Corporate Governance

Our Board Charter sets out the roles and responsibilities of the Board. It requires that the Board meets formally at least six times annually, and clearly distinguishes between the role of the Board, and the role of management. The Board delegates responsibility to the CEO for implementing Synlait’s strategic direction and day-to-day operations, as recorded in our Delegated Authorities Policy. Management provides detailed reports to the Board to keep the Board up to date with key operational activities and other aspects of Synlait’s affairs, including financial performance.

Our Constitution includes specific governance arrangements permitted by waivers from various rules in the NZX Listing Rules granted by NZX Regulation Limited (“NZ RegCo”).

The minimum number of Directors on Synlait’s Board is three, the maximum is eight. At least two Directors must ordinarily reside in New Zealand and three must be independent. One of Synlait’s shareholders, Bright Dairy Holding Limited, is entitled to appoint four Directors, one of which must ordinarily reside in New Zealand and have local commercial and governance experience appropriate for an NZX listed company.

A Nominations Sub-Committee forms part of the People, Environment and Governance Committee. It makes candidate recommendations to the Board. When recommending Directors, the Sub-Committee considers experience, qualifications, character, criminal record, bankruptcy history, judgment, ability to work with others, current Board composition and skill set. Synlait’s Diversity and Inclusion Policy is also considered.

Before any candidate is finally selected, appropriate fit and proper checks are undertaken. Important information about candidates is provided to shareholders in the notice of meeting at which they will vote on the appointment of a new Director.

All Directors enter into an agreement with Synlait outlining their appointment terms, role requirements, including time commitments and remuneration, as well as indemnity and insurance arrangements.

Director profiles are on the People page of this website. Other information, including information about remuneration, ownership interests and independence, is in our annual report.

Attendance at Board and Committee meetings in the year to 31 July 2022 was as follows:

Our Board normally commit to a week-long session of organised visits and meetings focussed on some aspect of the business. Due to ongoing restrictions with COVID-19 in New Zealand and China (where the three Bright Dairy appointed Directors are based), this has not happened for the prior two years but will recommence again in FY23.

In FY22, our Board spent two days in strategy workshops with Management in November and May. In addition to this, two New Zealand based Directors spent a day in a strategic risks workshop.

Directors also attend two separate workshops with Management annually to review Synlait’s purpose and strategy. New Directors participate in an in-person induction programme, designed to educate them about Synlait and our governance arrangements.

Our Chair conducts an annual review of the Board and each Director. The People, Environment and Governance Committee assists with these performance reviews. An external performance review is conducted every three years. Each year the Committees review their performance against the respective Charter, and the recommendations in the Corporate Governance Code.

Three of our eight Directors are independent. This does not satisfy Recommendation 2.8 of the Corporate Governance Code, which suggests that a majority of our Directors should be independent, but is permitted by a waiver granted by NZX RegCo from the relevant NZX Listing Rule, and our Constitution.

Synlait has considered the independence of its three Independent Directors against the definition in the NZX Listing Rules, the commentary to Recommendation 2.4 in the Corporate Governance Code, and its Board Charter and is satisfied that the relevant Directors are independent.

When Graeme Milne ONZM, stepped down as Chair of the Board, it was decided that Dr John Penno was in the best position to Chair the Board and guide the company’s new CEO Grant Watson through his induction and establishment. Synlait entered 2022 with significant change behind it and the Board’s focus was on delivering a well-managed leadership transition for its staff, customers, suppliers, and investors.

Given Dr Penno was not an Independent Director, and no other Independent Directors were able to take up the Chair role, a change to Synlait’s constitution was proposed for ratification by shareholders at the 2021 Annual Meeting. This would allow either an Independent Director or the Board Appointed Director to be the chairperson of the Board through to the 2022 annual meeting. That change was approved by shareholders and Dr Penno will remain the Chair until a new chairperson is elected on or before the 2022 Annual Meeting.

Our Diversity and Inclusion Policy promotes a culture of diversity and inclusiveness, putting in place appropriate strategies and measurable objectives. We aim to achieve three main goals:

• Workforce diversity – employ, develop, and retain more women and Māori.
• Diversity through leadership – empower and equip our people leaders to recruit, develop and retain a diverse and competent workforce.
• Workforce inclusion – foster a culture that encourages flexibility and fairness, to enable all employees to realise their potential, and thereby increase employee retention.

To help us meet these goals we have our Mātua (Parental Leave) Policy and our Tāwariwari (Flexible Working) Policy’s in place. Management also reports to the Board on candidate diversity.

Our success will be measured against the following as at the end of FY23:

Management report to the Board on progress against the Diversity and Inclusion Policy. The Board also conducts an annual compliance assessment of the Policy.

Our Continuous Disclosure Policy helps employees comply with our reporting and disclosure requirements as a listed company. Everyone is required to be familiar with the Policy and associated procedures. Directors and Management are primarily responsible for compliance with our continuous disclosure obligations.

Synlait is committed to ensuring the integrity and timeliness of its financial reporting, and to providing information to shareholders in a timely manner. The Audit and Risk Committee oversees this process. Following review and approval by the Audit and Risk Committee, the complete set of financial statements and related audit report is submitted to the full Board for final approval.  Management makes detailed representations to the Board to assist them in their consideration of the draft financial statements.

Synlait’s full and half year financial statements are prepared in accordance with relevant financial standards. Recent full and half year financial statements and investor presentations are available on the Investor Centre page of this website.

In FY19, we established our Sustainability Framework and related Sustainable Innovation Platforms (SIPs) which align to our purpose and strategy. We publish a separate sustainability report each December which meets the disclosure requirements in the Corporate Governance Code. Our reports can be viewed here.

Synlait’s risk management framework is aligned to ISO31000:2018 guidelines and is applied across all sites and operations. Synlait operates under a Board approved Risk Management Policy, with supporting standards and procedures to achieve a consistent approach.

The Audit and Risk Committee is responsible for ensuring Management:

• Has processes for identifying, assessing, and responding to strategic and operational risks.
• Is promoting an appropriate ‘control culture’ throughout Synlait, with supporting processes and systems in place.
• Is regularly reviewing and evaluating the effectiveness of these processes, and implementing improvements identified.

The Committee reviews Synlait’s risk profile at each relevant meeting, along with progress on mitigations and material changes. A summary of the risk register and changes is provided to the Board at each meeting.

Synlait assesses risks as either strategic – that is, risks faced by Synlait because of the strategic objectives and/or decisions taken; or operational – that is, risks faced in in the pursuit of delivering on the objectives.

Several other policies and procedures support active management of key operational risks. These include the Delegated Authorities Policy, Tax Risk Management Policy, Health, Safety and Wellbeing Policy and the Food Safety and Quality Policy.

This table below summarises material risks currently being monitored by the Board and management.

At Synlait, risk is everyone’s responsibility. This principle is supported by an integration of risk management processes within key business functions and activities including:

•   Integrated Business Planning (IBP), with formal risk review processes built-in throughout each cycle.
•  Various Health, Safety and Wellbeing processes, including a permit to work process and critical risk programme.

Key to the implementation of our Health, Safety and Wellbeing Strategy is the engagement of our people. Synlait is challenging itself to do safety differently. This starts with developing an operating mindset that is focused on achieving zero harm, while meeting the company’s production goals. Synlait is focusing on the behaviours and workplace conditions we need to have in place each day, to achieve our vision to have ‘Everybody Home Safe, Every Day’.

COVID-19

The COVID-19 pandemic was a significant focus for Synlait – doing all we could to keep our people healthy and well, slowing down the transmission of the virus and ultimately keeping it out of our facilities. We analysed the risk to our workforce and implemented a series of controls to proactively manage this, including mandated vaccination and a daily Rapid Antigen Testing programme. At the peak of community infections, our management response team met daily to review our actions and review contingency plans. We succeeded in our efforts, with less than 5.8% of employees needing to isolate with infection, and no impact to our production plans.

Zero Harm Mindsets

To achieve the combination of organisational and behavioural change required to mature our safety culture and improve performance, in FY23 we will launch our cognitive behavioural safety programme (Zero Harm Mindsets). This will be delivered to leaders and frontline team members across all sites and areas of the business, with further engagement activities and related toolsets used to embed sustainable practices to reduce the risk of harm in the workplace.

Safety Essentials

We have progressed with developing Synlait’s Critical Risk Standards Programme, called Safety Essentials. This will remain a focus for FY23 as we set and agree on our minimum expectations required for controlling these potentially fatal exposures.

In FY22, there was a reduction in the total number of recordable injury events reported across the business. The Total Recordable Injury Frequency Rate decreased by almost 36% from the previous year’s performance (14.9 compared to 23.1 for FY21). These events resulted in medical treatment or required time off work.

We are actively improving this. Firstly, by improving the accessibility and functionality of our systems and processes that capture event data. This will provide valuable analysis and reporting capability to learn from each event and implement preventative work programmes. Secondly, we are continually improving our injury response and management processes to ensure our team members receive a high standard of care and return to work as early as possible while assessing their overall wellbeing.

More information on Synlait’s health and safety initiatives is available in our Sustainability Report.

Contact information for the investor relations team is on the contacts page of this website. We aim to respond to all enquiries in a timely manner. Shareholders can elect to receive Synlait communications either electronically or via mail. Our share registry, Computershare, manages this process.

Our Constitution, the Companies Act 1993  and the NZX Listing Rules afford shareholders the right to vote on certain matters affecting Synlait. Our shareholders can vote at any meeting of shareholders in person or by using a proxy or representative. On a show of hands, each shareholder attending in person, by proxy or by their representative has one vote. If a poll is taken, each shareholder attending in person, by proxy or by their representative has one vote per fully paid up share they hold. Postal votes are not permitted unless the Board notifies shareholders otherwise.

At the annual meeting held on 1 December 2021 shareholders were asked to vote on the appointment and remuneration of a new auditor, PricewaterhouseCoopers, and the re-election of Graeme Milne ONZM and Dr. John Penno as Directors. There was also a special resolution regarding changes to Synlait’s Constitution. The results of the poll can be found on the Investor Centre page of our website.

In November 2020 Synlait completed a capital raise by way of private placement and share purchase plan. This was the preferred structure for Synlait to raise capital at the time due to temporary regulatory changes that provided more flexibility in structure allowing Synlait to meet all of its key objectives including allowing almost all existing shareholders the opportunity to achieve at least their pro rata portion of the capital raise.

Synlait’s last annual meeting was held on Wednesday 1 December 2021. The Notice of Meeting was released on 28 October 2021. A recording of the meeting is available here.

Our 2022 meeting will be held on Friday 2 December in Christchurch. A Notice of Meeting will be issued in October. A recording of the meeting will be made available afterwards on the Investor Centre page of this website.