The Board is committed to following the ASX Corporate Governance Council Corporate Governance Principles and Recommendations (ASX Recommendations) and the Board and Management regularly reviews the Company’s policies and practices to ensure that the Company continues to maintain and improve its governance standards.
The specific aspects that support the implementation of this approach are described below in accordance with the ASX Recommendations.
Details of the main policies of corporate governance adopted by the Company and referred to in this statement are available on the OZ Minerals Corporate Governance page.
PRINCIPLE 1
Lay Solid Foundations for Management and Oversight
The Board operates in accordance with the broad principles set out in its charter which can be downloaded from the corporate governance section of the Company’s website.
Role
The Board is responsible for the overall operation and stewardship of the Company. The Board’s specific responsibilities include:
- Input into and approval of the strategic direction of the Company
- Approving and monitoring capital expenditure
- Monitoring of financial performance including the review and approval of significant financial and other reporting
- Reviewing and ratifying the systems in place that manage the material risks to the Company
- Appointing, removing and setting succession policies for the CEO, Directors and Senior Executives
- Establishing and monitoring the achievement of management’s goals
- Encouraging ethical behaviour throughout the organisation
Delegation
Clause 6 of the Board Charter sets out the Boards’ delegation of responsibility to allow the CEO and executive management team to carry on the day-to-day operation and administration of the Company. In carrying out this delegation the CEO reports routinely to the Board on the Company’s progress on achieving the short, medium and long term plans of the Company. The CEO is accountable to the Board for the authority that is delegated by the Board.
The Board Charter supports all delegations of responsibility by formally defining the specific functions reserved for the Board and its Committees, and those matters delegated to management.
Performance Review of Senior Executives
In accordance with clause 5.5 of its Charter, each year the Board approves the criteria for assessing the performance of the CEO and Senior Executives.
The performance of the Chief Executive Officer (CEO) is evaluated and assessed by the Board. The last review of the performance of the CEO was conducted in October 2008.
After the merger between Oxiana and Zinifex on 1 July 2008 the Board established new key performance indicators for the CEO to reflect the new challenges of the merged organisation. The Board will review the CEO’s performance against these performance criteria later on in the year.
In addition, performance reviews of Senior Executives are conducted regularly during the year by the CEO. The performance of Senior Executives is reviewed by comparing performance against agreed measures, examining the effectiveness and quality of the individual, assessing key contributions, identifying areas of potential improvement and assessing whether various expectations of shareholders have been met.
The Company is in the process of conducting these reviews with the direct reports to the CEO and their direct reports.
Further details of how the Company assesses the performance of the CEO and Senior Executives are set out in the Remuneration Report on page 26 of the 2008 Annual Report.
PRINCIPLE 2
Structure the Board to Add Value
Board Composition
The Board strives to ensure that it is comprised of strongly performing individuals of utmost integrity whose complementary skills, experience, qualifications and personal characteristics are suited to the Company’s needs.
The Company’s Constitution provides for a minimum of three, and a maximum of fifteen Directors.
At the commencement of the 2008 financial year, the Board comprised five Directors. As part of the terms of the merger of Oxiana Limited (renamed OZ Minerals Limited) and Zinifex Limited (renamed OZ Minerals Holdings Limited), the size of the Board was increased to eleven Directors to include all former Zinifex Directors on the Board.
This number has reduced to eight Directors in line with the stated objective of the Board to reduce the number of Directors, once the key elements of the integration had been established and implemented. The Board has determined that currently the appropriate number of Directors is eight – comprising the CEO, who is also Managing Director, and seven independent non-executive Directors. In selecting the Directors for retirement, the Board and Nomination & Remuneration Committee had regard to the optimal composition of the Board having regard to the on–going needs of the Company, the skills and experience of the Directors, their potential conflicts of interests, and the length of time the Directors have held office.
A profile of each Director, including their skills, experience, relevant expertise, special responsibilities and the date each Director was appointed to the Board of the Company is set out on page 13 of the 2008 Annual Report.
Independence
In accordance with the Board Charter and the ASX Recommendations the Board is comprised of a majority of independent Non-Executive Directors. The Board has determined that all Non-Executive Directors including the Chairman are independent and free of any relationship which may conflict with the interests of the Company. The Board defines ‘independence’ in accordance with the ASX Recommendations.
In order to ensure that any ‘interests’ of a Director in a matter to be considered by the Board are known by each Director, each Director has contracted with the Company to disclose any relationships, duties or interests held that may give rise to a potential conflict. Directors are required to adhere strictly to constraints on their participation and voting in relation to any matters in which they may have an interest. Each Director is required by the Company to declare on an annual basis the details of any financial or other relevant interests that they may have in the Company.
The Chair
Our Chairman Mr. Barry Cusack is an independent Non-Executive Director. The Chair is responsible for the leadership of the Board and to ensure that the Board functions effectively. The Chair’s role is separate to the duties and responsibilities carried out by the Company’s CEO, Mr Andrew Michelmore.
The Nomination and Remuneration Committee
The Board has a Nomination and Remuneration Committee. The duties and membership details of the Committee are set out in this section on page 6 of the 2008 Annual Report.
Selection and Appointment of Directors
The Nomination and Remuneration Committee assists the Board in identifying candidates who may be qualified to become Directors. The nomination of all new Directors including the CEO recommended by the Nomination and Remuneration Committee are considered by the full Board. The Board assesses the nominees against a range of specific criteria including their experience, professional skills, potential conflicts of interest and the requirement for independence. All new appointments to the Board are subject to shareholder approval.
Retirement and Re-election of Directors
The Company’s constitution requires one-third of the Directors (rounded down to the next lowest number) to retire by rotation at each annual general meeting (AGM). In selecting the Directors to retire the Board has regard to a number of factors including the optimal composition of the Board having regard to the on–going needs of the Company, the skills and experience of the Directors, their potential conflicts of interests, and the length of time the Directors have held office.
A Director must retire in any event at the third AGM since he or she was last elected or re-elected. Retiring Directors may offer themselves for re-election.
The CEO is not subject to retirement by rotation and is not to be taken into account in determining the number of Directors required to retire by rotation.
Director Induction and Education
The Company has a process to educate new Directors about the nature of the business, current issues, the corporate strategy and the expectations of the Company concerning the performance of Directors. Directors are given access to continuing education opportunities to update and enhance their skills and knowledge.
It has been the practice of Directors to visit the Company’s mining operations and meet with management to gain a better understanding of the business on a regular basis. During 2008, the members of the Board’s Sustainability Committee (previously known as the Compliance Committee) visited the Prominent Hill site.
New Directors also receive a letter of appointment which outlines their main responsibilities together with an Induction Pack that provides new Directors with a broad range of information about the Company.
Independent Professional Advice and Access to Company information
Directors have right of access to all relevant Company information and to the Company’s Executives and, subject to prior consultation with the Chairperson, may seek independent advice from a suitably qualified advisor at the Company’s expense.
Evaluating Board Performance
As the new Board was only formed in late June 2008 and there have been changes to the composition of the Board since then, the Board determined that a formal review of their performance should only be conducted after the new Board had been operating for at least 12 months.
It has however, reviewed the performance of each Director, including those standing for re-election in order for the Board to make a recommendation as to the re-election of the relevant Director or Directors.
The criterion for the evaluation of each Director is their contribution to specific Board objectives, including the following:
- Setting corporate strategies
- Identification, analysis and responses to risks and issues
- Monitoring of the Company’s progress against its business objectives
- Understanding and analysis of the Board papers presented by management
- Use of industry, financial and broad knowledge to add value to the deliberations of the Board
Board Committees
To facilitate the execution of its responsibilities, the Board’s Committees provide a forum for a more detailed analysis of key issues.
Each Committee is entitled to the resources and information it requires to carry out its duties, including direct access to advisers and employees.
The Charter of each of the Company’s Board Committees requires the Committee and subsequently the Board to review the performance of the Committee annually. In light of recent events and the fact that the composition of the Committees changed during the year, each of the Committees resolved to defer review of their performance until July 2009.
Details of the number of meetings of the Board and each Committee held during the year, and each Director’s attendance at those meetings are set out on page 17 of the of the 2008 Annual Reportt.
Each Committee reports its deliberations to the following month’s Board Meeting. The current Committees of the Board are the Audit Committee, Sustainability Committee and Nomination and Remuneration Committee. Their membership and functions are set out as follows:
Nomination and Remuneration Committee
Current Members: Peter Mansell (Chairman), Ronald Beevor and Anthony Larkin.
Changes during 2008: The membership of the Committee changed during the year in accordance with the terms of the merger between the Company and Zinifex. The changes to the composition of the Committee during the year ended 2008 were as follows:
- Peter Mansell was appointed to the Committee and succeeded Ronald Beevor as Chairman of the Committee on 20 June 2008
- Anthony Larkin was appointed as a member on 20 June 2008
- Barry Cusack and Brian Jamieson were members until 20 June 2008
Function: The Committee assists the Board in discharging its responsibilities in relation to remuneration of executives and non-executive Directors and determining the composition and performance of the Board. Committee duties include:
- regularly reviewing the size and composition of the Board and making recommendations to the Board for the appointment and removal of Directors
- ensuring that an effective and up-to-date induction and education program is implemented
- reviewing Board and Senior Executive Succession Plans on a regular basis to ensure an appropriate balance of skill and experience is maintained
- reviewing all aspects of the remuneration (including base pay, incentive payments and equity awards) and any proposed change to the terms of employment of the Directors, the CEO and Senior Executives
- regularly reviewing the Company’s remuneration framework to ensure it is linked to the Company’s performance and that it motivates Directors and Senior Executives to pursue the long term growth of the Company.
Audit Committee
Current Members: Anthony Larkin (Chairman), Ronald Beevor and Brian Jamieson
Changes during 2008: The membership of the Committee changed during the year in accordance with the terms of the merger between the Company and Zinifex. The changes to the composition of the Committee during the year ended 2008 were as follows:
- Anthony Larkin was appointed to the Committee and succeeded Brian Jamieson as Chairman of the Committee on 20 June 2008
- Ronald Beevor remains a member
- Michael Eager was a member until 20 June 2008
Function: The Audit Committee assists the Board in the effective discharge of its responsibilities in relation to financial reporting and disclosure processes, internal financial controls, funding, financial risk management and the internal and external audit functions.
The Audit Committee reviews the financial statements, accounting policies (including conformance to relevant reporting standards), adequacy of Group policies relating to financial reporting and controls (including compliance with laws, regulations and ethical guidelines) and the annual audit arrangements, both internal and external. It monitors the ability of the Company to fund its activities and reviews all funding strategies of the Group.
The Committee also liaises with the Company’s internal and external auditors, reviews the scope of their activities, reviews their performance and independence and advises the Board on their remuneration, appointment and removal.
The Audit Committee comprises three independent Non-Executive Directors. The Board has determined that all Committee members have appropriate experience and financial expertise to discharge the responsibilities of the Committee.
Sustainability Committee (previously known as the Compliance Committee)
Current Members: Dean Pritchard (Chairman), Michael Eager and Brian Jamieson
Changes during 2008: The membership of the Committee changed during the year in accordance with the terms of the merger between the Company and Zinifex. The changes to the composition of the Committee during the year ended 2008 were as follows:
- Dean Pritchard was appointed to the Committee and succeeded Michael Eager as Chairman of the Committee on 20 June 2008
- Owen Hegarty was a member until 20 June 2008
- Peter Cassidy was appointed to the Committee on 20 June 2008 and remained a member until his resignation from the Board on 30 January 2009
- Richard Knight was appointed a member of the Committee on 20 June 2008 until his resignation from the Board on 31 December 2008.
Function: The Sustainability Committee’s role is to assist the Board in the effective discharge of its responsibilities in relation to safety, health, environmental and community issues for the OZ Minerals Group, and the oversight of risks relating to these issues and other non-financial risks.
Integration Committee
Current Members: There are no current members as this Committee was formed in July 2008 following the merger and disbanded in late November 2008. The Chairman of the Committee was Owen Hegarty and the other members of the Committee were Brian Jamieson and Ronald Beevor.
Function: The function of the Integration Committee was to assist the Board in overseeing the overall integration of Oxiana and Zinifex as a merger of equals and to facilitate the smooth transition to a merged entity.
Monitoring of the Integration Plan to ensure that the key deadlines and milestones of the integration plan and framework are met and achieved.
Assess whether appropriate short term management plans are in place to ensure smooth continuation of the business (i.e. whilst synergies and improvements are being identified and acted upon).
Ensure synergy opportunities are included in the Integration Plan and implemented.
Advise the Board of the development and implementation of the communication plan.
PRINCIPLE 3
Promote Ethical and Responsible Decision Making
The Board and the Company’s employees are expected to uphold the highest levels of integrity and professional behaviour in their relationships with all of the Company’s stakeholders. Below is a summary of the Company’s core codes and policies which apply to Directors and employees. The policies were updated and reviewed during 2008 following the merger with Zinifex. All policies are available on the Company’s website.
Code of Conduct
The Code describes standards for appropriate ethical and professional behavior for all Directors, employees and contractors working for the Company. The Code of Conduct requires all Directors, employees and contractors to conduct business with the highest ethical standards including compliance with the law and to report any interest that may give rise to a conflict of interest. Breaches of the Code of Conduct are taken seriously by the Company and may be reported using the Company’s Whistleblower Program. The Code of Conduct is made available to all employees.
Values
The Company has also implemented a set of values designed to guide the Directors and all employees in their day-to-day dealings with each other, competitors, customers and the community. The values established are summarised under the headings Respect, Integrity, Action and Results.
Whistleblower Policy
The Company is committed to ensuring the Company’s employees and contractors can raise concerns regarding illegal conduct or malpractice in good faith without being subject to victimisation, harassment or discriminatory treatment, and to have such concerns properly investigated. The Whistleblower Policy provides a mechanism by which all employees can confidentially report improper or illegal conduct without fear of discrimination.
Trading in the Company’s Shares
To safeguard against insider trading the Company’s Securities Trading policy prohibits Directors and employees from trading the Company’s securities if they are aware of any information that would be expected to have a material effect on the price of Company securities.
The policy also establishes ‘black out periods‘during which Directors and employees must not trade in the Company’s securities:
- 14 days immediately before the release of each quarterly activities report i.e. during the months of January, April, July and October; and
- 31 days immediately before release of half yearly and annual results.
Further it is recognised that Directors and Senior Executives are more likely to be in possession of price sensitive information. As a result Directors must notify the Chairman and Company Secretary of any intended trade and confirm that he or she is not in possession of any price sensitive information. The same notification process applies to Senior Executives; however, Senior Executives must notify the Company Secretary and the Chief Executive Officer.
The policy also prohibits Directors, Executives and Employees from entering into any hedging arrangement over unvested securities issued pursuant to any share scheme, performance rights plan or option plan.
In addition, the Company has processes in place to determine whether Directors have entered into any margin loans in relation to their holdings in the Company’s securities, and to determine whether these arrangements are material pursuant to the Company’s disclosure obligations. Each Director is required to advise the Chairman of any fact or circumstance about himself, or affecting him, which, if known may have a material impact on the Company, which includes the possibility of margin loans to materially affect the price of the Company’s securities. Directors have been asked by the Company from time to time to provide relevant information and confirmations to assist the Company to verify that it complies with its disclosure requirements.
The Company discloses to ASX any transaction conducted by the Directors in the Company’s securities in accordance with the ASX Listing Rules.
PRINCIPLE 4
Safeguard Integrity in Financial Reporting
Audit Committee
The Board has an Audit Committee to assist the Board to safeguard integrity in the Company’s financial reporting. The duties and membership details of the Committee are set out in this section on page 6 of the 2008 Annual Report.
PRINCIPLE 5
Make Timely and Balanced Disclosure
The Company is committed to providing relevant up-to-date information to its shareholders and the broader investment community in accordance with the continuous disclosure requirements under the ASX Listing Rules and the Corporations Act.
Following the merger with Zinifex the Board updated its Continuous Disclosure Policy and introduced some new measures (as explained below) to ensure that information considered material by the Company is immediately disclosed.
The Board has authorised the Company Secretary and the Executive General Manager of Business Support as the Disclosure Officers, to ensure that information is released by the Company in a timely and accurate fashion.
To supplement the Continuous Disclosure Policy the Board has also approved Disclosure Protocols and Procedures to provide further guidance to staff on understanding and complying with the Company’s continuous disclosure obligations.
PRINCIPLE 6
Respect the Rights of Shareholders
The Board aims to ensure that shareholders are informed of all information necessary to assess the performance of the Company. To achieve this during 2008 the Board adopted a Shareholder Communication Policy which outlines the process through which the Company will endeavour to ensure timely and accurate information is provided equally to all shareholders.
Information is communicated to Shareholders through:
- the annual report which is available to all shareholders (in both hardcopy and electronic form)
- the release to the ASX and on the Company’s website, of the half yearly financial report, quarterly production and activities report and other information, including ASX releases in accordance with the Company’s continuous disclosure obligations
- providing information on the Company’s website about the Company, including the Charters that govern the Board and Board Committees, the Company’s key policies, statutory reports of the last 2 years and releases to the ASX from 2008 onwards
- the release to ASX and the Company’s website of all Company presentations made during briefings conducted with analysts and institutions from time to time.
Shareholders are also encouraged to attend the AGM and use the opportunity to ask questions. Shareholders can also view the AGM via a webcast available on the Company’s website. Questions can be lodged prior to the meeting by completing the relevant form accompanying the notice of meeting. The Company makes every endeavor to respond to the most commonly asked questions. The external auditor attends the meeting and is available to answer questions in relation to the conduct of the audit.
PRINCIPLE 7
Recognise and Manage Risk
The Company is exposed to numerous risks across its business, most of which are common to the mining industry. The Company’s commitment and approach to managing these risks is outlined in the Company’s Risk Management Policy and is available on the Company’s website.
Both the Sustainability Committee and Audit Committee assist the Board in monitoring the Company’s risks.
The Sustainability Committee monitors the Company’s non-financial risks. The Committee receives reporting on the control mechanisms which are designed and implemented by management to ensure that the safety, environmental, legal and reputation risks faced by the Company are identified, assessed and managed.
The Audit Committee monitors the Company’s financial risks. The Audit Committee reviews and assesses the adequacy of the Company’s internal control and financial management systems and accounting and business policies. The Audit Committee is given further assurance on the Company’s financial management systems through the Company’s independent internal audit function.
During 2008 the Company managed the additional risks associated with its merger with Zinifex. The Integration Committee, which is mentioned earlier in this report on page 6 reviewed and monitored the key integration risks that arose as a result of the merger. The Integration Committee was assisted and given further assurance by the special purpose steering integration committee, which provided assistance on a day to day basis to the business and reported on steps undertaken to mitigate and treat the key integration risks identified.
The Company has an internal audit function that assists with the identification and control of financial risks of the Company. The internal audit function for 2008 was outsourced to two external firms. Prior to the merger between the Company and Zinifex, the internal audit function of the Company was outsourced to Deloitte and the internal audit function of Zinifex was conducted by Protiviti. After the merger both firms continued to conduct the internal audit functions of the respective Oxiana and Zinifex operations. The internal audit function has independent status within the Company and conducts regular audits and reviews in accordance with an audit plan approved by the Audit Committee. The Audit Committee reviews the mission and charter of the internal audit function and ensures that its scope of work is appropriate in relation to the key financial risks facing the Company. The main areas of focus of internal audit include; assessing the design and operating effectiveness of financial controls, reviewing compliance with statutory regulations and Company policies as appropriate, and fraud awareness and prevention. Internal Audit also recommends improvements in management and control practices to assist in risk mitigation. Internal audit recommendations and key findings are reported to the Audit Committee.
Senior management are responsible for risk management in their respective areas of accountability. They ensure that procedures exist to monitor risks and, through observation and audit, gain assurance that effective controls are implemented and consistently applied.
The heritage risk management frameworks that operated for Zinifex and Oxiana continued in operation for 2008. Both frameworks apply enterprise wide, thereby considering risks from all sources. They are supported by risk management systems that record the risks identified, their rating, associated controls and follow up actions.
The Board has recognised the need to implement a common risk management framework across the group. The Company is in the process of developing this framework and it will be rolled out during 2009. This process includes the implementation at all sites of the Company’s Sustainability Standards. These are a comprehensive set of standards that provide a systematic approach to the management of Safety, Health, Environmental and Community related risks.
Management Reporting and Certifications
Management reports to the Board and its Committees on the material business risks faced by the Company, the effectiveness of the Company’s risk management and internal control system, and the Company’s management of its material business risks.
During the financial year, the Audit Committee was provided with independent reports from the Company’s internal financial auditors. The reports provided the Audit Committee with an appraisal of the internal controls, and a summary of recommendations made to management for the audits conducted.
The CEO and Chief Financial Officer have each declared in writing to the Board that the financial records of the Company for 2008 have been properly maintained and present a true and fair view of the Company’s financial position and financial results, in accordance with the Corporations Act and the relevant accounting standards. Their reports were supported by underlying certification from the General Managers at sites, and employees responsible for key functional areas.
The reporting and control mechanisms together with the assurances of the Sustainability and Audit Committees support the written certifications given by the CEO and the Chief Financial Officer to the Board annually, that the Company’s financial reports are based on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks.
PRINCIPLE 8
Remunerate Fairly and Responsibly
The Nomination and Remuneration Committee provides recommendations and direction for the Company’s remuneration practices. The Committee ensures that a significant proportion of each Senior Manager’s Remuneration is linked to his or her performance and the Company’s performance. Performance reviews are conducted regularly to assess the performance of Senior Managers and to determine the proportion of remuneration that will be ‘at risk’ for the upcoming year. The Company’s executives participate in a long term incentive program that is linked to the Company’s performance against the Company’s peers in the resources industry. For further details on this see the Remuneration Report within the 2008 Annual Report.
Board Remuneration
The total annual remuneration paid to Non-Executive Directors may not exceed the limit set by the shareholders at an Annual General Meeting (currently $2.7 million). The remuneration of the Non-Executive Directors is fixed rather variable.
Further details in relation to Director and executive remuneration are set out in the Remuneration Report within the 2008 Annual Report.