1. PURPOSE OF CHARTER
The Board Charter sets out the role, composition, authorities and operation of the Board of Petsec Energy Ltd (Petsec or Company) and the respective roles of the Board and management (both collectively and individually) in setting the direction, management and control of the organisation.
1.1 This Charter has been adopted by Petsec’s Board to assist the Board and its committees in the exercise of their responsibilities. The principles and policies set out in this Charter are in addition to and are not intended to change or interpret any laws or the application of the Company’s Constitution. The Board of Directors will review this Charter at least annually and, if appropriate, revise this Charter from time to time. The Charter is reproduced on the Company’s website.
The Charter delineates the functions and responsibilities of the Board and management. The Board gives direction and exercises judgement in setting the Company’s objectives and overseeing their implementation. The Managing Director is responsible to the Board for the day to day management of the Company.
The Board is accountable to shareholders for the performance of the Company. In carrying out its responsibilities, the Board undertakes to serve the interests of shareholders as well as its employees, suppliers and customers and the broader community honestly, fairly, diligently and in accordance with all applicable laws.
2. ROLE OF THE BOARD
2.1 The Board is responsible to shareholders for the Group’s overall corporate governance and, in conjunction with management, for Petsec’s overall business performance.
The principal functions and responsibilities of the Board include the following:
(a) Providing leadership to the Company by:
(i) Guiding the development of an appropriate culture and values for the Company through the establishment and review of the Code of Ethics & Corporate Conduct, as well as rules and procedures to enforce ethical behaviour and provide guidance on appropriate work methods;
(ii) Always acting in a manner consistent with the Company’s culture and Code of Ethics & Corporate Conduct;
(b) Setting the corporate objectives and strategic direction of the Group and monitoring the implementation of that strategy by management:
(i) Reviewing the progress and performance of the Company in meeting these corporate objectives, including reporting the outcome of such reviews on at least an annual basis;
(c) Ensuring corporate accountability to the shareholders primarily through adoption of an effective shareholder communications strategy;
(d) Monitoring operational & financial position and performance;
(e) Overseeing the control and accountability systems to ensure the Company is progressing towards the goals set by the Board and in line with the Company’s purpose, the agreed corporate strategy, legislative requirements and community expectations;
(f) Ensuring robust and effective risk management, compliance and internal control systems (including legal compliance) are in place and operating effectively to manage principal risks faced by the Company;
– Before approving the Group’s annual financial statements, receive from the CEO and CFO a declaration that, in their opinion, the financial records of the entity have been properly maintained and that the financial statements comply with the appropriate accounting standards and give a true and fair view of the financial position and performance of the Group and that the opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively.
(g) Appointing and where appropriate removing the CEO, ratifying other key executive appointments and planning for executive succession.
(h) Ensuring appropriate human resource systems (including OH&S systems) are in place to ensure the well-being and effective contribution of all employees;
(i) Delegating appropriate powers to the CEO, management and Board committees to ensure the effective day-to-day management of the business and monitoring the exercise of these powers; and
(j) Making all decisions outside the scope of delegated powers
The detail of some Board functions will be handled through Board committees. However, the Board as a whole is responsible for determining the extent of powers residing in each committee and is ultimately responsible for accepting, modifying or rejecting committee recommendations.
3. SIZE AND COMPOSITION OF BOARD
3.1 Number of Directors
The Board shall consist of a minimum of three Directors and a maximum of eight Directors in accordance with the Company’s Constitution.
The majority of Directors must be independent, non-executive Directors. This ensures that all Board discussions or decisions have the benefit of outside views and experience, and that the majority of Directors are free of any interests or influences that could, or could reasonably be perceived to materially interfere with the Director’s ability to act in the best interests of the Company.
The Board is guided by the factors relevant to assessing independence set out in the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations (3rd Edition, 2014).
The independence of the Company’s non-executive Directors will be assessed on an ongoing basis.
The Chairman shall be selected by the Directors in accordance with the Constitution.
3.3 Appointment of Directors
The Directors may at any time appoint any person as a Director either to fill a casual vacancy or as an additional Director, provided that the total number of Directors does not exceed the maximum number.
3.4 Skills Required on the Board
The Board, through the Nomination & Remuneration Committee, will regularly review the balance of skills and experience of the Board in light of the mix required for the future. When considering vacancies, the Board will take into account a candidate’s capacity to enhance the mix of skills and experience of the Board.
3.5 Duration of Appointment
Directors shall remain on the Board until required to vacate the office by law or as detailed in the Constitution. The terms and conditions for Directors are contained in their letter of appointment.
4. THE ROLE OF INDIVIDUAL DIRECTORS
As members of the peak decision-making body in the Company, Directors share ultimate responsibility for the Company’s overall success. Therefore, Directors have an individual responsibility to ensure that the Board is undertaking its responsibilities as set out in this Charter. Directors need to ensure that the Board is providing:
(a) leadership to the Company, particularly in the areas of ethics and culture;
(b) clear and appropriate corporate objectives and strategic direction;
(c) accountability to key stakeholders, particularly shareholders;
(d) oversight of policies;
(e) oversight of all control and accountability systems including all financial operations and solvency, risk management and compliance;
(f) an effective senior management team and appropriate personnel policies; and
(g) timely and effective decisions on matters reserved to it.
4.1 Directors’ Code of Conduct
In accordance with legal requirements and agreed ethical standards, Directors and key executives of the Company:
(a) will act honestly, in good faith and in the best interests of the Company as a whole;*
(b) owe a fiduciary duty to the Company as a whole;
(c) have a duty to use due care and diligence in fulfilling the functions of office and exercising the powers attached to that office;*
(d) will undertake diligent analysis of all proposals placed before the Board;
(e) will act with a level of skill expected from directors and key executives of a publicly listed company;
(f) will use the powers of office for a proper purpose, in the best interests of the Company as a whole; *
(g) will demonstrate commercial reasonableness in decision making;
(h) will not make improper use of information acquired as Directors and key executives; *
(i) will not disclose non-public information except where disclosure is authorised or legally mandated;+
(j) will keep confidential, information received in the course of the exercise of their duties and such information remains the property of the Company from which it was obtained and it is improper to disclose it, or allow it to be disclosed, unless that disclosure has been authorised by the person from whom the information is provided, or is required by law; *
(k) will not take improper advantage of the position of Director * or use the position for personal gain or to compete with the Company; +
(l) will not take advantage of Company property or use such property for personal gain or to compete with the Company; +
(m) will protect and ensure the efficient use of the Company’s assets for legitimate business purposes; +
(n) will not allow personal interests, or the interests of any associated person, to conflict with the interests of the Company; *
(o) have an obligation to be independent in judgment and actions, and Directors will take all reasonable steps to be satisfied as to the soundness of all decisions of the Board; *
(p) will make reasonable enquiries to ensure that the Company is operating efficiently, effectively and legally towards achieving its goals;
(q) will not engage in conduct likely to bring discredit upon the Company; *
(r) will encourage fair dealing by all employees with the Company’s customers, suppliers, competitors and other employees; +
(s) will encourage the reporting of unlawful/unethical behaviour and actively promote ethical behaviour and protection for those who report violations in good faith; +
(t) will give their specific expertise generously to the Company; and
(u) have an obligation, at all times, to comply with the spirit, as well as the letter of the law and with the principles of this Code. *
( * From the AICD Code of Conduct)
(+ From the ASX Corporate Governance Council’s Principles of Good Corporate Governance)
4.2 Conflict of Interest and Related Party Transactions
(a) Conflicts of Interest
Directors must disclose to the Board actual or potential conflicts that may or might reasonably be thought to exist between the interests of the Director and the interests of the Company. On appointment, Directors will have an opportunity to declare any such interests and they will be entered into the corporate register.
Directors should update this disclosure by notifying the Company Secretary in writing as soon as they become aware of any conflicts. Directors are also expected to indicate to the Chairman any actual or potential conflict of interest situation as soon as it arises.
The Board can request a Director to take reasonable steps to remove the conflict of interest. If a Director cannot, or is unwilling to, remove a conflict of interest, then the Director must absent himself or herself from the room when discussion and voting occur on matters to which the conflict relates. The entry and exit of the Director concerned will be minuted by the Company Secretary. Directors do not have to absent themselves when either (a) conflict of interest relates to an interest common to all Company members/shareholders, or (b) the Board passes a resolution that identifies the Director, the nature and extent of the Director’s interest and clearly states that the other Directors are satisfied that the interest should not disqualify the Director concerned from discussion and/or voting on the matter.
(b) Related Party Transactions
Related party transactions include any financial transaction between a Director and the Company and will be reported in writing to each Board meeting.
In general, the Corporations Act requires related party transactions to be approved by the shareholders; the Board cannot approve these transactions. An exemption to this requirement occurs where the financial benefit is given on arm’s length terms.
The Board has resolved that where applications are made by a related party to a Director or officer of the Company, then the Director or officer shall exclude himself/herself from the approval process.
Related party for this process means:
(i) a spouse or de facto spouse of the Director; or
(ii) a parent, son or daughter of the Director or their spouse or de facto spouse; or
(iii) an entity over which the Director or a related party defined in (a) or (b) has a controlling interest.
The Company Secretary will maintain details of related party transactions in the corporate register.
5. THE ROLE OF THE CHAIRMAN
The Chairman’s role is a key one within the Company. The Chairman is considered the “lead” Director and utilises his/her experience, skills and leadership abilities to facilitate the governance processes.
There are two main aspects to the Chairman’s role. They are the Chairman’s role within the boardroom and the Chairman’s role outside the boardroom.
5.1 Inside the Boardroom
Inside the boardroom, the role of the Chairman is to:
(a) Establish the agenda for the Board and chair board meetings;
(b) Provide guidance to other Board members as to what is expected of them;
(c) Ensure that Board meetings are effective in that:
(i) the right matters are considered during the meeting (for example, strategic and important issues);
(ii) matters are considered carefully and thoroughly;
(iii) all Directors are given the opportunity to effectively contribute; and
(iv) the Board comes to clear decisions and resolutions are noted;
(d) Brief all Directors in relation to issues arising at Board meetings;
(e) Ensure that the decisions of the Board are implemented properly;
(f) Ensure that the Board behaves in accordance the Company’s Code of Ethics and Corporate Conduct; and
(g) Initiate and guide the annual process of Board and Director evaluation.
5.2 Outside the Boardroom
Outside the boardroom, the role of the Chairman is to:
(a) Undertake appropriate public relations activities;
(b) Act as Chairman of General Meetings;
(c) Be the spokesperson for the Company at the Annual General Meeting and in the reporting of performance and profit figures;
(d) Be the major point of contact between the Board and senior management;
(e) Ensure Directors are kept fully informed on all matters which may be of interest; and
(f) Regularly review with senior management, progress on important initiatives and significant issues facing the Company.
6. THE ROLE OF THE COMPANY SECRETARY
The Company Secretary is charged with facilitating the Company’s corporate governance processes and so holds primary responsibility for ensuring that the Board processes and procedures run efficiently and effectively. The Company Secretary is also responsible for scheduling meetings, proposals, and retention of Board papers, minutes and for managing the Company’s legal and statutory compliance program. The Company Secretary is accountable to the Board, through the Chairman, on all governance matters and reports directly to the Chairman as the representative of the Board. The Company Secretary is appointed and dismissed by the Board and all Directors have a right of access to the Company Secretary.
7. THE ROLE OF THE CEO
7.1 The Position
The Chief Executive Officer (CEO) is responsible for the attainment of the Company’s objectives and vision for the future, in accordance with the strategies, policies, programmes and performance requirements approved by the Board. The position reports directly to the Board.
The CEO’s primary objective is to ensure the ongoing success of the Company through being responsible for all aspects of the management and development of the Company. The CEO is of critical importance to the Company in guiding the Company to develop new and imaginative ways of winning and conducting business.
The CEO will manage a team of executives responsible for all functions contributing to the success of the Company.
7.2 The specific responsibilities of the CEO shall include:
(a) Develop, in conjunction with the Board, the Company’s vision, values, and objectives;
(b) Responsibility for the achievement of corporate objectives;
(c) Development and implementation of short, medium and long term corporate strategies and plans to achieve the Company’s vision and overall business objectives;
(d) Undertake the role of key Company spokesperson and approve all material releases to ASX and investor shareholder releases;
(e) Ensure statutory, legal and regulatory compliance and compliance with corporate policies and standards;
(f) Ensure maintenance of appropriate risk management practices and policies;
(g) Develop and motivate direct reports and their respective teams;
(h) Ensure there is an appropriate staff appraisal system in place in the Company; and
(i) Manage the appointment of CFO, Company Secretary and other executive positions.
7.3 Limitations on authority delegated to the CEO
The authority delegated to the CEO is determined by the Board and all matters outside the scope of those delegations shall be referred to the Board for approval.
8. BOARD MEETINGS
8.1 Meeting Frequency
The Board will meet approximately eight times per year or as otherwise determined by the Board. The Audit Committee will meet at least three times a year and the Nomination and Remuneration Committee at least twice a year as prescribed by their respective charters.
8.2 Board Meeting Agenda
An agenda will be prepared for each Board and Committee meeting. In general, it may contain some or all of the following topics:
(b) Minutes of Previous Meetings;
(c) Operations Report;
(d) Financial Report;
(e) Corporate Governance and Company Secretary;
(f) Other General Business; and
(g) Confirmation of Next Meeting.
The Company Secretary, in consultation with the Chairman and the CEO is responsible for preparing an agenda for each Board meeting. However, any Director may request items to be added to the agenda for upcoming meetings. The Company Secretary circulates the agenda to all Directors with the Board papers four days prior to the meeting.
Each Director is free to raise at any Board meeting subjects that are not on the agenda for that meeting.
8.3 Conduct of Meeting
The Chairman will determine the degree of formality required at each meeting while maintaining the decorum of such meetings. As such, the Chairman will:
(a) ensure that all members are heard;
(b) retain sufficient control to ensure that the authority of the Chair is recognised. This may require a degree of formality to be introduced if this is necessary to advance the discussion;
(c) take care that the decisions are properly understood and well recorded; and
(d) ensure that the decisions and debate are completed with a formal resolution recording the conclusions reached.
8.4 Senior Management Attendance at Board Meetings
Senior members of management may be invited to be in attendance at Board meetings to present reports on, or seek approvals within, their areas of responsibility. The auditor has a standing invitation to attend all Audit Committee meetings and will meet with the Committee at least twice a year to present the results of the half year audit review and full year audit.
8.5 Emergency Decision Making – Written Resolutions
A circular resolution in writing signed by all of the Directors is as valid and effectual as if it had been passed at a meeting of the Directors duly convened and held.
8.6 Retention of Board Papers
The Company Secretary maintains a complete set of Board papers at the Company’s head office
8.7 Board Minutes
Minutes are to be a concise summary of the matters discussed at a Board Meeting. Minutes will contain a brief reference to relevant Board papers tabled plus any official resolutions adopted by Directors. All decisions will be recorded in the minutes by means of a formal resolution.
8.8 Board Calendar
In order to provide an even distribution of work over each financial year, the Board will adopt a twelve-month Board Calendar. Included will be all scheduled Board and Committee meetings as well as major corporate and Board activities, such as strategic planning and the CEO’s evaluation, to be carried out in particular months. It will be updated and approved prior to the start of each calendar year.
The Board may establish committees to assist it in carrying out its responsibilities.
The Board currently has two committees:
(a) Audit Committee; and
(b) Nomination & Remuneration Committee.
Each Committee has a Charter that has been approved by the Board. The Board has the ability to alter the roles of each Committee as it sees fit.
Each Committee is chaired by an independent Non-Executive Director. Following each Committee meeting, the Board is to be given a verbal report on proceedings plus access to Committee papers.
10. DIRECTOR PROTECTION
10.1 Access to Professional Advice
A Director of the Company is expected to exercise considered and independent judgment on the matters before them. To discharge this expectation, a Director may from time to time need to seek independent, expert advice on matters before them.
Prior to seeking professional advice a Director shall inform the Chairman about the nature of the advice or information sought, the reason for the advice, the terms of reference for the advice and the estimated cost of the advice. Where more than one Director is seeking advice about a single issue, the Chairman shall endeavour to coordinate the provision of the advice.
10.2 Access to Board Papers
The Directors have the right to access board papers as granted by the Corporations Act.
10.3 Indemnity and Insurance Arrangements for Directors
Clause 79 of the Company’s Constitution allows the Company to provide Directors’ and Officers’ Insurance for the benefit of Directors. Each Director enters into a Deed of Indemnity and Access, covering the subject of indemnity of Directors, Directors’ and Officers’ insurance and access to Company documentation.
11. BOARD AND SENIOR EXECUTIVE EVALUATION
The Board considers the evaluation of its own and senior executive performance as fundamental to establishing a culture of performance and accountability. Details regarding the evaluation of senior executives are set out in the Nomination & Remuneration Committee Charter.
11.1 Board and Director Evaluations
The Board considers the ongoing development and improvement of its own performance as a critical input to effective governance. As a result, the Board undertakes an annual evaluation of Board and Director performance. The Board considers the outcome of the review in a dedicated meeting and develops a series of actions and goals to guide improvement.
11.2 Board Committee Evaluations
At annual review, the Board sets a number of expectations of its Committees. These expectations are derived considering previous reviews, an assessment of the Company’s current and future needs, and a review of each Committee’s Charter or purpose. As a result of this review, the Board may amend or revoke a Committee’s Charter.
The Board annually reviews performance of the Committees and itself against these expectations. The results of the review are a key input into the expectations set by the Board for the coming year.
12. NON-EXECUTIVE DIRECTOR REMUNERATION
Non-executive Directors are paid their fees out of the maximum aggregate amount approved by shareholders for the remuneration of non-executive Directors. The sum each non-executive Director is paid is determined by the Nomination & Remuneration Committee from time to time. Additional fees may be paid for participation on Board committees; however, the total fees paid to non-executive Directors, including fees paid for participation on Board committees, are kept within the total amount approved by shareholders.
12.2 Performance-Based Bonus
Non-executive Directors do not receive performance-based bonuses.
12.3 Equity-Based Remuneration
The Company’s Employee Option Plan and Employee Share Plan do not exclude non-executive Directors from participation. The Corporations Act and ASX Listing Rules require that such participation may only be with the approval of shareholders in general meeting.
12.4 Other Benefits
Non-executive Directors are entitled to statutory superannuation and, in addition, non-executive Directors have their indemnity insurance paid by the Company.
The retirement benefits payable to non-executive Directors appointed prior to 2003 are the equivalent of the sum of the last three years’ Directors’ fees. Non-executive Directors appointed during or after 2003 are not entitled to receive retirement benefits, in accordance with the recommendations made by the ASX Corporate Governance Council.