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policies and functional overviews of the Company’s strategic objectives and operations. Additionally, the expectations of the Board in respect to a proposed appointee to the Board and the workings of the Board and its committees are conveyed in interviews with the Chairman. Induction procedures include access to appropriate executives in relation to details of the business of the Company.

Under the Company’s Constitution, approximately one third of Directors retire by rotation each year. Directors appointed during the year are also required to submit themselves for election by shareholders at the Company’s next Annual General Meeting.

REVIEW OF BOARD AND EXECUTIVE PERFORMANCE

A Board review is conducted on a biennial basis and individual Director reviews occur annually. The biennial review of the Board and of its committees was conducted by an independent consultant in 2005 and the next review is scheduled for 2007.

During 2006, individual Director reviews were held. This process was facilitated by the Chairman and involved individual meetings with each Director.

Performance evaluation of key executives is also undertaken on a quarterly and annual basis by the CEO, the results of which are used by the Remuneration Committee of the Board in determining future remuneration and generally for review by the Board in relation to management succession planning.

PART 2: BOARD RESPONSIBILITIES

RELEVANT POLICIES AND CHARTERS

See www.santos.com

  • Board Guidelines

  • Audit Committee Charter

  • Nomination Committee Charter

  • Remuneration Committee Charter

  • Finance Committee Charter

  • Safety, Health and Environment

Committee Charter

The Board is responsible for the overall corporate governance of the Company, including its strategic direction and financial objectives, oversight of the Company and its management, establishing goals for

management and monitoring the attainment of these goals.

Specifically, the Board is responsible for:

  • the provision of strategic direction and oversight of management;

  • significant acquisitions and disposals of assets;

  • significant expenditure decisions outside of the corporate budget;

  • hedging of product sales, sales contracts and financing arrangements;

  • the approval of, and monitoring of, financial performance against strategic plans and corporate budgets;

  • the approval of delegations of authority to management;

  • corporate governance generally;

  • ethical standards and codes of conduct;

  • the selection and evaluation of, and succession planning for, Directors and executive management;

  • the remuneration of Directors and executive management; and

  • the integrity of and oversight of operational

and financial risk management.

Each Director ensures they are able to devote sufficient time to discharge their duties and to prepare for Board and committee meetings and associated activities. The Board has also established a number of Board committees to assist with the effective discharge of its duties. The number of meetings of the Board and of each of its committees and the names of attendees at those meetings are set out on page 50 of this Annual Report.

The Board delegates management of the Company’s resources to the Company’s executive management team, under the leadership of the Chief Executive Officer and Managing Director (CEO), to deliver the strategic direction and goals approved by the Board. This is formally documented in the Company’s Delegation of Authority which details the responsibilities delegated by the Board to executive Management for:

  • implementing corporate strategies;

  • maintaining and reporting on effective risk management; and

  • operating under approved budgets and written delegations of authority.

BOARD PROCEDURES

The Board Guidelines prescribe that the Board is to meet at least eight times a year, including a strategy meeting of two days’ duration. Ten Board meetings are generally scheduled per year, two more than required under the Board Guidelines. In 2006, a total of 14 meetings were held. Board members are expected to attend any additional meetings as required.

Board meetings are structured in two separate sessions, without management present for one of those sessions unless specifically invited to address a particular issue. The agenda for meetings is prepared by the Company Secretary in conjunction with the Chairman and CEO, with periodic input from the Board. Board papers are distributed to Directors in advance of scheduled meetings.

To assist in the effective execution of its responsibilities, the Board Guidelines include procedures for providing Directors with all relevant information and familiarity with the Company’s major centres of operation. Further, Board meetings take place both at the Company’s head office and from time to time at key operating sites, to assist the Board in its understanding of operational issues; the Company has implemented an ongoing regular education program in relation to the Company’s business, opportunities and risks. These arrangements ensure each Director is able to inform and familiarise themselves with the Company’s operations and does not rely exclusively on information provided to them by management.

Executive management attend Board and committee meetings, at which they report to Directors within their respective areas of responsibility. This assists the Board in maintaining its understanding of the Company’s business and assessing the executive management team. Where appropriate, advisors to the Company attend meetings of the Board and of its committees.

BOARD COMMITTEES

The Board has established the following committees to assist with the effective discharge of its duties:

  • Audit Committee;

  • Safety, Health and Environment Committee;

  • Finance Committee;

  • Nomination Committee; and

  • Remuneration Committee.

Santos Annual Report 2006 37

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