropriate, to its own circumstances. While risks are owned and managed by employees at all levels of the organisation, the existence of an executive-level Risk Champion in each Business Group helps ensure a consistent approach to risk management.

ERM seeks to apply risk management across an entire organisation, and it does this so that all material risks can be identified, assessed and mitigated. In recognition of this, the Amcor Board recently reviewed the risk appetite of the organisation. To facilitate the identification and assessment of all material risks, the Board agreed to expand the parameters of the risk appetite to include safety, environment, reputation and corporate governance, in addition to financial risks.

Amcor’s assurance function, which includes the Internal Audit function, plays a key role in reviewing the effectiveness of Amcor’s compliance and control systems, including risk management. Findings from reviews are communicated in formal reports to the Board and the Audit and Compliance Committee, and then appropriate action is taken to support the maintenance of a strong control environment.

The combined strength of Amcor’s risk management and assurance activities, coupled with Amcor’s risk management culture, provides the Group with an effective ERM framework.

A summary of Amcor’s risk related policies can be found with other corporate governance policies under the corporate governance section of the Amcor website.

Risk management continuous improvement

In February 2009, the second annual independent ERM Framework Maturity Assessment was completed by Ernst & Young. The assessment included analysis of the current ERM framework from both a technical and behavioural perspective in addition to benchmarking Amcor’s ERM framework’s compliance with:

• ASX Principles – Principle 7
• Standard & Poor’s Corporate Rating Process
• Dow Jones Sustainability Index.

Key stakeholders including members of the Board, senior management and the Business Group Risk Champions were engaged as part of the maturity assessment process.

The assessment results indicated that Amcor made significant progress towards its desired level of risk management maturity. Over the coming 12 months the focus of ERM enhancement will shift from technical design to an embedding phase with additional focus on providing assistance to the Amcor Business Groups on the behaviours, culture and capabilities required to ensure risk management becomes integrated as a standard business process. To support the embedding of ERM, Amcor has begun the implementation of a software tool to greatly improve the identification, assessment and analysis of all material risks.

Sustainability performance and remuneration

We believe that alignment of management remuneration to Company values reinforces the importance of the Code of Conduct and Ethical Policy and fosters the development of a sound ethical culture. The remuneration of Amcor Ltd’s senior managers is linked to our core values of:

• Safety
• Integrity
• Teamwork
• Social Responsibility
• Innovation.

All senior managers are subject to 360-degree value surveys in relation to their ethics, values and compliance performance. The individual’s line manager, business peers, corporate peers and direct employees complete the value survey annually. An individual who fails to pass our defined performance benchmark is ineligible to receive a bonus for that financial year.