Altium’s Board of Directors is responsible to shareholders for the performance of the company in both the short and longer term and seeks to balance competing objectives in the best interests of the Group as a whole. Their focus is to enhance the interests of the shareholders, employees and customers and to ensure the company and its controlled entities are properly managed. The Board believes good corporate governance is essential to the future of the company and will continue to adopt all relevant best practice standards. A description of the company’s main corporate governance practices is set out below.

1. Board of Directors
2. Remuneration & Nomination committee
3. Employee share trading
4. Audit and Risk Management committee
5. Continuous disclosure
6. Communication with shareholders
7. Risk management
8. Review of Board performance
9. Employee code of conduct

1. Board of Directors

The Directors are responsible for promoting the success of the Altium Group in its role as a leading global developer and supplier of electronics design software for the Microsoft Windows environment, and as a commercial entity listed on the Australian Stock Exchange.

Structure

The Board is currently comprised of five non-executive directors and two executive directors. The names of the directors, the year of their appointment, and their status as non-executive, executive or independent, are set out in the table below. Details of the background, experience and professional skills of each director are set out in the Board members page.

Functions

The functions of the Board include:

• review and approval of strategy, budgets, and financial plans
• monitoring organizational performance and its achievement of the company’s strategic goals and objectives
• monitoring financial performance including the approval of the annual and half-yearly financial reports and liaison with the company’s auditors
• appointment, and assessment of the performance of Joint Chief Executive Officers and other members of the senior management team
• ensuring effective management processes are in place
• approving major initiatives
• enhancing and protecting the reputation of the company
• ensuring the risks facing the company and its controlled entities have been identified and that appropriate controls, monitoring and reporting mechanisms are in place, and
• reporting to shareholders.

The Board has established a number of committees to assist in the execution of its duties and to allow detailed consideration of complex issues. Current committees of the Board are the remuneration & nomination, and audit & risk management committees. Day to day management of the company’s operations and the implementation of corporate strategy is delegated by the Board to the Chief Executive Officer and senior executives.

The Charter for Altium’s Board of Directors is available on request.

Director independence

Directors are expected to bring independent views and judgment to the Board’s deliberations. The Board considers that for a director to add value to the Board they should have either knowledge of the company or the highly technical industry in which the company operates. The Board is therefore not prepared to set a required number of independent directors as this may preclude a person who would otherwise make a valuable contribution to the Board. The Board does however recognise the need for independent directors and as seen in the Board structure table above, there are four independent directors including the Chairman.

Meetings of the Board

The Board meets formally between six and eight times a year, and on other occasions as required. Senior management attend and make presentations at Board meetings as considered appropriate and are available for questioning by directors.

Retirement and re-election

The Constitution of the company requires half of the directors, including the CEO, to retire from office at each Annual General Meeting. Directors who have been appointed by the Board are required to retire from office at the next Annual General Meeting and are not taken into account in determining the number of directors to retire at that Annual General Meeting. Each Director who has held office for two or more years must retire from office. Retiring directors are eligible for re-election by shareholders. The Chairman is appointed by the Board which also determines the period the elected Chairman is to hold office.

2. Renumeration & Nomination committee

The Renumeration and Nomination Committees were combined to form a single committee on February 25, 2008 and consist of the following directors:

• William A Bartee (Chairman)
• David Warren
• Samuel Weiss
• Andre Pravaz

The main responsibilities of the Committee are to:

• conduct an annual review of the membership of the Board with regard to present and future needs of the company
• make recommendations on Board composition and appointments
• propose candidates for Board vacancies
• oversee Board succession including the succession of the Chairman
• establish criteria for Board independence and conduct an annual review of directors’ independence
• establish induction guidelines for newly appointed directors and regularly assess the effectiveness of the induction process.
• ensure the executive management team is provided with appropriate incentives to encourage enhanced performance, and members are rewarded for their individual contributions to the success of the company
• to annually review executive remuneration and other terms of employment with regard to performance, relative comparative information and independent expert advice
• to ensure remuneration packages are set at levels that are intended to attract and retain executives capable of managing the company's global operations
• to ensure remuneration and other terms of employment for all directors are formalised in service agreements
• and to review any transaction between the company and directors in order to ensure the structure and the terms of the transaction are in compliance with the Corporations Act and are appropriately disclosed.

When the need for a new director is identified or an existing director is required to stand for re-election, the Committee reviews the range of skill, experience and expertise on the Board, identifies its needs and seeks candidates with the appropriate skill and experience for Board consideration. The full Board then appoints the most suitable candidate who must stand for election at the next annual general meeting of the company. Reappointment of existing directors is not automatic and is contingent on their past performance and contribution to the consolidate entity. The composition, operation and responsibilities of the Committee are generally consistent with ASX Principles 2 and 9.

3. Employee share trading

Under the company’s share trading guidelines, all employees and directors of the company and its related companies are advised not to trade in the company’s shares or other securities if they are in possession of ‘inside information’. Subject to this policy and in the light of the ASX’s continuous disclosure requirements, trading can occur at any time and is not limited to specified windows following the publication of financial results.

In addition, in order to trade, employees and directors of the company must advise the Company Secretary of their intention to trade and sign a form advising the Company Secretary that there is no known reason to preclude them trading in the company’s shares or other securities. The company’s share trading policy is consistent with ASX Principle 3.

4. Audit and Risk Management committee

The Audit and Risk Committee monitors internal control policies and procedures designed to safeguard company assets and to maintain the integrity of financial reporting, consistent with ASX Principle 4. The charter for the Audit and Risk Committee has been revised in light of the ASX Principles.

Among the specific responsibilities set out in its revised charter, the Audit and Risk Committee reviews and reports to the Board on all financial information published by the company or released to the market, assists the Board in reviewing the effectiveness of the organisation’s internal control environment, recommend to the Board the appointment, removal and remuneration of the external auditors, review the terms of their engagement and the scope and quality of the audit, and review insurance matters for the company.

The members of the Audit and Risk Committee are:

• Carl J Rooke (Chairman)
• William A Bartee
• Samuel Weiss
• Andre Pravaz

Other persons considered appropriate attend meetings of the Audit Committee by invitation. The Committee also meets from time to time with the external auditors independent of management. The composition, operations and responsibilities of the Committee are consistent with ASX Principles 4 and 7.

5. Continuous disclosure

Altium has established written policies and procedures on information disclosure which are consistent with ASX Principle 5. The focus of these procedures is on continuous disclosure of any information concerning the company and its controlled entities that a reasonable person would expect to have a material effect on the price of the company’s securities, and improving access to information for all investors.

Price sensitive information is publicly released through the stock exchange before disclosing it to analysts or others outside the company. Further dissemination to investors is also managed through the stock exchange.

The company has nominated the company secretary to have responsibility for:

• making sure that the company complies with continuous disclosure requirements;
• overseeing and co-coordinating disclosure of information to the stock exchange, analysts, brokers, shareholders, the media and the public; and
• educating directors and staff on the company’s disclosure policies and procedures and raising awareness of the principles underlying continuous disclosure.

6. Communication with shareholders

Altium provides quarterly updates on revenue earnings and publishes other information for shareholders via releases to the ASX, in the annual report, and in shareholder newsletters. Copies of this and other information can be found on the Investor Relations section of our website.

7. Risk management

The Board, through the Audit and Risk Committee, is responsible for ensuring there are adequate policies in relation to risk management, compliance and internal control systems. Management is ultimately responsible to the Board for the group’s system of internal control and risk management.

Consistent with ASX Principle 7, the company is committed to the identification, monitoring, and management of risks associated with its business activities, and is embedding in its management and reporting systems a number of risk management controls. These include:

• guidelines and limits for approval of capital expenditure and investments;
• a group regulatory compliance program supported by approved guidelines and standards covering such key areas as occupational health and safety, finance, legal and insurance;
• a comprehensive annual insurance program including external risk management surveys;
• policies and procedures for the management of financial risk and treasury operations including exposures to foreign currencies and movements in interest rates;
• a formal planning process of product development and upgrade programs for a 1-2 year horizon;
• annual budgeting and monthly reporting systems for all businesses which enable the monitoring of progress against performance targets and the evaluation of trends;
• appropriate due diligence procedures for acquisitions and divestments; and
• crisis management systems for IT infrastructure within the group.

8. Review of Board performance

The Altium Directors’ Reference Manual sets out the conduct and responsibilities of directors in accordance with the Board Charter. In order to ensure that the Board works efficiently and effectively, the performance of each Committee is discussed with the committee chairman and the individual directors. The Chairman undertakes an individual assessment of the performance of individual directors. Any concerns arising out of these assessments are raised directly with the director concerned. While the Board does not conduct a formal Board Performance Assessment, the reviews that are undertaken are consistent with ASX Principle 8 and will be continually reviewed.

9. Code of conduct

Altium is committed to conducting business with honesty and integrity, and the conduct of every employee is vital in achieving this aim. The Code of Conduct provides a guideline for appropriate behavior expected from all Altium employees. It is not intended to cover all issues that may arise, but rather to provide a framework within which employees can address ethical issues that may arise through the daily business of the company.

Employees are expected to perform the duties associated with their position to the best of their ability in a diligent, impartial and conscientious manner. This includes compliance with legislative and industrial obligations, and company policies. Copies of Altium’s Code of Conduct are available on request.