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2. Governance Summary

AGL is committed to ensuring that its corporate governance framework, policies and practices are of a high standard. Delivering on this commitment requires AGL to have a sound understanding of current governance requirements and practices, as well as being attuned to emerging governance trends and shifting stakeholder expectations. Set out below is a summary of selected aspects of AGL’s corporate governance framework and a highlight of the key governance issues affecting AGL during FY20.

Throughout FY20, AGL’s corporate governance arrangements were consistent with the Corporate Governance Principles and Recommendations (4th edition) published by the ASX Corporate Governance Council (ASX Principles). AGL’s 2020 Corporate Governance Statement is available at agl.com.au/CorporateGovernance.

AGL’s 2020 Corporate Governance Statement outlines AGL’s arrangements in relation to its Board, Board Committees, Executive Team, risk management framework and financial reporting, diversity and inclusion, key corporate governance policies and shareholder engagement.

AGL's governance framework is summarised in the diagram below.

2.1. Board skills

During FY20, a refreshed Board skills analysis was undertaken, which was facilitated by an experienced external consultant. The Board Skills Matrix (Table 1) was updated following an analysis of the skills and experience of each Director and an assessment of the current and future strategic direction, opportunities and challenges facing AGL.

The skills analysis demonstrated that AGL’s Board members are highly experienced and all skills that would be considered important or critical to the effective performance of the Board are present on the Board. In particular, the Board has strength in the skills and experience required for the delivery of AGL’s strategic priorities – Growth, Transformation and Social Licence.

The updated Board Skills Matrix also identified additional skills and experience that may be required in the future having regard to the ongoing transition of the energy sector. Those areas include customer and marketing, financial markets and trading and technology, which will be the focus for future succession planning and development plans.

Further details about AGL's Board Skills Matrix are set out in AGL's 2020 Corporate Governance Statement available at agl.com.au/CorporateGovernance.

2.2. Key areas of focus during FY20

The key areas of focus for the Board during FY20, in addition to standing agenda items, are set out in Table 2.

The key areas of focus for the Board Committees, in addition to standing agenda items, are set out in Table 3.

Table 1 – Board Skills Matrix

Skills, experience & knowledge

Key competencies

Competency level

BVD

AGL Strategic Priorities

  • Growth - Accelerate growth to meet evolving customer needs
  • Transformation - Reposition, refresh and reinvigorate AGL
  • Social licence - Meet and exceed rising community expectations
Proficient

Commercial & leadership

  • CEO/Leadership Team experience and strategic delivery in large, complex industrial organisations
  • Strategic thinking
  • Industrial and large asset operations management
  • Deal making, mergers and acquisitions
  • Innovation and disruption
  • Engineering
  • Operational efficiency and optimisation
  • Project governance and management
  • Financial markets and trading/derivatives and futures
Proficient

Corporate finance

  • Large complex ASX financial management skills (including accounting, capital management, treasury, tax)
  • Financial governance (including internal controls, audit, financial and business performance reporting)
Practiced

Customer & Marketing

  • Marketing, brand and reputation management
  • Customer experience, insight and analytics
  • Business to business marketing
Practiced

People & culture

  • Large workforce management and planning
  • Culture and leadership oversight and development
  • Remuneration, talent development, succession planning
Proficient

Risk

  • Risk management strategies, appetite, culture
  • Operational risk (safety/people & well-being, technology, security, liquidity & financial, process & systems, OH&S, business resilience and crisis management)
  • Strategic and emerging risk
  • Regulatory, prudential, compliance & legal risk
Proficient

Technology

  • Technology literacy
  • Digital marketing/customer service delivery
Practiced

Stakeholder management

  • Stakeholder management and communications (including staff and community)
  • Government and regulatory relations and policy
  • Shareholders and investment advisors
Proficient

Corporate governance

  • ASX100 board and committee experience
  • Prudential and fiduciary governance
  • ASX100 board and/or committee Chair experience
  • ESG including environment and sustainability
Proficient

Sector experience

  • Electricity and gas
  • IT and telecommunications
  • Merchant banking
  • Financial markets
  • Mass market retail
  • ASX50
  • Capital intensive businesses (including industrials, manufacturing, large construction)
  • New and emerging energy industries and businesses
Practiced

Attributes

  • Highest standards of ethics and integrity
  • Cultural alignment
  • Diverse thinking styles
  • Networks and influence
Proficient

Key:

Proficient – Board regarded overall to have expert or highly qualified proficiency, knowledge and experience in the subject matter or domain.

Practiced – Board overall has a sound working knowledge and understanding of the subject matter.

Table 2 - Board Focus Areas during FY20

Committee

Key Focus Areas in FY20

Business Value
Drivers

Board

  • Initiatives to support our people, customers and community through both the bushfire emergency and the COVID-19 pandemic and overseeing AGL's social licence program.
  • Board succession processes, which resulted in the appointment of Mark Bloom as a Non-Executive Director on 1 July 2020.
  • Overseeing the processes to appoint new members to the Executive Team, including Markus Brokhof (Chief Operating Officer) and Liz McNamara (EGM Corporate Affairs).
  • Group performance (including financial performance, asset performance, customer metrics and HSE performance).
  • Growth options available to AGL, including the Perth Energy and Southern Phone Company acquisitions.
  • AGL’s transformation programs, including grid scale and residential battery projects.
  • AGL's Climate Statement, which confirms AGL's target of net zero emissions by 2050.
  • AGL’s customer strategy, including the implementation of customer affordability measures such as the COVID-19 Customer Support Program.
  • AGL's executive remuneration framework, including the introduction of carbon transition metrics in AGL's Long Term Incentive Plan from FY21.
  • AGL’s governance and risk management systems and identifying ways to further strengthen governance, accountability and culture within AGL.
  • The ongoing feasibility of the LNG import jetty project at Crib Point.

Table 3 – Board Committee Focus Areas

Committee

Key Focus Areas in FY20

Business Value
Drivers

Safety, Customer & Corporate Responsibility

  • Site visits to AGL’s Loy Yang power station and Mt Beauty hydro operations to oversee key health, safety and environmental issues affecting the sites.
  • Site visit to AGL's customer call centre in Adelaide, which included customer call listening and meeting with a C&I customer.
  • AGL’s safety, culture, systems, capability and risk, including overseeing initiatives to improve health, safety and environmental performance.
  • Key themes in relation to AGL’s customers including complaint handling processes, brand health, initiatives to drive improved customer advocacy and customer affordability.
  • Action AGL is taking to deliver on its strategic priority to build Social Licence and to promote stakeholder advocacy.

Audit & Risk Management

  • Overseeing the issues, incidents and risks identified by management in Group Audit, compliance and risk reports and ensuring there is clear accountability for, and effective closure of, relevant issues.
  • Overseeing AGL's financial reporting processes, including consideration of AGL's half-year and full-year reports and AGL's 2020 TCFD Report - Pathways to 2050.
  • AGL’s transition to reporting that meets the principles of the International Integrated Reporting Framework.
  • Reviewing the effectiveness of AGL’s governance and risk management systems and identifying ways to further strengthen governance, accountability and culture within AGL.
  • AGL’s preparedness for peak period operations and reviewing performance of assets during peak periods, including risk controls and lessons learned.
  • Post implementation reviews of major projects.
  • Reviewing reports from management on emerging sources of risk and the mitigation measures in place to deal with those risks, including in relation to IT security and climate change.

People & Performance

  • Overseeing the preparation of AGL’s Remuneration Report.
  • Changes to AGL’s Executive Remuneration Framework, including the introduction of carbon transition metrics in AGL's Long Term Incentive Plan from FY21.
  • CEO and Executive Team FY21 objectives.
  • Consideration of AGL’s Diversity Targets.
  • Executive succession planning and talent development.
  • Action AGL is taking to foster employee engagement and monitoring of workplace culture.

Nominations

  • FY20 Board Review process.
  • Succession planning to address AGL’s future opportunities and challenges, including the process to appoint Mark Bloom as a Non-Executive Director.

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