## Corporate Governance 

## Delegation to the CEO and the Executive Team 

The Board has delegated to the CEO and the Executive Team responsibility for implementing AGL’s strategic direction and for managing AGL’s day-to-day operations. Specific limits on the authority delegated to the CEO and the Executive Team are set out in the Delegated Authorities approved by the Board. The authorities delegated to the CEO and the Executive Team cover a range of matters including sales contracts, operating expenditure, capital expenditure, employment contracts, billing adjustments and debt write-offs, and communications with media and shareholders. 

## Executive Team 

The Executive Team comprises the CEO and eight senior managers (Executives) who report directly to the CEO. 

During the year, Anthony Fowler was promoted from the position of General Manager Energy Portfolio Management to the Executive position of Group General Manager Merchant Energy to replace Jeff Dimery who resigned from AGL in September 2010. 

Each Executive is employed under a Service Agreement which sets out the terms on which the Executive is employed including details of the Executive’s duties and responsibilities, rights, and remuneration entitlements. The Service Agreement also sets out the circumstances in which the employment of the Executive may be terminated by either AGL or the Executive, including details of the notice periods required to be given by either party, and the amounts payable to the Executive as a consequence of the termination by AGL of the Executive’s employment. 

With one exception, all AGL Executives are employed on an indefinitely continuing basis. AGL’s Chief Information Officer is employed under a Service Agreement which stipulates that his employment with AGL will cease on 30 June 2013 unless extended by agreement between him and AGL. 

## Recommendation 1.2 – Companies should disclose the process for evaluating the performance of the Executive Team 

Executive Team performance evaluations have been conducted for the financial year ending 30 June 2011. Details of the evaluation process and the linkages between the result of performance evaluations and remuneration are disclosed in the Remuneration Report commencing on page 48 of this Annual Report. 

## Principle 2: Structure the Board to add value 

AGL’s Constitution provides for a minimum of three Directors and a maximum of ten. The Board currently comprises seven non– executive Directors and one executive Director. The executive Director is AGL’s CEO, Michael Fraser. 

The Directors of AGL at any time during the financial year are listed with a brief description of their qualifications, experience and special responsibilities on pages 42 and 43 of this Annual Report. 

During the financial year, Mark Johnson retired as a Director, and Belinda Hutchinson was appointed as a Director. 

The Board met 15 times during the financial year. Director’s attendances are set out on page 44 of this Annual Report. 

## Recommendation 2.1 – The majority of the Board should be independent Directors 

AGL considers a Director to be independent if the Director is independent of management and free of any business or other relationship that could materially interfere, or be perceived as interfering, with the exercise of an unfettered and independent judgement in relation to matters concerning AGL. 

In assessing independence, the Board reviews the relationship that the Director, and the Director’s associates, have with AGL. In determining whether a Director is independent, the Board has considered whether the Director: 

> is a substantial shareholder of AGL or an officer of, or otherwise associated directly with, a substantial shareholder of AGL; 

> within the last three years, has been employed in an executive capacity by AGL or any of its related bodies corporate; 

> within the last three years, has been a principal of a material professional adviser or a material consultant to AGL or any of AGL’s related bodies corporate; 

> is a material supplier to, or customer of, AGL or any of AGL’s related bodies corporate, or an officer of or otherwise associated directly or indirectly with a material supplier or customer; 

> has a material contractual relationship with AGL; or 

> has any interest, or any business or other relationship which could, or could reasonably be perceived to, materially interfere with the Director’s ability to act in AGL’s best interests. 

The Board regularly assesses the independence of non–executive Directors and, during the financial year, has specifically considered the independence of all non–executive Directors in accordance with the above criteria. The Board has determined that each non–executive Director is, and was throughout the entirety of the financial year, independent. 

During the financial year, there were no circumstances in which individual Directors found it necessary to excuse themselves from consideration by the Board of specific matters because of the potential for independence to be compromised. 

No Director has received or become entitled to receive a benefit because of a contract between any company in the AGL Group and the Director, or a firm in which the Director is a substantial member, or an entity in which the Director has a substantial financial interest, other than: 

> in the case of non–executive Directors, remuneration as disclosed in the Annual Report which includes participation in the shareholder approved AGL Share Purchase Plan; and 

> in the case of the CEO, a contract of employment and entitlements under AGL’s Long–Term Incentive Plan. 

Directors have unfettered access to AGL records and information reasonably necessary to fulfil their responsibilities. Directors also have access to the Company Secretary on any matter relevant to their role as a Director. In addition, the Board has access to other relevant senior management to seek additional information concerning AGL’s business. 

