Role of the Board
The Board of Directors is accountable to shareholders for the performance of the company and the Group, and is responsible for the corporate governance practices of the Group.
The board’s principal objective is to increase shareholder value while ensuring that the Group’s overall activities are properly managed.
Sonic Healthcare’s corporate governance practices provide the structure which enables the board’s principal objective to be achieved, whilst ensuring that the business and affairs of the Group are conducted ethically and in accordance with the law.
The board’s overall responsibilities include:
- providing strategic direction and approving corporate strategies
- monitoring management and financial performance and reporting
- monitoring and ensuring the maintenance of adequate risk management controls and reporting mechanisms, and
- ensuring the business is conducted ethically and transparently.
The board delegates responsibility for day-to-day management of the business to the Managing Director and senior executives. The Managing Director also oversees the implementation of strategies approved by the board. The board uses a number of committees to support it in matters that require more intensive review and involvement.
As part of its commitment to good corporate governance, the board regularly reviews the practices and standards governing the board’s composition, independence and effectiveness, the accountability and compensation of directors (and senior executives) and the board’s responsibility for the stewardship of the Group.
The role and responsibilities of the board, the functions reserved to the board and those delegated to management, have been formalised in the Board Charter.
Composition of the Board
The composition of Sonic Healthcare's board is consistent with the principle of medical management and leadership, which has been a core strategy of Sonic Healthcare since 1992. Sonic Healthcare's Managing Director is a qualified patholgist, and the board also inclues two radiologists, ensuring that it has the capacity to understand complex medical issues and be in close touch with the medical marketplace. The presence of medical practitioners on Sonic's board also gives comfort both to referring doctors (Sonic Healthcare’s customers) and to owners of diagnostic practices which Sonic Healthcare seeks to acquire.
This strategy has resulted in a board which has a relatively high proportion of executive directors. Their presence on the board however has played an important role in consolidating several of the larger independent practices acquired by Sonic Healthcare into the cohesive group.
Sonic Healthcare’s non-executive directors, including the Chairman, are considered independent and perform major roles in the board committees.
For the reasons described above, Sonic does not comply with ASX Corporate Governance Council Recommendation 2.1: "A majority of the board should be independent directors". Due to the importance to Sonic of medical leadership and representation of major medical practice subsidiaries on the board, it is envisaged that Sonic will not fully comply with Recommendation 2.1 in the short to medium term, however the establishment of a Nominations Committee in July 2003, the retirements of two executive directors at the 2003 Annual General Meeting and the appointment of Mr Lou Panaccio (June 2005) as an additional independent director were significant steps towards compliance.
The board has resolved that the position of Chairman of the board be held by an independent director, and the position of Chairman and Managing Director will be held by different persons. The board has also resolved that the mere fact that a director has been in office for a period greater than 10 years does not change that director’s status as an independent. The board has specifically considered the position of Mr Barry Patterson and has determined that he is independent.
The size and composition of the board is determined by the full board acting on recommendations of the Nominations Committee. Sonic Healthcare's constitution requires that the board comprise no more than 12 and no less than 3 directors at any time. Sonic Healthcare’s constitution also requires all directors other than the Managing Director to offer themselves for re-election at an Annual General Meeting, such that they do not hold office without re-election for longer than three years.
Board meetings
The board meets formally at least 10 times a year to consider a broad range of matters, including strategy, financial performance reviews, capital management and acquisitions. Details of meetings (both full board and committees) and attendances are set out in the Annual Reports.
Independent professional advice and access to information
Each director has the right to seek independent professional advice at the company’s expense. However, prior approval of the Chairman is required, which is not unreasonably withheld. All directors have unrestricted access to company records and information and receive detailed financial and operational reports from senior management during the year to enable them to carry out their duties. Directors also liaise with senior management as required, and may consult with other employees and seek additional information on request.
Conflicts of interest of directors
The board has guidelines dealing with disclosure of interests by directors and participation and voting at board meetings where any such interests are discussed. In accordance with the Corporations Act, any director with a material personal interest in a matter being considered by the board does not receive the relevant board papers, must not be present when the matter is being considered, and may not vote on the matter.