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Governance StatementOrica’s directors and management are committed to conducting the company’s business ethically and in accordance with high standards of corporate governance. This statement describes Orica’s approach to corporate governance. The Board believes that Orica’s policies and practices comply with the Australian Stock Exchange (ASX) Corporate Governance Council Principles and Recommendations. The company’s corporate governance policies can be viewed by clicking here. Integrity of Reporting The company has controls in place that are designed to safeguard the company’s interests and integrity of its reporting. These include accounting, financial reporting, safety, health and environment and other internal control policies and procedures, which are directed at monitoring whether the company complies with regulatory requirements and community standards. Both the Managing Director and Executive Director Finance are required to state in writing to the Board that: · the company’s financial reports represent a true and fair view of the group’s financial condition and operational results and are in accordance with relevant accounting standards; and · these statements are founded 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. These assurances are based on a financial letter of assurance that cascades down through management and includes sign-off by business general managers and business chief financial officers. Comprehensive practices have been adopted to monitor: · that capital expenditure and revenue commitments above a certain size obtain prior Board approval; · financial exposures including the use of derivatives; · safety, health and environment standards and management systems to achieve high standards of performance and compliance; and · that business transactions are properly authorised and executed. Internal audit has a mandate for reviewing and recommending improvements to controls, processes and procedures used by the company across its corporate and business activities. The company’s internal audit is managed by the Chief Risk Officer and supported by an independent external firm of accountants. The company’s financial statements are subject to an annual audit by an independent, professional auditor who also reviews the company’s half-yearly financial statements. The Board Audit and Risk Committee oversees this process on behalf of the Board. Risk Identification and Management Orica believes that effective risk management supports the company’s ability to grow. Orica recognises the importance of risk management practices across all businesses and operations. Effective risk management highlights for management’s attention the risks of loss of value and provides a framework to achieve and deliver the company’s strategy. The Board establishes the policies for the oversight and management of material business risks and internal control. The design and implementation of the risk management and internal control systems to manage the company’s material business risks is the responsibility of management. The Board satisfies itself that management has developed and implemented a sound system of risk management and internal control. The key elements of the policies for the oversight and management of material business risks are: · Material financial and non-financial business risks are systematically and formally identified and assessed by the Board, Group Executive and business platforms on (at least) an annual basis. · Risk assessments are also performed for individual material projects, capital expenditure, products and country risks. · Internal controls are identified and where appropriate, management plans are established for each significant identified risk outlining the mitigation strategy and tasks, and the management responsible for the action. · Formal risk reporting is provided to the Board on an ongoing basis including information in relation to whether material business risks are being managed effectively – this includes information relating to risk profiles and progress against plans. The Managing Director and Executive Director Finance have provided a report to the Board that the risk management and internal control systems have been designed and implemented to manage the company’s material business risks, and management has reported to the Board as to the effectiveness of the company’s and consolidated entity’s management of its material business risks. A separate role of Chief Risk Officer exists, reporting to the Executive Director Finance and liaising directly with the Board Audit and Risk Committee, to manage the company’s risk management and internal audit program. An independent external firm of accountants assists the Chief Risk Officer in ensuring compliance with internal controls and risk management programs by regularly reviewing the effectiveness of the risk management and internal control systems, and periodically provides assistance and input when undertaking risk assessments. The Board Role The Board of Orica Limited sees its primary role as the protection and enhancement of long term shareholder value. The Board is accountable to shareholders for the performance of the company. It directs and monitors the business and affairs of the company on behalf of shareholders and is responsible for the company’s overall corporate governance. The Board responsibilities include appointing the Managing Director and succession planning, approving major strategic plans, monitoring the integrity and consistency of management’s control of risk, agreeing business plans and budgets, approving major capital expenditure, acquisitions and divestments, approving funding plans and capital raisings, agreeing corporate goals and reviewing performance against approved plans. Responsibility for managing, directing and promoting the profitable operation and development of the company, consistent with the primary objective of enhancing long term shareholder value, is delegated to the Managing Director, who is accountable to the Board. The Board recognises the respective roles and responsibilities of the Board and management in the charters prepared for the Board, Managing Director and Chairman and in the company’s reserved authorities approved by the Board. Composition The Board considers that its structure, size, focus, experience and use of committees enables it to operate effectively and add value to the company. Orica maintains a majority of non-executive directors on its Board and separates the role of Chairman and Managing Director. The Board currently comprises ten directors: eight independent non-executive directors, including the Chairman, and two executive directors, being the Managing Director and the Executive Director Finance.
The composition of the Board seeks to provide an appropriate range of experience, skills, knowledge and perspective to enable it to carry out its obligations and responsibilities. In reviewing the Board’s composition and in assessing nominations for appointment as non-executive directors, the Board uses external professional advice as well as its own resources to identify candidates for appointment as directors. The balance of skills and experience of the Board is critically and regularly reviewed by the Corporate Governance and Nominations Committee. Independence The Board recognises the special responsibility of non-executive directors for monitoring executive management and the importance of independent views. The Chairman and all non-executive directors are independent of executive management and free of any business or other relationship that could materially interfere with the exercise of unfettered and independent judgment or compromise their ability to act in the best interests of the company. The independence of each director is considered on a case by case basis from the perspective of both the company and the director. Materiality is assessed by reference to each director’s individual circumstances, rather than by applying general materiality thresholds. Each director is obliged to immediately inform the company of any fact or circumstance, which may affect the director’s independence. If a conflict of interest arises, the director concerned does not receive the relevant Board papers and is not present at the meeting whilst the item is considered. Directors must keep the Board advised, on an ongoing basis of any interests that could potentially conflict with those of the company. Selection and Appointment of Directors The directors are conscious of the need for Board members to possess the diversity of skill and experience required to fulfil the obligations of the Board. In considering membership of the Board, directors take into account the appropriate characteristics needed by the Board to maximise its effectiveness and the blend of skills, knowledge and experience necessary for the present and future needs of the company. Nominations for appointment to the Board are considered by the Corporate Governance and Nominations Committee and approved by the Board as a whole. Non-executive directors are subject to shareholder re-election by rotation at least every three years, and normally do not serve more than 10 years. All directors must obtain the Chairman’s prior approval before accepting directorships or other significant appointments. An orientation program is offered to new directors including a program of site visits and briefings on Orica’s businesses and operations and key policies and controls. Board Meetings The Board has eight scheduled meetings per year, of which six are two days duration. Additional meetings are held as the business of the company may require. Directors receive comprehensive Board papers in advance of the Board meetings. As well as holding regular Board meetings, the Board sets aside at least two days annually to comprehensively review business plans and company strategy. Directors also receive regular exposure to Orica’s businesses and the major regulatory controls relevant to the company. Directors also undertake site visits to a range of Orica operations to meet with employees, customers and other stakeholders. In those months that Board meetings are not scheduled directors receive financial and safety, health and environment reports and an update from the Managing Director on the performance of the company and any issues that have arisen since the last Board meeting. In conjunction with or in addition to scheduled Board meetings, the non-executive directors meet together without the presence of management and the executive directors to discuss company matters. To aid the effectiveness of Board meetings each scheduled Board meeting is subject to a critical review evaluating the standard of information and material presented to the Board and the quality of the contribution made by directors to the consideration of issues on the agenda. Board and Executive Performance Orica has in place a range of formal processes to evaluate the performance of the Board, Board Committees and executives. These processes can be viewed by clicking here. At the conclusion of the year, the Board carries out a review of its performance. Directors standing for re-election are subject to a performance review conducted by the Board. In addition, each Board Committee reviews its effectiveness. An independent review of Board, Committee and director performance is undertaken periodically. During the year the annual Board and committee reviews were conducted in respect of the previous financial year in accordance with the process set out above. The non-executive directors are responsible for regularly evaluating the performance of the Managing Director. The evaluation is based on specific criteria, including the company’s business performance, short and long term strategic objectives and the achievement of personal objectives agreed annually with the Managing Director. All Orica executives are subject to an annual performance review. The review involves an executive being evaluated by their immediate superior by reference to their specific performance contract for the year, including the completion of key performance indicators and contribution to specific business and company plans. All Orica executives, including the Chief Executive Officer, have had their performance evaluated during the year in accordance with the process set out above. Access to Information and Independent Advice Each director has the right of access to all relevant company information and to the company’s executives and, subject to prior consultation with the Chairman, or with the approval of a majority of the board, may seek independent professional advice at the company’s expense. Pursuant to a deed executed by the company and each director, a director also has the right to have access to all documents which have been presented to meetings or made available whilst in office, or made available in relation to their position as director for a term of ten years after ceasing to be a director or such longer period as is necessary to determine relevant legal proceedings that commenced during this term. Shareholdings of Directors and Employees The Board has approved guidelines for dealing in securities. Directors and employees must not, directly or indirectly, buy or sell the shares or other securities of Orica, excluding participation in the Dividend Reinvestment Plan, when in possession of unpublished price sensitive information, which could materially affect the value of those securities. Subject to this restriction, directors and employees may buy or sell Orica shares during the following trading windows: · in the 28 day period commencing 24 hours after the announcement of the Orica half-year results; and · in the period commencing 24 hours after the announcement of the full-year results and ending 31 January. Directors and employees must receive clearance from the Chairman or Company Secretary for any proposed dealing in Orica shares outside of a trading window. Directors and employees must not deal in Orica securities on a short-term basis or enter into short-term derivative arrangements in any circumstances. Directors and employees may deal in securities via a margin loan arrangement in relation to their Orica securities where: · the Orica securities are not held “at risk” or subject to restrictions under an Orica employee, executive or director plan; · the margin lending arrangement does not, of itself, trigger a transfer in the legal or beneficial ownership of the underlying securities; · the arrangement is entered into during a trading window; and · the Company Secretary is notified prior to the margin lending arrangement being entered into. Directors and employees may create or enter into a derivative arrangement in relation to Orica securities where: · the Orica securities are not held “at risk” or subject to restrictions under an Orica employee, executive or director plan; · the derivative arrangement would not be considered a short term derivative arrangement; and · the Company Secretary is notified prior to the derivative arrangement being entered into. Any transaction conducted by directors in Orica securities is notified to the Australian Stock Exchange. Each director has entered into an agreement with the company to provide information to allow the company to notify the ASX of any transaction within 5 business days. The current shareholdings are shown in Note 37 of the 2009 Annual Report.Directors’ Fees and Executive Remuneration The remuneration report on page 24 of the 2009 Annual Report sets out details regarding the company’s remuneration policy, fees paid to directors for the past financial year, and specific details of executive remuneration. Board Committees The Board has charters for each of its committees. Charters are reviewed annually and objectives set for each committee. The committees report back to the Board and do not have formal delegation of decision making authority. The Committee Chairmen report on the committees as a standing item of the Board agenda. Additionally any director is welcome to attend any committee, and minutes of the committees are circulated to the Board. The charters may be viewed by clicking here.
Board Audit and Risk Committee The Board Audit and Risk Committee comprises three independent non-executive directors with relevant financial, commercial and risk management experience. The Chairman of the Board Audit and Risk Committee is separate from the Chairman of the Board. Nora Scheinkestel is the current Chairman of the Board Audit and Risk Committee and the other members are Garry Hounsell, and Michael Tilley. The Chairman, Managing Director and Executive Director Finance attend ex officio. The committee is charged with assessing the adequacy of the company’s financial and operating controls, oversight of risk management systems and compliance with legal requirements affecting the company. The committee meets at least four times per year.
Details of directors’ attendance at meetings of the Audit and Risk Committee are set out in the Directors’ Report on page 21 of the 2009 Annual Report.
The committee assesses and reviews external and internal audits and risk reviews and any material issues arising from these audits or reviews. It also assesses and reviews the accounting policies and practices of the group as an integral part of reviewing the half yearly and full year accounts for recommendation to the Board. It also makes recommendations to the Board regarding the appointment of external auditors and the level of their fees and provides a facility, if necessary, to convey any concerns raised by the internal and external auditors independent of management influence. The external and internal auditors attend committee meetings and meet privately with the committee at least twice per year. The Board Audit and Risk Committee monitors the level of any other services provided by the external auditor for compatibility in maintaining auditor independence. Restrictions are placed on other services performed by the external auditor and projects outside the scope of the approved audit program require the approval of the Chairman of the Board Audit and Risk committee. Any other services with a value of greater than $20,000 must be submitted to the Committee for approval in advance of the work being undertaken. The committee is asked to ratify any other services less than $20,000 in value. The fees paid to the company’s external auditors for audit and other services are set out in Note 31 of the 2009 Annual Report.
Human Resources and Compensation Committee During 2009 the Board considered it was appropriate to expand the remit for the Remuneration and Appointments Committee to include a broader and deeper focus on human resources issues. This resulted in a name change for the committee to, Human Resources & Compensation Committee. The committee comprises Russell Caplan (Chairman), Garry Hounsell and Peter Duncan. The Chairman attends ex officio and the Managing Director and Executive Director Finance attend by invitation.
Details of directors’ attendance at meetings of the Human Resources & Compensation Committee are set out in the Directors’ Report on page 21 of the 2009 Annual Report. The Committee assists the Board in the effective discharge of its responsibilities for the oversight of management process and performance in the provision of human resources necessary to effectively execute the company’s strategy over the long term. The Committee recommends to the Board on the company’s recruitment, organisational and people development, retention, employee relations, policies and workplace capability, including the capability of candidates considered for succession to Managing Director and Group Executive positions. Remuneration arrangements and termination payments for the Managing Director, Executive Directors and executives reporting to the Managing Director, including short term incentive payments, performance targets and bonus payments, remain matters for all non-executive directors. Remuneration is set by reference to independent data, external professional advice, the company’s circumstances and the requirement to attract and retain high calibre management. Corporate Governance and Nominations Committee The Corporate Governance and Nominations Committee comprises Don Mercer (Chairman), Graeme Liebelt, Nora Scheinkestel, Peter Kirby, Russell Caplan and Michael Beckett. The committee monitors new developments in corporate governance practices and evaluates the company’s policies and practices in response to changing external and internal factors and the ethical guidelines affecting the company. This committee also deals with the nomination of directors and considers the most appropriate processes for review of the Board’s composition and performance. The committee evaluates the composition of the Board and the annual program of matters considered by the Board to determine whether the appropriate mix of members and business exists to enable the Board to discharge its responsibilities to shareholders. Details of directors’ attendance at meetings of the Corporate Governance and Nominations Committee are set out in the Directors’ Report on page 21 of the 2009 Annual Report.
Safety, Health and Environment Committee The Safety, Health and Environment Committee comprises Peter Kirby (Chairman), Michael Beckett and Michael Tilley. The Chairman, Managing Director and Executive Director Finance attend ex officio. The committee assists the Board in the effective discharge of its responsibilities in relation to safety, health and environmental matters arising out of activities within the company as they affect employees, contractors, visitors and the communities in which it operates. The committee also reviews the company’s compliance with the environment policy and legislation and reviews safety, health and environmental objectives, targets and due diligence processes adopted by the company. A Letter of Assurance for SH&E is written by the Managing Director and presented to the SH&E Committee on an annual basis after a thorough process of assessment by each business. Details of directors’ attendance at meetings of the Safety, Health and Environment Committee are set out in the Directors’ Report on page 21 of the 2009 Annual Report.
Executive and Special Committees In addition, there is a standing Executive Committee comprising the Chairman, the Managing Director, the Executive Director Finance and any other non-executive director who is available (but at least one), which is convened as required, to deal with matters that need to be dealt with between board meetings. From time to time special committees may be formed on an as-needs basis to deal with specific matters.
The company seeks to provide relevant and timely information to its shareholders and is committed to fulfilling its obligations to the broader market for continuous disclosure and enabling equal access to material information about the company. The Board has approved a continuous disclosure policy so that the procedures for identifying and disclosing material and price sensitive information in accordance with the Corporations Act and ASX Listing Rules are clearly articulated. This policy sets out the obligations of employees and guidelines relating to the type of information that must be disclosed and may be viewed by clicking here.Information provided to and discussions with analysts are subject to the continuous disclosure policy. Material information must not be selectively disclosed prior to being announced to the Australian Stock Exchange. The Company Secretary is the person responsible for communication with the Australian Stock Exchange. The www.orica.com website contains copies of the annual and half year reports, ASX announcements, investor relations publications, briefings and presentations given by executives (including webcasts) plus links to information on our products and services. Shareholders may elect to receive electronic notification of releases of information by the company and receive their notice of meeting and proxy form by email. Electronic submission of proxy appointments and power of attorney are also available to shareholders. Page 128 of the 2009 Annual Report contains details of how information provided to shareholders may be obtained.
The Board encourages full participation of shareholders at the Annual General Meeting. Important issues are presented to the shareholders as single resolutions. The external auditor attends annual general meetings to answer any questions concerning the audit and the content of the auditor’s report. Code of Conduct Orica acknowledges the need for directors, executives, employees and contractors to observe the highest ethical standards of corporate and business behaviour. Orica has adopted a Code of Conduct (entitled: Your Guide To How We Do Business) which applies to all countries in which Orica operates The Code of Conduct sets out the standards of business conduct required of all employees and contractors of the company. It is aimed at ensuring the company maximises its good reputation and that its business is conducted with integrity and in an environment of openness. The Code of Conduct provides clear direction and guidance with regard to expected standards of behaviour and conduct with respect to (amongst other things): • safety, health and environment; · protection of information and the company’s resources; · competition law and trade practices compliance; · privacy; · conflict of interest ; · insider trading and dealing in securities; · equal employment opportunity and harassment; · gifts and benefits; · prevention of bribery and facilitation payments; and · prevention of, and dealing with, fraud. The Code of Conduct is periodically reviewed and approved by the Corporate Governance and Nominations Committee and processes are in place to promote and communicate the Code of Conduct and relevant company policies and procedures. An Integrity Hotline (the “Speak Up” line) and associated website and email facility have been established to enable employees to report (on an anonymous basis) breaches of the Code of Conduct. If a report is made, it is escalated as appropriate for investigation and action. The Code of Conduct is overseen by the Orica Business Conduct Committee comprising the Executive Director Finance, General Manager Human Resources and Communications, the Group General Counsel and the Chief Risk Officer, who review compliance with the Code of Conduct over the relevant reporting period and make recommendations to the Corporate Governance and Nominations Committee to address any systemic issues. Donations The equivalent of dividends payable on a shareholding of approximately 0.5% of the company’s ordinary issued capital is allocated for donation at the direction of the Corporate Governance and Nominations Committee. From the amount allocated for corporate donations, Orica matches employee ‘Dare to Share’ contributions and may support worthwhile causes overseas. The amount remaining is allocated to the Orica Community Program and is distributed to selected Australian charitable organisations in accordance with published criteria. In addition Orica’s operations contribute to their local communities with donations, sponsorship and practical support. Orica policy is not make political donations. Safety, Health & Environment For more in-depth information on our SH&E and Sustainability commitments in 2009, visit the Orica website: www.orica.com/sustainability. The Sustainability section of this Annual Report details the actions being undertaken by the company to improve its environmental performance.
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