## AGL’s approach to Corporate Governance 

This Statement explains how AGL addresses the ASX Corporate Governance Council’s, ‘Corporate Governance Principles and Recommendations – 2nd Edition’ (referred to as either ASX Principles or Recommendations) issued in 2007, and amended in 2010. 

## Principle 1: Lay solid foundations for management and oversight 

## Recommendation 1.1 – Companies should establish the functions reserved to the Board and those delegated to the Executive Team 

## Role of the AGL Board (‘the Board’) 

The Board is responsible for the governance of AGL. The role of the Board is to provide overall strategic guidance and effective oversight of management. The Board derives its authority to act from AGL’s Constitution. 

The Board’s responsibilities are set out in a formal Charter which the Board reviews every two years. The Charter was most recently reviewed and amended in June 2010. 

The major powers the Board has reserved to itself are: 

> reviewing and approving AGL’s strategic plans and performance objectives; 

> selecting, appointing and monitoring the performance of the Chief Executive Officer (CEO) and, if appropriate, terminating the appointment of the CEO; 

> monitoring the performance of, and approving the remuneration policies and procedures applying to, the Executive Team; 

> monitoring the timeliness and effectiveness of reporting to shareholders; 

> approving and monitoring policies governing AGL’s relationship with other stakeholders and the broader community, including policies in relation to environmental management and occupational health and safety; 

> monitoring compliance with legislative and regulatory requirements (including continuous disclosure) and ethical standards, including reviewing and ratifying codes of conduct and compliance systems; 

> monitoring financial outcomes and the integrity of reporting, and in particular, approving annual budgets and longer– term strategic and business plans; 

> approving decisions affecting AGL’s capital, including determining AGL’s dividend policy and declaring dividends; 

> reviewing and recommending to shareholders the appointment or, if appropriate, the termination of the appointment of the external auditor; and 

> monitoring the effectiveness of AGL’s audit, risk management and compliance systems that are in place to protect AGL’s assets and to minimise the possibility of AGL operating beyond acceptable risk parameters. 

## The Board has established four Committees. They are: 

> Nominations Committee (see Principle 2) 

> Safety, Sustainability and Corporate Responsibility Committee (see Principle 3); 

> Audit and Risk Management Committee (see Principle 4); and 

> People and Performance Committee (see Principle 8). 

The main accomplishments of each of the Board Committees during 2011 are included in the commentary on Principle 2. 

Timetables for Board and Committee meetings are agreed annually in advance. 

## New Directors 

New Directors receive a formal letter of appointment and an induction pack. The appointment letter and induction pack contain sufficient information to allow the new Director to gain an understanding of: 

> the rights, duties and responsibilities of Directors; 

> the role of Board Committees; 

> the roles and responsibilities of the Executive Team; and 

> AGL’s financial, strategic, and operational risk management position. 

New Directors undertake an induction program which comprises: 

> An information pack which includes a copy of AGL’s Constitution; Board and Committee Charters; most recent Annual Report; most recent Appendix 4D or 4E and market results presentation; most recent monthly Group Performance Report; AGL strategic plan; organisational chart; Deed of Access, Insurance and Indemnity and details of AGL’s Directors and Officers insurance policy; and a copy of the register of AGL’s most signifi cant risks; 

> A program of meetings with members of AGL’s Executive Team; and 

> A program of meetings with other AGL employees responsible for areas such as Health, Safety and Environment (HSE), upstream gas operations, and wholesale energy trading. 

