2020 Corporate Governance Statement - Coles Group

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2020 CorporateGovernance StatementColes Group LimitedABN 11 004 089 936

Coles Group Limited 2020 Corporate Governance StatementColes Group Limited 2020 Corporate Governance rate Governance Statement1FY20 corporate governance highlights2Corporate governance framework3Our vision, purpose, strategy and values4Our Board of Directors6Roles and responsibilities7Board composition and succession10Board committees13Shareholders and reporting15Risk management16Diversity and inclusion19A culture of acting lawfully, ethically and responsibly22 www.colesgroup.com.au/corporategovernanceThe Board and the management team of Coles GroupLimited (‘Coles’, ‘the Company’ or ‘the Group’) arecommitted to the highest standards of corporategovernance and believe that a robust and transparentcorporate governance framework is central to the success ofour business. We are committed to maintaining and buildingon the confidence of our shareholders, our customers, oursuppliers, our team members and the broader communityas we continue to strive to achieve our vision to becomethe most trusted retailer in Australia and to grow long-termshareholder value.Coles continues to review the Company’s governancepolicies and practices to ensure that they remainappropriate in light of changes in corporate governanceexpectations and developments as reflected in the fourthedition of the ASX Recommendations, which apply to Colesfrom FY21. Many of the new recommendations contained inthe fourth edition are already addressed in the Company’sexisting governance arrangements.This Corporate Governance Statement sets out thecorporate governance framework currently in placeat the Group, including the key policies and practices.Coles complies with the third edition of the ASX CorporateGovernance Council’s Principles and Recommendations(ASX Recommendations).Further information about Coles’ corporate governanceframework and practices can be accessed on the Company’swebsite www.colesgroup.com.au/corporategovernance,which includes links to each of the publicly availabledocuments referenced in this Corporate GovernanceStatement.This Corporate Governance Statement is current as at24 September 2020 and has been approved by the Board.Stan Yarramunua performs a Welcome to Country at the first Coles Annual General Meeting in November 2019.B1

Coles Group Limited 2020 Corporate Governance StatementColes Group Limited 2020 Corporate Governance StatementFY20 ameworkIn our first full year as a listed entity, Coles’ robust corporategovernance framework has been integral to our responseto the extraordinary events of FY20.Strong corporate governance is an important foundation for theperformance of the Company and engenders the confidence ofthe investment market and Coles’ stakeholders.The Group’s FY20 key corporate governance highlights and focus areas included:BoardStrategyRisk managementDiversityand inclusionOverseeing the Group’s response to the unforeseen nationaland global challenges presented during FY20 including theirimpact on our team members, customers, suppliers and localcommunities.Hosting the Company’s first Annual General Meeting inNovember 2019, conducting the first Board performancereview and adopting the new Coles values which build onthe existing LEaD framework and behaviours.Executing the first year of our strategy, with good progressmade on delivering our vision to ‘Become the most trustedretailer in Australia and grow long-term shareholder value’underpinned by our three strategic pillars: Inspire Customers,Smarter Selling and Win Together. This includes progressagainst our eight strategic KPIs, which were laid out tomeasure the success of our strategy.Implementing initiatives that continue to drive an uplift in our riskmanagement maturity. This has entailed the establishment ofour risk appetite framework, including definition, measurement,monitoring and reporting of risk appetite for our material risks.We also implemented a technology platform to facilitate themanagement of risks and major compliance programs.The BoardAudit and RiskCommitteeNominationCommitteeManaging Director and Chief Executive OfficerExecutive Leadership TeamColes Team MembersContinuing our progress towards achieving our Better Togetherobjectives, including in relation to gender diversity, withthe proportion of men and women across the entire Colesworkforce for FY20 being 49.3% men and 50.7% women. Inaddition, at the end of FY20 we employed more than 4,700Aboriginal and Torres Strait Islander people across our stores,distribution centres and store support centres, representing3.8% of team members.2People andCulture Committee3

Coles Group Limited 2020 Corporate Governance StatementColes Group Limited 2020 Corporate Governance StatementOur values.Our behaviours.Our vision, purpose,strategy and valuesOur vision is to become the most trusted retailerin Australia and grow long-term shareholder value.In FY20, we launched new values which build on ourexisting LEaD framework and behaviours.Achieving our vision requires us to deliver on our purpose,which is to sustainably feed all Australians to help themlead healthier, happier lives. Our strategy, ‘Winning inour Second Century’, represents our plan to deliver onthis purpose and is underpinned by three strategic pillars:Inspire Customers, Smarter Selling, and Win Together.In FY20, Coles established a set of core values, whichembody who we are as a company and what we standfor. Our Coles values work together with our vision, purposeand our existing LEaD behaviours to provide a strongfoundation for our culture. They will guide the day-to-daydecisions and actions of all team members, shaping theway we work together to get things done.Developing our Coles valuesOur LEaD behavioursOur Coles values are supported by our LEaD behaviourswhich were developed with input from our team members.These inputs ensured team members’ views from all levels ofthe organisation and across all brands were incorporatedto define what makes Coles special and how we look whenwe are at our best. The Board and key leaders across thebusiness also provided input before deciding on the finalvalues and supporting statements. The Board has approvedthe Coles values and the Executive Leadership Team isresponsible for embedding the values across the business.LEaD reinforces our values by providing a framework for thebehaviours and actions expected of all team members,including executives and Directors. The LEaD frameworkcomprises three key pillars which drive the way we workto execute our strategy, deliver against our purpose andbuild long-term sustainable value for our shareholders.Customer obsessionLook aheadis all about putting the customer atthe heart of our decisions, deeplyunderstanding their needs and ensuringour solutions address them.is all about being future focused: knowingthe landscape, being less reactive andmore planned, and communicating thevision well.Passion and paceEnergise everyoneacknowledges our source of competitiveadvantage lies in our ability to work andadapt at speed and reflects the passionour team have for the work they do and therole we play supporting the community.is all about bringing people on the journey:collaborating across the business andsupporting and empowering everyone,while taking the time to celebrate the winsalong the way.ResponsibilityDeliver with prideis more than doing the right thing andtaking accountability for our actions; itextends to our commitment to the broadercommunity and the environment.is all about executing: being accountableand holding each other to account,staying the course and having fun whilewe do it.Health and happinessrecognises the importance of caringfor our team members, creating theenvironment that ensures their ongoinghealth and happiness, and knowing thatthey in turn will care for our customers,suppliers and the community.By upholding our Coles values and living the LEaD behaviours, we can build deeper long-term relationships with oursuppliers, provide an outstanding customer experience and have engaged and passionate team members.Our values and LEaD behaviours have been incorporated into Coles’ Code of Conduct which can be found atwww.colesgroup.com.au/corporategovernance or by clicking here45

Coles Group Limited 2020 Corporate Governance StatementColes Group Limited 2020 Corporate Governance StatementOur Boardof DirectorsRoles andresponsibilitiesBoard role and responsibilitiesSteven CainManaging Director andChief Executive OfficerJames Graham AMChairman of the BoardChairman of the NominationCommittee and Memberof the People and CultureCommitteeJacqueline ChowMember of the NominationCommittee and the Auditand Risk CommitteeDavid CheesewrightMember of the NominationCommittee and the Peopleand Culture CommitteeRichard FreudensteinChairman of the Peopleand Culture Committeeand Member of theNomination CommitteeAbi ClelandMember of the NominationCommittee and the Peopleand Culture CommitteeZlatko TodorcevskiChairman of the Auditand Risk Committeeand Member of theNomination CommitteeWendy StopsMember of the NominationCommittee and the Auditand Risk CommitteeThe Board provides leadership and approves the strategicdirection and objectives of the Group in the long-terminterests of, and to maximise value to, shareholders. TheBoard is accountable to shareholders for the overallperformance of the Company, having regard to theinterests of other stakeholders, including team members,customers, suppliers and the broader community.As at the date of this statement, the Board compriseseight Directors: James Graham AM (Chairman), DavidCheesewright, Jacqueline Chow, Abi Cleland, RichardFreudenstein, Wendy Stops, Zlatko Todorcevski andSteven Cain (Managing Director and Chief ExecutiveOfficer (CEO)). Each of the Directors was appointed on19 November 2018, save for Steven Cain who was appointedas Managing Director on 2 November 2018.Zlatko Todorcevski will retire as a Non-executive Director ofthe Company on 30 September 2020. The Company hasannounced the appointment of Paul O’Malley as a Nonexecutive Director effective 1 October 2020. Mr O’Malleywill stand for election at the 2020 Annual General Meeting.Details of the Directors, including their qualificationsand experience, can be found on pages 66–67 of Coles’2020 Annual Report which can be accessed hereThe Board has a charter that outlines its responsibilities,including powers that are expressly reserved to the Board,and powers that are specifically delegated to the CEO andmanagement. In particular, the responsibilities of the Boardinclude: approving and monitoring the implementation of theGroup’s core values, Code of Conduct, vision, strategicdirection, business plans and policies, in order to upholdcorporate reputation and maximise shareholder value; setting the risk appetite within which the Board expectsmanagement to operate; Biographical details of the Board of Directors can be found on pages 66–67 of Coles’ 2020 Annual Report which can beaccessed here.6reviewing, approving and monitoring the Group’s riskpolicy and risk management systems (for both financialand non-financial risks), including internal complianceand control mechanisms;7 approving and monitoring the progress of major capitalexpenditure, capital management, capital raisinginitiatives and major acquisitions and divestments; overseeing the Group’s accounting and corporatereporting systems; monitoring and guiding the culture, reputation andstandards of conduct of the Group to promote ethicaland socially responsible behaviour, in accordance withthe core values of the Group; approving the overall remuneration policy and theremuneration of the non-executive directors, the CEO,the direct reports to the CEO and any incentive and/orequity plans; overseeing, with recommendations from the Peopleand Culture Committee, that the remuneration policy isaligned with the vision, values, strategic objectives andrisk appetite of Coles; receiving information regarding material breaches ofthe Code of Conduct and Anti-bribery and CorruptionPolicy and reports of material incidents under theWhistleblower Policy; determining the size, composition and structure of theBoard, and the process for evaluating its performance; appointing and removing the CEO and the CompanySecretary, and approving and reviewing successionplans for the non-executive directors, executivedirectors, CEO and the direct reports to CEO; and satisfying itself that the Board reporting frameworkis appropriate and, where required, providingconstructive feedback to challenge the CEO and theexecutive leadership team.

Coles Group Limited 2020 Corporate Governance StatementColes Group Limited 2020 Corporate Governance StatementManagement role and responsibilitiesRole of the ChairmanThe CEO, with the support of the direct reports to the CEO,is responsible for the day-to-day management of Colesand its businesses. Under the Board Charter, the Boarddelegates all powers to manage the day-to-day businessof the Group to the CEO, with the exception of the powersreserved specifically to the Board.The Chairman of the Board is James Graham, who is anindependent, Non-executive Director. The Board Chartersets out the role of the Chairman, which includes to:The key responsibilities of the CEO are set out in the BoardCharter and include: managing and administering the day-to-day operationsof the Group and its businesses in accordance withthe core values, strategy, business plans and policiesapproved by the Board; developing strategies for the Group, its businesses andmanagement, and making recommendations to theBoard on such strategies, having regard to the Group’score values, reputation and key stakeholders; supporting a culture within the Group that promotesethical and socially responsible behaviour inaccordance with the Group’s core values; maintain effective communication and promoteconstructive and respectful relationships between theBoard and management; lead the Board; ensure the efficient organisation and conduct of theBoard’s function; brief all directors in relation to issues arising at Boardmeetings; chair general meetings of the Company; exercise such specific and express powers as aredelegated to the Chairman by the Board from time totime; and represent the Board in communicationsshareholders and other stakeholders.withCompany Secretarydeveloping the Group’s annual budget and conductingthe Group’s activities within the approved annualbudget;The Company Secretary is Daniella Pereira. The CompanySecretary reports directly to the Board through theChairman, and all Directors have access to the CompanySecretary.developing and maintaining the Group’s RiskManagement Framework and systems, includinginternal compliance and control mechanisms; andThe Company Secretary’s role is outlined in the BoardCharter and includes coordinating the timely completionand dispatch of Board and committee papers, ensuringthat the business at Board and committee meetings isaccurately recorded in the minutes and assisting the Boardand its committees on governance matters.reporting regularly to the Board with accurate, timelyand clear information, such that the Board is fullyinformed to discharge its responsibilities effectively.While management is responsible for providing the Boardwith accurate, timely and clear information, the Boardis responsible for satisfying itself that the framework formanagement reporting to the Board is sufficient. Whereappropriate, the Board will provide constructive feedbackto challenge the CEO and the Executive Leadership Team.Director independenceThe Board Charter states that the Board shall consist of amajority of non-executive directors who are considered bythe Board to be independent.Members of the Executive Leadership Team have writtenemployment contracts setting out the key terms of theiremployment. These executives receive a mix of annualremuneration and ‘at-risk’ remuneration, which is comprisedof short-term incentives and long-term incentives. Furtherinformation about Coles’ remuneration framework andthe review of performance outcomes can be found in theCompany’s Remuneration Report.The Board annually assesses the independence of eachDirector, having regard to:Coles’ Remuneration Report can be found on pages73–94 of Coles’ 2020 Annual Report which can beaccessed here8 any disclosures made by directors regarding theirindependence; the definition of independence set out in the ASXRecommendations; the relationships affecting the independent status ofa director as described in the ASX Recommendations;and any other matters the Board considers relevant.In addition, under the Charter, directors must immediatelydisclose to the Company Secretary and the Chairman anyinformation, facts or circumstances of which they becomeaware, which may affect their independence.Conflicts of interestThe Board has reviewed the position and relationshipsrelevant to each of the Directors in office as at the dateof this Corporate Governance Statement and with theexception of the CEO, considers that all Non-executiveDirectors are independent. have a duty not to place themselves in a position whichgives rise to a real or substantial possibility of conflict ofinterest or duty, in relation to any matter which is or islikely to be brought before the Board; have an ongoing obligation to disclose to the Boardimmediately any real or substantial possibility of conflictof interest or duty; are required to declare material personal interests orother conflicts requiring disclosure by formal standingnotices; and follow the obligations and procedures set out in thepolicy in the event of a conflict or potential conflict ofinterest or duty.Coles has a Director Conflicts of Interest Policy, which statesthat directors:Some of the Directors hold, or have previously held,positions in companies with which Coles has commercialrelationships. The Board has assessed the relationshipsbetween Coles and the companies in which Directors holdor held positions and has concluded that in all cases therelationships do not interfere with the Directors’ exercise ofobjective, unfettered or independent judgement or theirability to act in the best interests of Coles.David Cheesewright was initially nominated as a Directorby Wesfarmers Limited (Wesfarmers), which was asubstantial shareholder in Coles. Wesfarmers ceased tobe a substantial shareholder of Coles on 2 April 2020 andno longer has a right to nominate a director to the ColesBoard. Mr Cheesewright has continued as a Director ofColes and the Board has concluded that Mr Cheesewrightis independent.Independent adviceThe Board Charter states that the Board collectively, andeach director individually, may obtain independentprofessional advice at the Company’s expense, asconsidered necessary to assist in fulfilling their relevantduties and responsibilities.Mr Cheesewright retains a general retail consultancy withWesfarmers. The consultancy spans a wide range of retailbusinesses and the Board is satisfied that Mr Cheesewright’sconsultancy does not interfere with or compromise hisability to exercise objective or independent judgment oract in the best interests of the Group. The Board considersthat his contribution to the Board is significant due to hisexpertise and knowledge of the business and the industriesin which Coles operates.James Graham is Chairman and founder of GreshamPartners Limited, which was engaged by Wesfarmersas a financial advisor to Wesfarmers on the demerger ofColes. Prior to the demerger, Gresham Partners providedcertain advisory services to Coles (in which Mr Grahamwas not involved) and which have not continued sincethe demerger. The Board is satisfied that Mr Graham’srelationship with Gresham Partners does not interferewith or compromise his ability to exercise objective orindependent judgement or act in the best interests of theGroup.Mr Graham’s extensiv

Corporate Governance Statement 1 FY20 corporate governance highlights 2 Corporate governance framework 3 Our vision, purpose, strategy and values 4 Our Board of Directors 6 Roles and responsibilities 7 Board composition and succession 10 Board committees 13 Shareholders and reporting 15 Risk management 16 Diversity and inclusion 19

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