What Makes the Most Admired Companies Great Board Governance and Effective Human Capital Management

Richard Hardwick, Managing Director, Hay Group (Pacific) Welcome Why this is of interest to Hay Group Why we think this will be of interest to you Welcome Richard Hardwick, Managing Director, Hay Group (Pacific)

Carlo Cataldo, Head of Risk, GE Money The World’s Most Admired 2007: Denise Girdlestone Carlo Cataldo, Head of Risk, GE Money Working for the World’s Most Admired Board governance and Human Capital: a key differentiator, Paul Meijer Cheryl Batagol, Chair, Melbourne Water The journey of a local board Questions & Comments 9.15am close WELCOME The World’s Most Admired 2007 Carlo Cataldo, Head of Risk, GE Money Working for the World’s Most Admired Board governance and Human Capital: a key differentiator Cheryl Batagol, Chair, Melbourne Water The journey of a local board Questions & Comments 9.15am close

The World’s Most Admired Companies 2007 Denise Girdlestone, Senior Consultant, Hay Group

Fortune Survey of Most Admired Companies What is it? Study of corporate reputations Candidates: Fortune 1,000 and Global 500 companies Companies rated both overall (All Stars) and relative to their industry peers (Industry)

Fortune Survey of Most Admired Companies Attributes: Ability to attract and retain talented people Quality of management Quality of products or services Innovativeness Long-term investment value Financial soundness Wise use of corporate assets Social responsibility to the community and the environment 9. Effectiveness in conducting business globally

Why Study the Most Admired Companies? Most Admired Companies outperform industry peers and the market as a whole, on total shareholder returns Most Admired S&P 500 19.6% 7.1%

“All Stars” for 2007 World’s Most Admired General Electric* Toyota Motor* Procter & Gamble* Johnson & Johnson* Apple* Berkshire Hathaway* FedEx* Microsoft* BMW PepsiCo * Company also included in Top 10 list in 2006.

A Different Perspective on the All Stars Top Non-U.S. Companies Top Per European Raters Toyota Motor BMW Singapore Airlines Nokia Honda Motor Nestlé Toyota Industries Tesco Samsung Electronics BP

The 2007 WMAC Industry Honor Roll Best of... Computers Entertainment Food and Drug Stores Household and Personal Products Motor Vehicles Petroleum Refining IBM Walt Disney Tesco Procter & Gamble BMW Exxon Mobil

Working for the World’s Most Admired Company: Carlo Cataldo, Head of Risk, GE Money

The increasing role of Boards in Human Capital governance Paul Meijer, Consultant, Hay Group

And then there was…..

Life on the Board has changed Sarbanes-Oxley-Higgs-ASX-CLERP9 Liability of the Chair (Greaves Precedent) Committees Time According to an American 2003 survey of corporate Directors, boards have changed their Audit Committee policies and procedures (reported by 68% of participants), changed their Board Governance policies and procedures (54%) and established Board Governance Committees (40%). These dramatic changes are a direct reflection of the impact of the Sarbanes-Oxley Act, new and pending Securities and Exchange Commission rules, and proposed requirements on corporate boards by the New York Stock Exchange and Nasdaq. (source Kei Advisors LLC) Increasing attention into Risk, Auditing and Compliance Increasing number of committees So what will be the next big thing > 30 days annually spent by NEDS in Australia, more then in the US and UK (source Don Mercer)

So what do the Board of the World’s Most Admired do? They are more directly focused on human capital issues Message: they: have become more involved in the oversight and management of human capital. provide CEO and management regularly expertise on human capital issues Review the human capital strategy regularly receive information and metrics related to human capital management By the way, our experience in Australia indicates that Boards here generally do this as well

So what do the Board of the World’s Most Admired do? They are more directly focused on human capital issues Peer Group Most Admired Human capital strategy has been reviewed and approved by the board. 82 69 Message: they: have become more involved in the oversight and management of human capital. provide CEO and management regularly expertise on human capital issues Review the human capital strategy regularly receive information and metrics related to human capital management By the way, our experience in Australia indicates that Boards here generally do this as well 10 20 30 40 50 60 70 80 90 100 % Agree

So what do the Board of the World’s Most Admired do? They are more directly focused on human capital issues Peer Group Most Admired Human capital strategy has been reviewed and approved by the board. 82 69 Message: they: have become more involved in the oversight and management of human capital. provide CEO and management regularly expertise on human capital issues Review the human capital strategy regularly receive information and metrics related to human capital management By the way, our experience in Australia indicates that Boards here generally do this as well Board is regularly given information and metrics related to human capital management 82 67 10 20 30 40 50 60 70 80 90 100 % Agree

So what do the Board of the World’s Most Admired do? They are more directly focused on human capital issues Peer Group Most Admired 65 67 69 77 82 10 20 30 40 50 60 70 80 90 100 Human capital strategy has been reviewed and approved by the board Message: they: have become more involved in the oversight and management of human capital. provide CEO and management regularly expertise on human capital issues Review the human capital strategy regularly receive information and metrics related to human capital management By the way, our experience in Australia indicates that Boards here generally do this as well Board is regularly given information and metrics related to human capital management The CEO and management regularly draw on expertise of the board on human capital issues. % Agree

Boards of the World’s Most Admired evaluate their CEOs differently They look beyond strategy and finance Message: all Boards evaluate the CEO on financial metrics and strategy implementation, the difference with WMA Boards is that they have a stronger emphasis in the evaluation process on success in developing human capital Karyn, from your experience is there anything anecdotal we can say about this in the Australian context?

Boards of the World’s Most Admired evaluate their CEOs differently They look beyond strategy and finance Peer Group Most Admired In evaluating CEO performance, board focuses on strategy implementation. 97 92 Message: all Boards evaluate the CEO on financial metrics and strategy implementation, the difference with WMA Boards is that they have a stronger emphasis in the evaluation process on success in developing human capital Karyn, from your experience is there anything anecdotal we can say about this in the Australian context? In evaluating CEO performance, board focuses on financial success. 95 91 10 20 30 40 50 60 70 80 90 100 % Agree

Boards of the World’s Most Admired evaluate their CEOs differently They look beyond strategy and finance Peer Group Most Admired 66 91 92 81 95 97 10 20 30 40 50 60 70 80 90 100 In evaluating CEO performance, board focuses on strategy implementation. Message: all Boards evaluate the CEO on financial metrics and strategy implementation, the difference with WMA Boards is that they have a stronger emphasis in the evaluation process on success in developing human capital Karyn, from your experience is there anything anecdotal we can say about this in the Australian context? In evaluating CEO performance, board focuses on financial success. In evaluating CEO performance, board focuses on success in developing human capital. % Agree

WMA Boards manage CEO and Executive succession differently By being better prepared for the loss of top executives

WMA Boards manage CEO and Executive succession differently By being better prepared for the loss of top executives Peer Group Most Admired We have a well defined plan to cover the emergency loss of the CEO. 91 There is of course the famous case of McDonalds were they unexpectedly lost their CEO in April 2004 and had to replace his successor in November of the same year, again under sorry and unexpected circumstances, but they did and we can’t say the business has suffered 65 10 20 30 40 50 60 70 80 90 100 % Agree

WMA Boards manage CEO and Executive succession differently By being better prepared for the loss of top executives Peer Group Most Admired We have a well defined plan to cover the emergency loss of the CEO. There is of course the famous case of McDonalds were they unexpectedly lost their CEO in April 2004 and had to replace his successor in November of the same year, again under sorry and unexpected circumstances, but they did and we can’t say the business has suffered We have a well defined plan to cover the emergency loss of other top corporate executives. % Agree

So, a small checklist Are you up to speed with the status of Human Capital in your organisation? Is your CEO’s performance measured in regards to leadership development? Do you know who your next CEO will be? Do you have an emergency succession plan?

Cheryl Batagol, Chair, Melbourne Water A Local Perspective: The Journey of Melbourne Water Cheryl Batagol, Chair, Melbourne Water

Questions & Comments

Thank you