Corporate Governance

Scope of responsibility of Board

Responsibility for the Company’s proper corporate governance rests with the Board. The Board’s guiding principle in meeting this responsibility is to act honestly, conscientiously and fairly, in accordance with the law, in the interests of PepinNini’s Shareholders (with a view to building sustainable value for them) and those of employees and other stakeholders.

The Board’s broad function is to:

(a) chart strategy and set financial budgets for the Company;
(b) monitor the implementation and execution of strategy and performance against financial budgets; and
(c) appoint and oversee the performance of executive management and generally to take and fulfill an effective leadership role in relation to the Company.

Power and authority in certain areas is specifically reserved to the Board – consistent with its function as outlined above. These areas include:

(a) composition of the Board itself including the appointment and removal of Directors;
(b) oversight of the Company, including its control and accountability system;
(c) appointment and removal of senior management and the Company secretary;
(d) reviewing and overseeing systems of risk management and internal compliance and control, codes of ethics and conduct, and legal and statutory compliance;
(e) monitoring senior management’s performance and implementation of strategy; and
(f) approving and monitoring financial and other reporting and the operation of committees.

2. Composition of Board

The Board currently performs its roles and function, consistent with the above statement of its overall corporate governance responsibility, in accordance with the following principles:

(a) the Board should comprise at least three Directors;
(b) at least half of the Board should be non-executive Directors independent from management; and
(c) the chairman of the Board should be one of the non-executive Directors.

3. Board and charter policy

The Board has adopted a charter (which will be kept under review and amended from time to time as the Board may consider appropriate) to give formal recognition to the matters outlined above. This charter sets out various other matters that are important for effective corporate governance including the following:

(a) a detailed definition of ‘independence’;
(b)
a framework for the identification of candidates for appointment to the Board and their selection;
(c)
a framework for individual performance review and evaluation;
(d)
basic procedures for meetings of the Board and its committees – frequency, agenda, minutes and private discussion of management issues among non-executive Directors;
(e)
ethical standards and values – formalised in a detailed code of conduct;
(f)
dealings in securities – formalised in a detailed code for securities transactions designed to ensure fair and transparent trading by Directors and senior management and their associates; and
(g)
communications with Shareholders and the market.

These initiatives, together with the other matters provided for in the Board’s charter, are designed to ‘institutionalise’ good corporate governance and generally, to build a culture of best practice in PepinNini’s own internal practices and in its dealings with others.

4.Company committees

The Company’s size is not sufficient to warrant the establishment of separate committees for the nomination of directors and risk management. As an alternative the Company has formed a corporate governance committee (currently consisting of all directors) to assist with the building of its own internal practices concerning good corporate governance. In addition to their regular Board meetings, the Directors will meet on a regular basis to discuss action matters concerning:

  • risk management;
  • remuneration and issues relevant to remuneration policies and practices for all Directors and senior management; and
  • any recommendations concerning the appointment of new Directors and senior management.

Example of the items of business that the committee will address at its meetings are:

  • Board and committee structure to facilitate a proper review function by the Board;
  • corporate risk assessment and compliance with internal controls;
  • review and evaluation of market practices and trends on remuneration matters;
  • the performance of senior management;
  • development of suitable criteria such as skills, qualifications and experience for Board candidates;
  • identification and consideration of possible candidates; and
  • review of the performance of each Director and of senior management each year in accordance with the
    procedures developed and adopted by the Board.

Whilst items of risk management will be discussed on a quarterly basis, items concerning remuneration and nominations will be discussed annually.

5. Audit committee

The Company has established an Audit Committee which operates under a formal charter Audit Committee Charter (pdf 59KB). The Audit Committee meets and reports to the Board as required, but in any case at least twice each year. Its members are currently the two non executive directors including the Secretary of the Company. The Committee has authority to seek any pertinent information it requires from any employee or external party. The Company external auditor is invited to attend each meeting of the committee.

The responsibilities of the audit committee include:

  • oversee the existence and maintenance of internal controls and accounting systems, including the implementation of mandatory and non-mandatory accounting policies and reporting requirements
  • oversee the financial reporting process, including reviewing and reporting to the Board on the accuracy of all financial reports lodged with ASX which include the quarterly, half-yearly and annual financial reports
  • recommendations to the Board regarding the nomination, removal and remuneration of the external auditors
  • review the existing external audit arrangements, including ensuring that any non-audit services provided do not impair auditor independence and
  • assessing the adequacy of external reporting for the needs of Shareholders.

In fulfilling its responsibilities, the audit committee:

  • receives regular reports from management and the external auditors;
  • meets with the external auditors at least twice a year, or more frequently if necessary;
  • reviews any significant disagreements between the auditors and management, irrespective of whether they have been resolved;
  • meets separately with the external auditors at least twice a year without the presence of management;
  • provides the external auditors with a clear line of direct communication at any time to either the Chairman of the audit committee or the Chairman of the board.

The audit committee has authority, within the scope of its responsibilities, to seek any information it requires from any employee or external party.

6. Remuneration committee

The Company has established a Remuneration Committee. The Remuneration Committee meets and reports to the board annually. Its members are currently one executive director and one non-executive director.  The remuneration committee advises the board on remuneration and incentive policies and practices generally and makes specific recommendations on remuneration packages and other terms of employment for executive directors, other senior executives and non-executive directors and employees.

7. Best practice commitment

The Company is committed to achieving and maintaining the highest standards of conduct and has undertaken various initiatives that are designed to achieve this objective. PepinNini’s corporate governance charter is intended to ‘institutionalise’ good corporate governance and, generally, to build a culture of best practice both in the Company’s own internal practices and in its dealings with others.

The following are a tangible demonstration of the Company’s corporate governance commitment.

Independent professional advice

With the prior approval of the Chairman, which may not be unreasonably withheld or delayed, each Director has the right to seek independent legal and other professional advice concerning any aspect of the Company’s operations or undertakings in order to fulfill their duties and responsibilities as Directors. Any costs incurred are borne by the Company.

Code of Conduct

The Company has developed and adopted a detailed code of conduct to guide Directors and employees in the performance of their duties.

Code of conduct for transactions in securities

The Company has developed and adopted a formal code to regulate dealings in securities by Directors and senior management and their associates. This is designed to ensure fair and transparent trading in accordance with both the law and best practice.

Charter

The code of conduct and the code of conduct for transactions in securities (referred to above) both form part of the Company’s corporate governance charter which has been formally adopted and is incorporated in the PolicyManual Sep 08 (pdf1MB)

8. Compliance with ASX corporate governance guidelines and best practice recommendations

The ASX document, ‘Principles of Good Corporate Governance and Best Practice Recommendations’ (‘Guidelines’) applying to listed entities was published in March 2003 by the ASX Corporate Governance Council with the aim of enhancing the credibility and transparency of Australia’s capital markets.

The Board has assessed the Company’s current practice against the Guidelines and outlines its assessment below:

PRINCIPLES

Respect the rights of Shareholders

The board strives to communicate with shareholders both regularly and clearly – both by electronic means and using more traditional communication methods.  Shareholders are encouraged to attend and participate at general meetings.  The Group’s auditors will always attend the annual general meeting and are available to answer shareholders’ questions.  The Group’s policies are outlined in the Company Policy and Procedure Document available from the Company’s website. These policies ensure continuous disclosure of any information concerning the Group that a reasonable person would expect to have a material effect on the price of the Company’s securities.
The Company Secretary has been nominated as the person responsible for communications with the ASX. This role includes responsibility for ensuring compliance with the continuous disclosure requirements in the ASX Listing Rules and overseeing and co-ordinating information disclosure to the ASX, analysts, brokers, shareholders, the media and the public.
All information disclosed to the ASX is posted on the Company’s website as soon as possible as it is disclosed to the ASX. When analysts are briefed on aspects of the Group’s operations, the material used in the presentation is released to the ASX and posted on the Company’s website. Procedures have been established for reviewing whether any price sensitive information has been inadvertently disclosed and if so, this information is also immediately released to the market.
All shareholders receive a copy of the Company’s annual report.  In addition, the Company provides opportunities for shareholders to download from the website, annual and quarterly reports.

External auditors

The Company and audit committee policy is to appoint external auditors who clearly demonstrate quality and independence.  The performance of the external auditor is reviewed annually and applications for tender of external audit services are requested as deemed appropriate, taking into consideration assessment of performance, existing value and tender costs.  Ernst & Young was appointed as the external auditor in 2009 for the year ended 30 June 2010 and continue in office.

An analysis of fees paid to the external auditors, including a break‑down of fees for non-audit services, is provided in note 21 to the financial statements.  It is the policy of the external auditors to provide an annual declaration of their independence to the audit committee.

The external auditor will attend the annual general meeting and be available to answer shareholder questions about the conduct of the audit and the preparation and content of the audit report.

Risk Assessment and management

The board through the audit committee, is responsible for ensuring there are adequate policies in relation to risk management, compliance and internal control systems. These policies are available on the Company’s website. In summary the company policies are designed to ensure strategic, operational, legal, reputation and financial risks are identified, assessed effectively and efficiently managed and monitored to enable achievement of the Group’s business objectives.
Considerable importance is placed on maintaining a strong control environment. There is an organisation structure with clearly drawn lines of accountability and delegation of authority. Adherence to the Code of Conduct (see below) is required at all times and the board actively promotes a culture of quality and integrity.
Detailed control procedures cover management accounting, financial reporting, project appraisal, environment, health and safety, IT security, compliance and other risk management issues. The internal audit reporting group carries out regular systematic monitoring of control activities and report to both relevant operations and administrative management and the audit committee. The company risk management policy and the operation of the risk management and compliance system is managed by the company risk management group consisting of senior management and senior executives chaired by the executive director – administration.  The board receives updates at monthly directors’ meetings on material risks that may impede meeting operational and business objectives. The risk management group is then responsible for implementing appropriate controls to effectively manage those risks which are in turn monitored by the board.
The environment, health and safety management systems (EHSMS)
The Company recognises the importance of environmental and occupational health and safety (OH&S) issues and is committed to the highest levels of performance. To help meet this objective the EHSMS was established to facilitate the systematic identification of environmental and OH&S issues and to ensure they are managed in a structured manner.  The system allows the company to :

  • monitor its compliance with all relevant legislation
  • continually assess and improve the impact of its operations on the environment
  • encourage employees to actively participate in the management of environmental and OH&S issues
  • use energy and other resources efficiently and
  • encourage the adoption of similar standards by the Group’s principal suppliers and contractors

Code of conduct

The Company has developed and adopted a detailed code of conduct(Securities Trading Policy (pdf167KB)) to guide directors and employees in the performance of their duties.  The Company has also developed and adopted a formal code to regulate dealings in securities by directors and senior management and their associates.  This is designed to ensure fair and transparent trading in accordance with both the law and best practice.

The directors are satisfied that the Group has complied with its policies on ethical standards, including trading in securities.

Diversity Policy

The Company values diversity and recognises the benefits it can bring to the organisation’s ability to achieve its goals. Accordingly the Company has developed a Diversity Policy (pdf37KB). This policy outlines the Company’s diversity objectives in relation to gender, age, cultural background and ethnicity. It includes requirements for the board to establish measurable objectives for achieving diversity, and for the board to assess annually both the objectives, and the Company’s progress in achieving them.

ASX Principles of Good Corporate Governance and Best Practice Recommendations

Subject to the exceptions outlined below, the Company has adopted the ‘Corporate Governance Principles and Recommendations including 2010 Amendments’ (‘Guidelines’) applying to listed entities as published in 2010 by the ASX Corporate Governance Council.  Below is a listing of the Best Practice Recommendations that PepinNini Minerals Limited does not comply with.

BEST PRACTICE RECOMMENDATION

NOTIFICATION OF DEPARTURE

EXPLANATION OF DEPARTURE

Principle 2.1

A majority of directors are not independent

Currently, two of the four directors satisfy the criteria for independence.  The Company considers that the expense involved in the recruitment and employment of an additional independent director is not justified given the present size and complexity of its operations.  Together, the current directors have a broad range of experience, expertise, skills, qualifications and contacts relevant to the business of the Company and have demonstrated that they make quality and independent judgments in the best interests of the Company on all relevant issues.  Procedures are in place whereby directors having a conflict of interest in relation to a particular item of business must exclude themselves from the meeting before commencement of discussion of the topic.

It is intended that, subject to the performance of the Company, new candidates for the board will be considered.

Principles 2.2 and 2.3

The Chairman is the Managing Director of the Company

The board considers the position of Mr Norman Kennedy as Chairman and Managing Director to be appropriate as he founded the Company, is a sustantial shareholder, has been instrumental in the development of the Company, has a comprehensive knowledge of its operations and has successfully built value for shareholders since the Company listed on the ASX.  Mr Kennedy’s industry experience and his involvement with the Company since its inception are well recognised and viewed positively by shareholders.  Clear protocols are in place to deal with conflicts of interest.  Mr Chris Lambert acts as an independent Chairman when the board is discussing items in which a conflict of interest may arise.

The board does however recognise that as the Company expands its operations the ability of the Chairman to provide an independent view of management may require the appointment of an independent Chairperson in the future.

Principle 2.4

A separate Nomination Committee has not been formed

The board has not formed a separate Nomination Committee.  The full Board consists of four directors and has formed the view that it is more efficient for the board as a whole to deal with matters that would otherwise be dealt with by a Nomination Committee.  Strategies such as reviewing the skill base and experience of existing directors and identification of attributes required in new directors are in place and, if necessary, appropriate independent consultants will be engaged to identify possible new candidates for the board.

 

BEST PRACTICE RECOMMENDATION NOTIFICATION OF DEPARTURE EXPLANATION OF DEPARTURE

Principle 4.2

A majority of members of the Audit Committee are not independent

An Audit Committee of one-executive and one non-executive director has been established and has a formal charter.  The Audit Committee is not in compliance with the Guidelines in that the majority of members are not independent.  To safeguard the integrity of financial reporting, the Chairman of the Audit Committee is independent and regular sessions are held with the external auditors in the absence of management to discuss any issues or concerns the auditors may have.  Separate audit committee meetings are held to finalise annual and half yearly financial reports before recommending approval by the board.

Principle 8.2

The Remuneration committee should be structured so that it:

• consists of a majority of independent directors

• is chaired by an independent chair

• has at least three members.

A Remuneration Committee of one-executive and one non-executive director has been established and has a formal charter.  The Remuneration Committee is not in compliance with the Guidelines in that the majority of members are not independent.  To safeguard the integrity of Remuneration setting the Chair of the Remuneration Committee is independent.

 

CORPORATE GOVERNANCE SCORECARD

Principle 1

Lay solid foundations for management and oversight

Comply

1.1

Companies should establish the functions reserved to the Board and those delegated to senior executives and disclose those functions.

Yes

1.2

Companies should disclose the process for evaluating the performance of senior executives.

Yes

1.3

Companies should provide the information indicated in the Guide to reporting on Principle 1

Yes

Principle 2

Structure the board to add value

 

2.1

A majority of the Board should be independent directors.

No

2.2

The chair should be an independent director.

No

2.3

The roles of chair and chief executive officer should not be exercised by the same individual.

No

2.4

The Board should establish a nomination committee.

No

2.5

Companies should disclose the process for evaluating the performance of the board, its committees and individual directors.

Yes

2.6

Companies should provide the information indicated in the Guide to reporting on Principle 2.

Yes

Principle 3

Promote ethical and responsible decision-making

 

3.1

Companies should establish a code of conduct and disclose the code or a summary of the code as to:

Yes

 

• the practices necessary to maintain confidence in the Company’ integrity

Yes

 

• the practices necessary to take into account their legal obligations and the reasonable expectations of their shareholders

Yes

 

- the responsibility and accountability of individuals for reporting and investigating reports of unethical practices

Yes

3.2

Companies should establish a policy concerning diversity and disclose the policy or a summary of that policy. The policy should include requirements for the Board to establish measurable objectives for achieving gender diversity and for the Board to assess annually both the objectives and progress in achieving them.

Yes

3.3

Companies should disclose in each annual report the measurable objectives for achieving gender diversity set by the board in accordance with the diversity policy and progress towards achieving them.

Yes

3.4 Companies should disclose in each annual report the proportion of women employees in the whole organisation, women in senior executive positions and women on the board. Yes
3.5 Companies should provide the information indicated in the Guide to reporting on Principle 3. Yes

Principle 4

Safeguard integrity in financial reporting

 

4.1

The board should establish an audit committee.

Yes

4.2

The audit committee should be structured so that it:

 

 

• consists only of non-executive directors

No

 

• consists of a majority of independent directors

Yes

 

• is chaired by an independent chair, who is not chair of the board

Yes

 

• has at least three members

Yes

4.3

The audit committee should have a formal charter.

Yes

4.4

Companies should provide the information indicated in the Guide to reporting on Principle 4.

Yes

Principle 5

Make timely and balanced disclosure

 

5.1

Companies should establish written policies designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior level for that compliance and disclose those policies or a summary of those policies.

Yes

5.2

Companies should provide the information indicated in the Guide to reporting on Principle 5.

Yes

Principle 6

Respect the rights of shareholders

 

6.1

Companies should design a communications policy for promoting effective communication with shareholders and encouraging their participation at general meetings and disclose their policy or a summary of that policy.

Yes

6.2

Companies should provide the information indicated in the Guide to reporting on Principle 6.

Yes

Principle 7

Recognise and manage risk

 

7.1

Companies should establish policies for the oversight and management of material business risks and disclose a summary of those policies.

Yes

7.2

The board should require management to design and implement the risk management and internal control system to manage the company’s material business risks and report to it on whether those risks are being managed effectively. The board should disclose that management has reported to it as to the effectiveness of the Company’s management of its material business risks.

Yes

7.3

The board should disclose whether it has received assurance from the chief executive officer (or equivalent) and the chief financial officer (or equivalent) that the declaration provided in accordance with section 295A of the Corporations Act is 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.

Yes

7.4

Companies should provide the information indicated in the Guide to reporting on Principle 7.

Yes

Principle 8

Remunerate fairly and responsibly

 

8.1

The board should establish a remuneration committee.

Yes

8.2

The remuneration committee should be structured so that it:

• consists of a majority of independent directors

• is chaired by an independent chair

• has at least three members

 

No

Yes

No

8.3

Companies should clearly distinguish the structure of non-executive directors’ remuneration from that of executive directors and senior executives.

Yes

8.4 Companies should provide the information indicated in the Guide to reporting on Principle 8. Yes